Entrepreneur and venture capitalist Kunal Shah, the founder of fintech platform CRED, has transferred his flat at Worli in Mumbai to his own company Grey House Construction for around Rs 52 crore, documents accessed by IndexTap showed.
Grey House construction paid a price consideration of Rs 51.82 crore and a stamp duty of Rs 1.72 crore for the transaction, the deed of assignment and transfer showed.
The 42nd floor unit is located in the project Omkar 1973 in Worli, Mumbai and is spread across an area of 5,208 sq ft. The unit was registered in the name of Grey House Construction on July 30, 2021, and the documents were executed on March 31, 2021, the last date to avail of the stamp duty waiver by the Maharashtra government.
Shah, who founded the members-only credit card bill payment platform in 2018, bought the unit from the developer Omkar Realtors and Developers Pvt Ltd in March 2016 for Rs 47.46 crore. The property comes with eight car parking slots, the document said.
Individuals buy real estate assets in a corporate entity’s name due to various reasons. Limited companies have a significantly lower tax rate than individuals who pay income tax.
Creditors also do not have access to your personal assets that way. These entities can also have access to better loan amounts when looking to grow their businesses, according to experts.
There was no response from Shah.
The project by Omkar Realtors and Developers called ‘Worli 1973’ derived its name from the location’s latitude (19°) and longitude (73°).
CRED rewards users for payments made through its app. Before launching CRED, Shah founded Freecharge in 2010 and served as CEO until it was acquired by Snapdeal for $450 million in 2015.
Indian corporates are actively managing their real-estate portfolio after the outbreak of COVID-19. The strategy for several companies has primarily been driven by the need to liquidate assets to generate cash flows.
Tax efficiency angle
Several businessmen are transferring real estate assets to corporate entities they control with an eye on tax efficiency. It is more tax-efficient to purchase an investment property through a limited company. How does that work?
When you own a property in your personal name, you need to pay tax on any profit you receive from that property, even if you are intend to use the profits to reinvest in more property. With a limited company, all the profits can be kept in the company and used to reinvest.
Also, in the event a company that owns a property wants to sell it, there is an option to sell shares of the property rather than the property itself. So, if one is selling the company itself, one does not have to pay stamp duty for the property, which is part of the company.
According to Sunil Tyagi of Zeus Law, often family owned businesses or companies float a special purpose vehicle (SPV) to purchase real estate properties. In the event a property held by the SPV is sold, the company may not have to pay stamp duty on the transaction as it would entail only a transfer of shares from one owner to the other and saves stamp duty on transfer of property.
Also, most companies have the funds to purchase such high-end properties, which an individual may not have. If one transfers money from a company to his individual account, it will be taxable.
On August 10, leading merchant commerce platform Pine Labs said Shah has been appointed to
its board as the company gears up for an IPO in the US.