Process of Fractional Ownership of Commercial Property Getting Taxed

Fractional ownership of commercial real estate has proven to be a new way of creating wealth. However, anything you can use to accumulate wealth has specific tax implications.

The tax rules for partial ownership of commercial property differ from the rules applicable to other dwellings.

 There is usually heavy taxation of sales registrations. To avoid this, sellers often waive their tax liability and invest in other assets of equal or greater value that can maximize the benefits of u/s 54 or 54F of the Income Tax Act of 1961. However, fractional owners are not treated as others for tax purposes.

“In case of joining, the status of these investments is that only a part/all of the assets are transferred, and there is no physical change at all. Thus, the sellers will have to pay taxes”, CEO of Strata Property Management and co-founder Sudarshan Lodha told FE Online.

In the fractional module financial backers get value shareholding and protections of a venture vehicle (SPV) that possesses and works the fundamental property. Lodha say's, if you are the sole buyer of the property, you will be nominated for the property prior to the investment you have made. In this exchange, you will be the full owner of the property and your name will be mentioned in the inheritance registers. However, if you invest through a partial membership, you will have a joint venture of assets and the businesses will be in the name of an affiliated third party. . These parties are called Special Purpose Groups (SPVs),

SPV is a company created by parent companies to isolate financial risks. In short, when you own property from a shareholder, you become a shareholder rather than the owner of the property. no tax assistance

According to Definite CEO Varun Mohan, tax "amortization" benefits cannot be transferred to any part of the estate.

“Some names cannot be changed like others. Even if you are selling residential property for sale, you can only buy real estate or leases from a specialist agency and you can apply for an exemption under the sections 54, 54F, and 54EC,” Mohan said.

"This can only be done if the proceeds from the sale are used to purchase real estate. If you buy a business from the sale of another real estate, you cannot deduct the proceeds from income. “The financial implications are the same whether you buy a division or another business,” he added.