Taxation on trading profits from a joint account between 2 people

Me and my cousin are thinking to open a joint demat and Trading account on zerodha. If we start with different equity contribution and share fno trading profits according to our equities. How do we file for itr?
@AlgoGeek @siva @nithin


Are you going to trade in one person’s name or setup a partnership firm or pvt ltd or llp?

Not concrete yet, What do you recommend? And what are the compliance costs of starting a partnership or pvt company? @nithin

Hi @Aditya_Bhat,

In case, of joint holders, the first holder of an account is considered as an owner of the account i.e. his/her PAN will be linked to the profits made on that account. Hence he/she will be liable to pay taxes on the profits earned.

In your case, whoever is the first holder of the account will be taxed for profits earned from an account. And if the total income of a first holder falls under higher income tax slab rate then they will end up with paying higher taxes.
Here only the shareholding will be in joint names.
Since you both wish to share the profits and hold securities equally then incorporation of new Firm, PLC or LLP will be a better option. Since you both can transfer the funds to it and share the profit as per your contributions. The compliance cost will be higher but the tax burden can be reduced.

Hope this helps! :slight_smile:

@ quicko Thank you so much, can you link me to some article which will explain more on how to form a partnership firm and reduce the tax liability… It would be awsm if in the future quicko can open a blog or become a teacher in the learn app. @nithin if you could make an arrangement then it would be really helpful.

I make a profit of Rs.100000 . On the advisory of Mr.x .
I paid Mr.x ; the advisory fees Rs.40000/= .

So ; Rs. 40000 is expense in my trade business .
So . I have to calculate my tax liability on the Rs.60000 only !

Awaiting for the reply…

To register a Partnership Firm, an application form and the fees are to be submitted to the Registrar of State.
You can connect with us here at Quicko, we’ll be happy to help!

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