Read the all the post on trading QnA and also the article written by you. and got me a little confused. If I’m looking to trade only options in a pvt ltd company (say changed the objective of an existing company, to get around the creation of a new company with trading as objective).
The pvt ltd company will :
Not raise any outside funds, only directors capital.
Only trade Options (no other assets, no other income, no shares etc)
The purpose is to reduce tax outflow compared to individual
The company will invest in MF and pledge the same for margin.
PnL range expected upwards of 3cr (100% option trading).
In a 2017 post you had mentioned that NBFC license in not required for trading FnO is that still valid?
Would I still need a NBFC license? or is FnO income not part of the 50 50 rule? and is the 50 50 rule valid only for investing?
Would not investing in MF and pledge for margin, change your answer. Can think of not doing that to save tax.
Also if the answer is yes, “I would need to get an NBFC license”, what happens if I trade without it. Would it lead to just suspension of the company (if discovered by RBI) or are the repercussion much more serious (both financially and otherwise).
ps. In case you have already answered this, can you point me in that direction.
You can always pay salary ,commission etc to move funds . Also if you are making x amount you keep it in reserves and not withdraw it fully , this is how it works practically. But yeah it’s more of individual preferences.
Corporate rates are low , you make one cr , pay yourself 10lk , pay 22% -25 on companies net of 90lk. This is from my experience and interaction with CAs. Enhanced credibility and limited liability being the added perk
Like I said depends on individual need. Practically why would you want to withdraw whole amount. If it’s the case llp is better.
Compliance too depends on the type of business and relation with CA.
Also you can adjust salary amounts according to your needs
You can work around not taking majority of the money out by giving salary to yourself or relatives, also interest on capital can be paid out. All these adjustment can be done to reduce the need to take out the money from the company for a long period of time.
The difficult part is the requirement for a NBFC license.
I think that condition makes using a Pvt Ltd difficult.
Just a curious question - what’s the tax implication for withdrawing money from an LLC after paying all the expenses and the salaries to the partner (this is also taxable on individual account) and the taxes I am drafting a very simplistic overview of my question. Pardon my ignorance
Revenue = 150
All Expenses & Salaries - 50. Note the salary part is taxable on individual account
Income before Taxes = 100
Tax on LLP (30% of 100) = 30
Net Income after Taxes = 70
My question is how do we withdraw the remaining 70. Is there a dividend distribution tax applicable (in the hands of giver/receiver)? I read that there’s an exemption.
If the 70 is let say divided amongst 2 partners (35 each), do the partners have to pay either Income tax or tax on Dividend received?
If yes then either way it’s not beneficial as the resultant Income after taxes for the LLP has already been taxed at 30% (tax on LLP) and any additional taxes would be sub optimal
Provisions of section 10(2A) of the Income Tax Act exempts share of profit received by a partner in the total income of the partnership firm/LLP. The main objective of granting the exemption, under section 10(2A) to the share of profit received by the partner, is the avoidance of double taxation.
You are free to withdraw whole profit in your case-70. No ifs and buts . This is the case in LLP. No taxes for withdrawing profits in llp or partnership.
These days a lot of Indian trading Gurus on youtube seem to be trading from their company accounts. Eg (P.R. Sundar, V.P FInancials, Shreyas Bandi of NiftyBN , Optionables.) How are these guys doing it then? Do they have NBFC? Seems unlikely or else, their main objective is training and their income through training is more than their trading income thus not requiring an NBFC licence. Is this a legit way to trade FnO without getting NBFC licence?
Has there been a change in rule in relation to NBFC registration, is it true that the requirement is only for public Ltd company and not private limited company. I.e. can I trade in a private limited company (100% fno income) and still not be covered in the NBFC registration requirement.
