And yet you are relying on internet users. Don’t you think you should consult an expert? Pay his fees and remove all ambiguity?
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This.
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Starting that on Monday.
Getting all information before hand
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AP of a stock broker is the easiest route for a pvt ltd company. Unless its a pvt ltd company u don’t have the extra tax benefit. Also if you take money out of the company u loose the extra tax benefit looking from the individual tax angle.
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My main motive for registering as Pvt Ltd was to save tax & write off business expenses.
My business expenses includes buying a car, office rent .
We can claim expenses in ITR-3 but we cannot claim purchase of vehicles as business expenses.
I do understand tax is 30% flat.
Can we claim the same in PARTNERSHIP FIRM similar to that of Pvt Ltd ?
@Jason_Castelino @t7support @nithin
Please do answer
Putting my plan to start Pvt Ltd Company on hold as it is not exactly legal & want to avoid any legal consequences.
I will just repeat again. Expenses are allowed and disallowed on the basis of whether they are business expenses or not. Any expense of personal nature cannot be claimed irrespective of the type of entity you have.
If you think you can buy a car and claim depreciation in a company, you are reading too much on the net. How is car going to help you in trading? Even if you buy it your company name, though you can claim depreciation in books of accounts, when total income is calculated for the purposes of taxation, such depreciation is to disallowed. So total income will be same whether the entity is company or firm or an individual.
The things that you read on net are not coming from CAs who do tax audit. If I am your auditor I will clearly disallow such expenses. The problems is we read what we wanna read. If it’s going to benefit us, we will think what we read is right.
If it was so, don’t you think our finance ministry would have covered this loophole by now?
I agree is there a small advantage if you go for partnership firm. I have given my opinion here.
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truer words were never spoken
U don’t start a company to save tax. You start a company for higher goals. Besides if you factor in all the compliance, regulatory overheads and restrictions on how money can be moved in and out of a pvt ltd company structure, it doesn’t appeal much for saving 5% tax.
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Hmm… we have discussed earlier in the thread that if you setup a company only with the purpose of trading, you will end up needing to take an NBFC license.
A company or limited liability partnership (LLP) is created with those wanting their money to be managed being shareholders or partners. Their pooled funds are then used as trading capital. There are a couple of issues with this.
Firstly, an LLP with the objective of investing or trading is not allowed, so people use an alternate objective to create the LLP. This is a clear violation of MCA (Ministry of Corporate Affairs) rules. In the case of a Private Limited or Public Limited company, if more than 50% of revenue comes from financial income (trading), then the company is required to get registered as an NBFC (Non-Banking Financial Corporation) with RBI. One way to avoid this NBFC registration is by becoming a stockbroker and registering with SEBI. Both these registrations come with their compliance requirements, and as a stockbroker, an added cost of having to run a full broking stack as the firm cannot rely on other brokers for trading.
This could also be set up as a partnership firm to avoid the NBFC or SEBI registration requirement, but the issue with a partnership firm is that all partners have unlimited liability. In trading, where potentially there could be unlimited losses, partnership firms are not the right structure for investors.
While running trading through a setup like this allows flexibility in trading and collecting fees, you can’t actively seek new investors in the business promising returns from trading the markets. This would qualify the entity to register as an AIF. Check this SEBI order (Page 14, Point ix) banning the entity and the promoters for actively seeking capital to be invested into the stock markets as an LLP (without AIF license). So at best, if you did create a company or partnership firm, this can be set up only with family (white or allowed) and friends (grey) as a proprietary trading firm (grey). But you can’t actively seek capital from outsiders to manage (black).
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Copy pasting from another thread.
There is definitely an NBFC requirement, but unless you reach out to RBI for something or RBI reaches out to you for something or if your auditor doesn’t file the exception report to RBI (which is required if financial income is more than 50%), then you may not get spotted.
Also like @TAXIQ.IN said, whenever RBI spots and asks for registration, they will provide time.
By the way, if this really has to be done, maybe partnership firm is a better option.
even Zerodha was partnership firm till 18/19. right ?
Yeah, we were. But as a brokerage business, our income was like any other business, not just from trading or investing.
One Person Company could be best option for trading and investment. if government allow OPC to do financial activities without NBFC license.
No. Even this is not allowed
I said “if”. as of now partnership firm is the only option.
Apologies, it sounds like I’m arguing, but I intend to clarify things. How does F&O trading come under investment? Aren’t Futures and Options contracts between two parties rather than assets? If so, shouldn’t the profit/loss be classified as capital gains/losses? My principal business is not the acquisition of shares but underwriting options. Like how a car insurance company cannot consider the policies underwritten as investments, the options I sell are just contracts and not investments.
@TAXIQ.IN Do you have any supporting documents for your claim?
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Hey, you can take whatever stance you want. You don’t have to get us to change our view on this. 
@somnath248 @Bhuvan @ShubhS9 maybe we can get a legal opinion from a leading law firm and post it on Tradingqna. This topic is interesting for our podcast series planned as well. Get a couple of popular lawyers and CAs to talk about everything around this.
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That will be a very good initiative…please do this
Also cover the way out if someone has incorporated a company in the discussion…if at all, nbfc license is required for trading derivatives only
Also i was checking AIF cat 3 registration…it says corpus of 20 crore is required…in the definition of corpus they have mentioned " corpus is the total amount of funds committed by investors to the AIF by way of written contract"… Does it mean a minimum of 20 crore is needed to setup AIF cat 3…please guide @nithin