As we grow and compound our portfolio, we have to pay more taxes as individuals. What are our options to scale the trading business to :
One of them is to have multiple trading accounts , in the name of your family members. (But that is also only till profit reaches certain amount) Apart from that what other options do we have? Has anyone in this community set up a firm / Pvt company for tax benifit, claim deductions ?
Trading as a company has issues, check this. You will end up needing an NBFC license.
If you are trying to save on income taxes by dividing trading into your family member accounts, I guess you know that there are potential issues with that as well. Income tax returns have to be filed in their names and there can be scrutiny where they are required to meet the Income-tax officers. I think it is not worth the hassle.
As an individual, the best you can do is to show trading as a business and then claim everything you spend towards trading from your internet bills to cable bills (for watching CNBC 
) as an expense.
Check this
I agree to this as long as the profits are below HNI threshold, whose effective tax rate is 43%!
With Other options- again there are so many hinderances.
Pvt Company - There is complication of NBFC and RBI getting involved.
LLP - Trading cannot be the sole objective of LLP
Partnership Firm- Unlimited Liability.
Sole propritor - same as Individual
HUF - anyone here who is trading under can enlighten more on this.
Which one is most beneficial to save on taxes legally? Aren’t there anyone here who can advice based on their jouney/experience.
We risk so much, our hard earned money, savings, and when we make profit, dont feel like sharing 43% with government.
Is 43% true ?!
HUF will be as good as another family member. But if you are saying after a certain point your family members are not enough to cover your income, I am afraid another person in the form of HUF will be of much help.
Yes, such high tax rates is not fair but it is how it is. The only way we can avoid paying high tax is by not earning such high income. 
Yes, for incomes greater than 5 Cr it works out to be 43%, which is ridiculous.
In contrast, people who make money through LTCG (Business owner/Equity) are only taxed when they sell and only pay 10% when they do so. Returns from buy and hold equity is lower than trading and with higher risk, but can try to design systems in a way such that most of the gains have over 1 year holding periods.
Even better if you can create a growing business where returns can be exponential, but that is easier said that done …
@Anikethan how is this 43% calculated… We have like STT, GST on brokerage, Income tax etc… Is it all included in that 43% you mentioned or is it 43% extra tax apart from that ?
As per my calculations on approximately its shows 24% tax and charges… Am I missing out on something more on this?
FNO income is taxed under tax slabs (30% for above 10L)
4% edu cess on tax
37% surcharge on tax (for income above 5cr)
Effectively it is 42.74%
STT and other taxes get deducted from your FNO income
Is it same for cash market ? I only trade equity delivery.
Here is an innovative strategy to reduce the FNO income by @Jason_Castelino :
This is applicable if you are in a 30% bracket and sitting on a good Business income
I would recommend partnership firm with your family member.
Even as an individual, you have unlimited liability, and you mentioned trading in family members accounts anyway, so both have unlimited liability anyway.
This cuts your max tax rate a bit.
Hope this helps
LTCG is clear, but STCG vs business income can still be an issue if you have many transactions.
From chapter 3,
Blockquote
For equity delivery based investments, if you are holding stocks for more than a year, you would have received some kind of dividend and even if you didn’t, you can show them all as investments and claim an exemption under the long term capital gain. If you are buying and selling stocks frequently (yes it is an open statement, but there is no rule which quantifies ‘frequent’) for shorter terms, it is best to declare that as non-speculative business income instead of STCG.
Another thing to keep in mind is that if investing/trading on the markets is your only source of income, and even if your trading activity is moderate, it is best to classify income from all your equity trades as a business income instead of capital gains. On the other hand, if you are salaried or have some other business as your primary source of business, it becomes easier to show your equity trades as capital gains even if the frequency is slightly higher.
Partnership Firm also has unlimited liability. Moreover you dont even get the benefit of the basic exemption limit.
Is there something that I am missing here?
One of my friend who is a CA also suggested this. He said Max tax would be 30% + cess . Is this correct ?
What is the meaning of Unlimited Liability in the context of a trading firm ? It will be same as individual right ?
Benifit of Basic exemption limit is negligible compared to reduction of tax from 42.74 to 31.4 correct ?
Categorising it as STCG or Business income is in our hands. Of course frequent BTST is subjected to be changed as Business income, but doing short swing trades, albeit frequently, can still be categorised as STCG. If AO has an objection, then we can fight it/ change it. Why to declare in the initial stage and pay unneccesary tax ?
There is a surcharge of 12percent for income over 1cr. So effective rate comes to 34.944%.
So if you are expecting income in excess of 5cr, then this can be beneficial.
I will read more into this. Because I cant believe law makers missed this loophole. Usually such loopholes are covered. Individuals usually pay the least rate comparatively.
Yeah, still some of the difference will be negated by STT which cannot be deducted for investments.
I have not started trading overnight yet, so have not checked how much difference it might make.
In equity intraday alone, stt alone can easily remove say 20-40% of returns. Overnight i guess it will depend on holding period.
