I doubt if it can happen in 2 months. Have seen multiple people apply and take much longer. Now that NSE Now has stopped, if you want a trading platform you will need to go tie-up with a vendor for trading (OMS, RMS) and backoffice (reporting, etc). This will take much more time than 1 year.
The alternate for NOW is the platform that BSE offers called BEST. But for this, you will need to take membership on BSE as well, only NSE won’t work. You will still need a backoffice platform.
What is effective income tax rate for corporate trading directly with NSE as a member ?
Individual having more that 10 cr income has tax rate of 42%.
One Person Company can apply for NSE membership alpha/normal ?
This contradicts your previous reply - “Ah. If you want to be a Pvt ltd company doing only trading, you will need an NBFC license (more than 50% of revenue from financial activities) or an alpha membership on the exchange. Best to be a partnership/LLP if you want to avoid this.” . Please clarify.
Hmm… how does it contradict?
If you create a company, a pvt/public ltd, you will need to get yourself a NBFC license if more than 50% of revenue is from financial activities. Or else you would need to get a membership on the exchange.
If you trade in your individual account or a partnership/LLP (not a pvt/public ltd) then this NBFC requirement doesn’t come into play.
If you trade as a company, you will have two level of taxes. One is the corporate tax and second is dividend distribution tax. If the company makes money and you decide to withdraw using dividends or salary, there will be taxes as per the applicable income tax slab of the person taking salary.
One person company can’t be a member on the exchange
https://www1.nseindia.com/membership/content/FAQsfornewmembershiponNSEwebsite.pdf
Thanks Nithin for clarifying. I considered LLP also as a company, hence the confusion.
I have been researching for the past few months about starting a Prop Trading firm with 4 of my close friends. The plan is to pool money from all partners of the firm and hire some employees to do the actual trading based on the strategy we give them. Here are my findings based on the discussions happening in this forum.
But I am now in a dilemma whether to start the firm after reading a comment by Nithin in Forming A Prop Trading Firm (LLP)
"You can’t have the objective of an LLP as “investment/Trading”. You can potentially start an LLP with a different objective and still trade/invest. But this opens up potential future issue"
We do not want to get into any legal trouble after registering the company. Can you please advice what would be the right way to go about this? What all can be the potential future issues?
I can see a lot of people discussing here about starting a Prop Firm, but I cannot see anyone saying they have successfully started one. Is it because they do not want to openly disclose about starting a Prop Trading firm because of some grey areas?
For your case, the only way is to set up a partnership firm (not even an LLP). Partnership firms can be set up to trade/invest. The only issue with a partnership firm is that the partners have unlimited liability. This means that if for some reason the partnership loses more money than what is put in business (owes others money), then the liability will come on all the partners.
Thanks Nithin for the advice. We do not want to get involved into anything which have unlimited liabilities. Dropping the plan for now.
There was a limit of paid up capital in One Person Company.
In budget this threshold limit has been removed. I think NSE should allowed OPC to become member/alpha member.
Unlimited liability will arise only if you allow losses to mount beyond your capital. It can occur only in Futures and options which can be avoided by hedging, especially with new margin rules.
What I meant is, I always prefer Limited Liability firms (LLP, Pvt Ltd etc) than proprietorship and partnership. It is in the context of future legal issues which may arise and not about the stock market in general.
@mohitmehra I have carry forward losses from previous years (in my individual account). Now, I want to change my trade name (i.e. map my proprietorship bank account and act as a Sole prop trading firm). Can I still use my offsets (the carry forward) losses accumulated in my individual trading account while now working as the proprietorship trade name? (the PAN will be same in both cases. I am just changing my Trade name)
I have gone through the thread and thanks everyone for contributing such valuable information, however just to get some clarity I have the question below.
Question - I want to set up a separate legal entity for trading Futures & Options only, what would be the most suitable option for me. I would be using my own money to trade only Derivatives (no cash market transactions) and not solicit money from anyone outside my family
Purpose of setting up a separate legal entity;
You could show all those expenses even if you didn’t set up a separate entity, trading in your individual name and using ITR3. It doesn’t make sense as a private limited as you will also need to pay additional dividend distribution tax over and above the corporate tax for the money you take out. That dividend distribution tax now is as per your income tax slab, so you could pay as much as 60% (25% corporate+ tax on the highest slab on dividends).
While you could set up a partnership, there isn’t any additional benefit. The best way is to just do it in your individual name, you will end up saving the additional costs you will have to pay a CA in case of a partnership.
You can choose to open a partnership firm to reduce your total tax liability if your =trading profits exceed 50 lakhs per annum. The maximum surcharge for a partnership firm is 12% for profits above 1 crore.
The additional cost for auditing and other compliances for partnership firm would be a lot higher when compared to an individual.
Thanks @nithin and @Ragavendran_V for your comments.
The one way I was thinking to legally lower my tax incidence was to create a partnership firm or private Ltd firm and then pay salaries to family members who fall in lower tax bracket, this way the salary would be paid before calculating net profit for the partnership firm/Pvt Ltd firm and the personal income tax rate applicable on my family member is way lower than 35% applicable on my income. (I read there are limits to salary paid in a partnership firm related to book profits though).
@Quicko executive suggested on a call that I should open a Pvt Ltd firm (instead of partnership or LLC firm) with an approximate cost of ~8-9K for setting the firm and another ~20K annually as compliance cost. @Quicko let me know if the numbers are correct/close to reality or in case in am missing anything
Special thanks for Tradingqna - Thanks everyone in this thread/forum for contributing and enhancing knowledge. Lot of stuff shared here is just amazing 
Annual compliance cost of 20000 Rs. is too low for a private ltd company. Clarify the same with Quicko again.
Online tax portals charge 1000 for simple ITR filing on behalf of a salaried taxpayer with no other sources of income.
You could pay salaries to family members which will be taxed at a lower rate. However, the remaining profits in the company cannot be easily cashed out as dividends are taxed according to your own tax slab.
A few things
You could be a proprietor and employ staff who are paid salaries. You don’t need to be a partnership or Pvt ltd. You need to take registration of Professional tax if salary exceeds Rs 15k per month (Karnataka). It might differ based on states. In a proprietorship, you as a proprietor can also take a salary.
In a partnership, the partners can also take salaries (limit of 60% of profits) apart from paying salaries to others.
Btw, if you are structuring all of this just to pay salaries where it is not due (illegitimate), if spotted by the IT department can be disallowed completely and can have penalties. Best to avoid all of this just to reduce taxes unless your family members are actually helping you out in the business of trading.
Thanks again @nithin and @Ragavendran_V.
Looks like for now it’s best to trade under my own name and file ITR3 No complex accounting structure to take car off with just a simple yearly ITR3 and advance tax payment.
If someone who has created a separate legal entity and traded derivatives has found it to be beneficial, please do share your experience and if it’s worth it
Hi @Rajat2805,
Here’s a read where we discuss if a trader can incorporate a company for trading in markets.
The cost for incorporating a company is approx INR 8-9K and the compliance costs vary from INR 20-30K depending on the nature of compliance.
Hope this helps 
