Trading F&O via LLC or Pvt Ltd

[nithin]

Copy pasting from another thread.

@Algo_Mint

F&O income is classified as business income and not trading/speculative for taxation purpose. If that’s the case, why is it considered as financial income? Moreover underwriting options is more like running an insurance business with all the settlement obligations taken care by Clearing member unlike the insurance business. Even insurance companies don’t require NBFC registration with RBI. If so, I don’t think NBFC licence is required. RBI 50-50 rule is not applicable here. Please correct me if you think I’m wrong.

@TAXIQ.IN

Trading in Equity or F&O comes under financial activity as we understood from our conversation one-to-one with RBI on some matters where eventually we have to close the activity or wind up the company. IF your income from Financial activity and assets are more than 50% of financial activity we need to go NBFC License from RBI. This is our first-hand experience. This is very important for people who are in multiple businesses and apply for RBI for some or other registrations. The deep verification by RBI will compel the companies/group companies if they are involved to close the activity or face action. RBI DO gives a chance for compliance.

https://www.rbi.org.in/commonperson/English/Scripts/FAQs.aspx?Id=1167#:~:text=Financial%20activity%20as%20principal%20business,registered%20as%20NBFC%20by%20RBI

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.