How to reduce tax liability on Trading income?

I hope you’re doing well.

I’ve been trading for the past five years. Since the past two years, I have been generating steady profits and am feeling confident.

I therefore started exploring for tax-saving strategies in order to lower my tax liability and looking at it as a long-term business. I’ve found the following two possibilities:

1. Trading in many accounts of family members

  1. I can trade in multiple accounts of family members to lower my tax obligation.
  2. However, this strategy doesn’t appear to be long-term viable.
  3. Additionally, slippages are included when placing orders in several accounts during intraday trading.

2. Establish a Pvt. Ltd. company:
1. I’m ready to establish a Pvt. Ltd. company and trade using that account.
2. My research indicates that I can claim several items as company expenses and lower my tax obligation. Ex: Travel expenses for the director; payouts to friends and family, etc.
3. However, I’m uncertain about the following:

  • NBFC License: Many trading forums state that getting an NBFC license is necessary if a company’s primary source of income is trading profits. Many prominent YouTube traders (like Shreyas Bandi, and others) trade on company accounts without an NBFC license. This was noted in the video they made. Please share your thoughts on this.

  • My employment with another company:
    1. In addition to trading, I work for a software company. When I create my own Pvt. Ltd. company, I will be a shareholder and director. Will it have an effect on my employment with another company?
    2. Let’s assume that my existing employer will not oppose at this time. But will it affect me if I change jobs in the future? Please share your thoughts on this.

If you have an other solution for this in addition to the first two alternatives. Please inform me. I appreciate it.

All expenses which are allowed for a company are also allowed for an individual too.
Also NBFC license required.
Please do not believe all that you read on the internet. Consult a professional for tax planning.

1 Like

Why isn’t this so prevalent?

Alternatively you can be a an alpha member at the exchange or be an Authorised partner of a stock broker and run a prop desk in the company created for the said purpose. Know that each comes with a set of compliance and operational requirements.

This depends on your employer. A good share of companies have a no no policy for moonlighting and would say so in their job offer letter to you.