Bank insisting property should be in firm name
My wife purchased agriculture land in karnataka and converted it in to non agriculture for industrial purpose, now she want to start industry under proprietorship. So she applied for loan for building and machinery bank insisting land should be in the name of firm so is it possible to transfer land in the name of firm, if yes , whether it will attract stamp duty.
Asked 10 months ago in Property Law from Ichalkaranji, Maharashtra
The bank is right. Your wife can introduce land as capital in the firm. As per sec 45(3), amount entered in books will be deemed as sale price in the hands of the partner/sole proprietor. But if such value is less than the value adopted for stamp duty purpose, then as per sec 50c, such value adopted for stamp duty purpose will be treated as the sale price. She should transfer the land in the name of firm through a proper transfer deed. The value entered in the books will be treated as the capital contribution of the partner and the same shall be treated as cost of acquisition in the hands of firm. In case the transfer amount for stamp duty purpose is more than the actual transfer amount, then the difference will be treated as income from other source in the hands of firm.
1. The land need not be transferred to firm. Once firm is set us it can be shown as property of the firm as such declaration can be made in the partnership firm.
2. There is no need for making registered gift deed which will attract full stamp duty.
1)stamp duty would be payable in case of transfer of ownership of land from individual to name of firm
1. If it is a proprietorship concern then the Bank should not refuse to provide loan if the land is in the name of the proprietor,
2. For conveying the title of the land in the name of he proprietorship concern will incur stamp duty and registration cost,
3. Change the Bank and seek loan from some other Bank.
Since it is a proprietary concern, the banks should not insist on transferring the property from individuals name to concern name. However if the property is in the name of firm, probably the loan sanction conditions might be met because the loan disbursement might be in firm's name. You can check the stamp duty and registration charges applicable from this website (http://www.guidancevalue.com/stampdutycal.php)