One person Company LLC.
Partnership firm is the best. All else will be having more compliance issues
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Hmmm… there is absolutely no issue on how much turnover you generate, as long as you file your ITR on time. You can do it in your personal name itself. NBFC won’t help in anyways, NBFC will actually be a lot more painful - since you are regulated by RBI as a NBFC. NBFC is for lending money, not for trading the markets.
If you really want to separate it out (which is not required), create a LLP and trade through that. Btw turnover when filing ITR as a trader is not contract turnover but sum of gross P&L. Check this.
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So @nithin @TAXIQ.IN , when the turnover is calculated in the contract note for stamp duty etc - is a different method than that used for calculating for the purpose of income tax ?
Yeah I checked - its very well documented in Zerodha Varsity.
“But it is not the contract turnover the IT department is interested in; they are interested in your business turnover.”
And the business turnover (for futures only) = The total of favorable and unfavorable differences shall be taken as turnover
Hence if I do 20 nifty futures trades that generates a total PNL of 10000 - it will be the PNL which is the turnover.
In that case, one question remains, given PNL is the turnover, the profit/loss will always be 100% of the turover if we trade only futures ? So in that case we never need an audit ? Any thoughts @TAXIQ.IN or @nithin
Do go through the entire module to get a better context of taxation.
If you buy and sell 10 lots of Nifty at around 10000. Your contract turnover is 1.5 crores. This is on which stamp is charged.
But if you buy and sell and say make a loss of Rs 10k, your turnover for IT calculation of audit is Rs 10000.
Turnover calculation when trading is only to determine if you need an audit. As an active trader, I think it is best for everyone to get their statements audited. Quite a simple process, explained in the module again.
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LLP/ Partnership firm will be better than a Company as there are restriction on fund flow in the company. Scrutiny are system generated , you wont able to avoid , you need to make policy clear and been in trading , the books are clean unless you play with it as its organised industry.
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@nithin Nithin, I am planning to form a LLP company to trade only Futures, Options and commodities ( no stock investments/trading) 95% would be day trades and trading with company directors money. I am in same doubt whether it required NBFC license to trade FnO segment and I am not clear about it. I found this link 50-50 rule says it requires license if gross income more than 50% from asset generation. Can you please help.
Here is the link https://www.rbi.org.in/Scripts/FAQView.aspx?Id=92
- What does conducting financial activity as “principal business” mean?
Financial activity as principal business is when a company’s financial assets constitute more than 50 per cent of the total assets and income from financial assets constitute more than 50 per cent of the gross income. A company which fulfils both these criteria will be registered as NBFC by RBI. The term ‘principal business’ is not defined by the Reserve Bank of India Act. The Reserve Bank has defined it so as to ensure that only companies predominantly engaged in financial activity get registered with it and are regulated and supervised by it. Hence if there are companies engaged in agricultural operations, industrial activity, purchase and sale of goods, providing services or purchase, sale or construction of immovable property as their principal business and are doing some financial business in a small way, they will not be regulated by the Reserve Bank. Interestingly, this test is popularly known as 50-50 test and is applied to determine whether or not a company is into financial business.
Not required to get NBFC to trade F&O. But yeah, if you start investing into stocks and financial assets constitute more than 50 per cent of the total assets and income from financial assets constitute more than 50 per cent of the gross income - then yeah.
@TAXIQ.IN , don’t think this applies for LLP right?
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Thanks Nithin it is clear know.
@nithin Nithin, do the company needs SEBI registration and approval to trade only FnO with LLP company directors money(no client interaction/client’s money), Can you please help.
no approval if u r trading ur own money
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Thanks a lot Nithin
I just want to get one thing cleared, just like mentioned by @sritrader even I want to start a LLP where we 20 people would be registered ourselves as partners and day trade in F&O. Is it feasible/legal? Secondly if we get profits then should the LLP as a whole pay a tax or after dividing the profits among various partners do we need to self declare the tax.
Does LLP require separate trading account to be opened? Does Zerodha support opening an account for LLPs?
it is required , yes they do
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Like I have said earlier, if this a way to manage other people’s money, this ain’t legal.
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LLP can involve in F&O trading and number of partners can be 20 and even more. On profits LLp will pay tax and post tax money can be distributed between partners. This mode can be used close friends and family members.
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