P V VAITHYANATHAN (retired) 18 June 2012

Tax on goodwill amount

I am 70 years old, and own a flat in Chennai. Recently the owners of our flat decided to go in for a joint development of our property with a contractor. Each flat owner now receives a lumpsum as goodwill money from the contractor. Please let me know whether this goodwill money is taxable in any way. If so, how to avoid or minimise the same? Appreciate your valuable advices. Thanks.

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3 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 18 June 2012

In an opinion,

A self-generated goodwill is not taxable, it is exempt...

Reason is very simple, as tax is always on "gain/loss" on sale and not on the asset itself...

In self-generated goodwill, there's no cost, so question of gain/loss doesn't arise,so it is exempted...

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alok arunkumar bhagat (PRACTICING LAWYER) 19 June 2012

goodwill is received for transfer of development rights.... it is taxable and subject to capital gains at full value.

As per SEc 55(2) (a)(ii) cost of acquisition of self generated goodwill is considred as nil for calculation of capital gains and therefoer full value is taxable.

tax can be avoided u/s 54F.

alok bhagat