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Tax query

harsh (Business) (29 Points)

26 April 2016

Here is a trading example with some tax queries. :

A = Stockist (Who keeps the goods (garments) )

B = Sourcing Agent (Commision Agent , Intermediate)

C = Wholesaler or retailers ( Who deals from B to buy goods)

Let's assume that B sources goods upto 50 lakhs in a financial year & earns his cut profit of 10% (5 lakhs) as a commision from C. Goods are directly transported from A to C .And B is only involved in taking orders & payments deposits from C.

Situtaion : C deposited upto 50 lakhs into B account in a year , B keeps his cut & Deposited 45 Lakhs to A.

Question : What taxes B have to pay , & what type of bank account B should use for bigger transactions ?

*Tips On saving taxes for B Would be great.*

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3 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 26 April 2016

look at the invoice system first

A ships the goods to C on 50 Lacs value or 45 lacs value ?

if value is 50 Lacs, then deemed that C has paid to B

if value is 45 Lacs then deemed that A has paid to B

now coming to Tax point

for B the income is purely commission based business income, and he is free to make deduction of his expenses made towards execution of this order, viz travelling, telephone, postage, accounting, bank charges

1 Like

harsh (Business) (29 Points)
Replied 26 April 2016

Thanks For Your answer.

Kindly clear me in both the situations :

If Invoice says 45 lakhs , what impacts it will cause on the taxes for B.

If Invoice says 50 lakhs , what impacts it will cause on the taxes for B.

How much tax B exactly has to pay ?.

Santosh Sukhnani (Student CA Final ) (34 Points)
Replied 26 April 2016

In case invoice is of 45Lacs, B will receive his share of 5lakhs from C seperately. where as in case invoice is of 50lacs, B will receive his share from A. In both the case B's income would be the same i.e 5,00,000.