The best way in my opinion to scale a trading business is to remain a sole proprietor of your own trade. Getting involved in some other segment can create unnecessary obstacles and this means that your focus will be shifted from trading to some other thing. It is better to stay small and light instead of going heavy.
Ok, agreed for a moment. But what will be the scale we are looking here ?
Let’s say 10 cr business income, 2 cr I claim expenses ( superficially) , then do you mean to say we pay around 3.3 cr as tax ?
How do larger traders, HNIs manage?
wow 2 cr expenses, assuming this is not STT etc, what kind of business expenses do you show ?
My assumption so far has been that expenses will not have compounded growth to keep up with capital…
I could do unnecessary expenses to save tax but it would also hurt my future income.
Arre… that’s why I told superficially, the point I was trying to make is the quantum of tax that would go out as we scale up.
Not exactly… but correct in principle…
Base tax rate of 30% (At a 5C income, all deductions are meaningless)
Above 5C income has a surcharge of 37% (37% of 30% base rate = 11.1%)
Plus Cess: 4%
For over 5C income, tax rate is 45.1%
Base tax rate of 30%
Above 1C income has a surcharge of 12% (12% of 30% base rate = 3.6%)
Plus Cess: 4%
For over 5C income, tax rate is 37.6%
These are my calcs, please correct me if I am wrong…
Anything other than a sole proprietorship or partnership firm has tons of obstacles… as elaborated in this article…
One correction, cess is also on tax , not directly on income
Thanks, did not realise that.
Maybe you missed my last post, but I acknowledged that I didn’t know cess doesn’t apply to the entire amount, and only to the taxable amount….
Yeah. Actually I read directly from the notification and replied straight away. And later I realised Anikethan has already replied.
Any luck here ? @Jason_Castelino .
From above comments, so far it looks like Partnership firms ( preferably with a family memeber) will be the best for HNI/ ? 5 cr income. (still 35% )
I did read about it to find out if I was missing out on something. For now as it stands, whatever we had discussed above holds good. If you are sure of your income, you should go for a partnership firm.
You are getting 65%. See the positive side of it.