How one can setup a Proprietary Trading Firm, any registration needed with SEBI, other formalities, etc?

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 :slight_smile: 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

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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 :slight_smile:

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Does compliance cost [20000 Rs. per year] for private ltd company include the following?

  1. Maintaining book of accounts, balance sheet and preparation of P&L.
  2. Audit under Companies Act and audit for tax purpose.
  3. Quaterly filings, secretarial filings.


Annual Compliance Plan will include the following

  1. Statutory Audit as per Companies Act
  2. Preparation of Financial Statements (P&L Account, Balance Sheet)
  3. Income Tax Return Filing of PLC
  4. MCA Annual Form Filing (Form ADT-1, Form AOC-4, MGT-7)

For details, feel free to get in touch with us on [email protected] and our team will reach out to you


@Quicko ,
Someone called me from Quicko 10 days back and said that an expert will get in touch with me to discuss the annual compliance cost for partnership firm. However, nobody reached out to me.

@nithin Is it legal for 4/5 partners to come together form a partnership firm purely for trading equities+FnO, open a partnership demat on zerodha and trade using the pooled money of partnership. What are the possible implications? Can the trader(one of the partners) be paid an additional remuneration(apart from profit share) while others get only profit share? Also considering a 20L profit on 1cr capital what will be taxation on individual partners?(30% will be on firm’s profit I presume). Will be greatful if u reply. TIA.

30% tax is charged on the partnership’s profit. The partners don’t have to pay any more tax on their share of profits.

20 lakhs * 0.3 = 6 lakhs. [Tax liability for partnership]

The trader who is paid remuneration should pay tax on it according to the individual tax slabs that is applicable to him.

But is this arrangement legal as the firm will purely trade and no other activities atleast at the outset. Also how easy/hard is it to add capital every quarter or so and eventually even close the firm a few year down the line assuming a shift to llp/pvt co offering other services as well?

Forming a partnership to only trade is legal. There is an article written by @nithin on this. You can close the firm after few years.

But a shift to LLP or private company with an objective to only trade is either not legal or too costly.

@nithin - is it true that a prop-trading pvt ltd co will now need 10cr capital to register with RBI as an NBFC-ICC or does the 2cr limit still apply?

In my case, the intent is to donate all the profits, so the tax saving between 39% and 25% is substantial.

I think it will be 10 cr capital for all NBFCs.

@TAXIQ.IN @Ca_Omprakash_Jain @Quicko would you guys know?

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Hello @nithin @Venkat_Krishnan,

The limit of minimum Net Owned Funds to register with RBI as NBFC is ₹10 Crores.
Read more about it: Non-Banking Financial Companies (NBFC)

Hope this helps!

@nithin, Zerodha policy on settlement of ITM calls- " * Call/Put options – ITM options get exercised but expire at 0 value. The strike price of the contract will be the buy/sell (average) price of the stocks." Shouldn’t the contract price be the strike price of the call option?

For example, if I hold IDFCFirst 50CE and the expiry price is say 60 (buy/sell average), will I get the shares in physical delivery at Rs50 each or at Rs60 each?

Asking because there’s an opportunity to convert F&O gain into STCG and hence pay lower taxes.

You will get the shares at Rs.50.

Thanks, @Ragavendran_M. And this delivery is guaranteed? i.e., if the seller of the option doesn’t hold the stock, his broker will compulsorily buy from market and deliver? Or is there a chance that I won’t get delivery?

Yes, the clearing corporation will settle the shares. If suppose shares are not available, the exchange will conduct the auction and deliver to the buyer. even after the auction if the shares are unavailable they will do a closeout. (cash settlement which is very rare).

Had a post on this.

What if your analysis is 100% accurate and is making money for the clients all the time, does the analyst require a SEBI registration?

One thing I noticed is clients complain when they lose money. And then SEBI debars or fines that analyst.

What if things are working and no complaints??