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Private Limited Profit-Double taxation

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Himanshu Agarwal

Proprietor

142 Points Posted on 02 February 2024

Hello All,
in case of Pvt Ltd co when company earns the profit
it pays the tax on the same..
and When it is distributed to shareholders they again pay the tax on the same.
is it not double taxation?
and any better planning in case of closely knitted pvt Ltd company

Replies (6)

Quick Summary

This discussion addresses the issue of 'double taxation' in Private Limited companies, where profits are taxed once at the company level and again when distributed as dividends to shareholders. Participants explore whether this is indeed double taxation and seek strategies for closely held companies to mitigate this effect. Suggestions include distributing profits via salaries to family members up to a certain limit and potentially classifying personal expenses as company expenditures, though the legal distinction between company and shareholder income is also highlighted.

mayank singla

28 Points Posted on 02 February 2024

Sir dividend mat dikhao salary dikha do 10 lakh tak 112500 (assuming old scheme) to agar 4 family members ha to 40 lakh salary, wahi sallary ni dikhaoge to 12 lakh tax on company profit, baaki jo personal kharche ha khane ka pine ka wo company ke expense dikha do

prasad Nilugal

GST Practitioner & Accounts

8998 Points Posted on 02 February 2024

As per the income tax act , Company & Shareholders are two different assesse and will be taxed as per their income . profit is companies income and Dividend distributed out of profit to share holders is shareholders income , so both are taxed according their income differently.

sabyasachi mukherjee

Profession

19978 Points Posted on 04 February 2024

The tds certificate is provided by the employer , employees take into account and seperate arrangements are being made.

RAJA P M

"Do the Right Thing...!!!"

77792 Points Posted on 04 February 2024

@ My Dear Great Mr Sabyasachi Mukherjee Sir,

Where is Employer and Employees in this query...??

please note that...

Shree Ji Steel Corporation

staff

32 Points Posted on 05 February 2024

Hello,

Indeed, what you're describing is often referred to as "double taxation," which occurs when corporate profits are taxed at both the company level and again at the individual level when dividends are distributed to shareholders. This is a common feature of the corporate tax system in many countries, including but not limited to the United States, where corporations are treated as separate legal entities for tax.

For closely held private limited companies, several strategies might be employed to mitigate the impact of double taxation, although the specifics can depend greatly on the jurisdiction in which the company operates. Here are a few general strategies: