Hello,
Request your responses for the below mentioned situation for investment and income tax optimization.
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Ajay currently is employed in India and earns enough to be in the highest income tax bracket.
He has an option to invest into a promising business in India itself where the ROI is like 3 years and in a positive industry and hence he is keen on investing 50 lakhs into this business.
He will be seeing returns / dividends / profit share coming in from 2nd year onwards and should be recovering all his investment within 2 years from there on (i.e., in 3 years from his investment date). It will be all profits from 4th year onwards.
In this scenario, what is the best way for Ajay to invest so that his tax implications are minimised?
1. Should he invest as an individual by paying 50 lakhs from his savings, get returns from 2nd year onwards which will be added to his other income and taxed appropriately aka at highest tax slabs.
2. Form an investing company with 50 lakhs as it's seed capital and invest into this business as a company. What is the tax implications for this company? Is this a better option over directly putting his money as an individual?
3. Form a trust with his family members, place the money there and operate the investing to this business as a trust? Is this a better option?
4. Any other option for Ajay to save on the taxes for his returns from this investment of 50 lakhs into this business?
What is the best option for Ajay to save on income tax?
CAclubindia
