Taxation for a family investment firm

Tax planning 110 views 3 replies

Rohshan

MBA

21 Points Joined April 2024

Inorder to reduce taxation on personal account due to FNO profits, I am planning to setup a private limited company for investment and trading purposes, wherein i will be primarily trading in FNO and cash segment.

I & my father will be giving our personal money as loan to this PVT LTD entity and will start trading under company account. Both me and my father will be working as contractors in our PVT LTD firm. We plan to withdraw contractual remuneration & interest from the trading profits that we generate in the PVT ltd.

Example:

company profits:: 2 crore

interest amount ( @ 12% on 2 cr capital) i.e 24 lakh

contractual remuneration Me & father 80 lakh each i.e arnd 1.6 cr

Total taxable for PVT LTD: 2 cr - 24 lk -1.6cr= 16Lakh

Total corporate Tax @ 25% of 16 lakh = 4 Lakh

Taxable income for me & father (under 44ADA presumptive taxation)10% of 80 lakh= 8 lakh each

Is this structure legal? Are there any fundamental / legal flaws in we opt-in for this structure?

Replies (3)

Vishal Manakshe

299 Points Joined September 2020

Your structure is legal within the four corners of law. However, there are few calculation mistakes such as you have to declare a minimum 50% profit in case you opt for 44ADA, etc.

Further, there are multiple advantages and disadvantages of the company, and so on

I can guide you through the overall structure and process.

Kindly check your dm🙏🏻

sabyasachi mukherjee

27922 Points Joined May 2017

Taxation for a family investment firm is set

Nikhil Kaushik

Fellow CA

86871 Points Joined June 2009

i would rather simply split the transactions into multiple accounts and pay tax under 44AD on it. and in case turnover exceeds 44AD limit, park expenses in that PAN including salaries/professional fee etc and pay tax on account basis on that PAN only.