Any way to save tax for Individual Trader

Budding Star

I saw there are many threads discussing LLP/pvt ltd/ alpha membership etc. As I read more I get more confused and new threads comes up.

I am an individual trader who just want to know if there is a way for an individual trader to reduce tax liability from ~33% to 42% if he/she is earning more than 1cr to 5cr per year from Stock market (Stocks + F&O).

I don’t earn any of the above range currently but I am on track to earn >1cr this FY and thinking if there is a way other than splitting into multiple accounts for family members and HUF to reduce it from next FY...

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Deal Cadet Deal Cadet
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share your secrets first

Critic Critic
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This FY just started 10 days back, and you are already nearing a 1Cr profit ? Or are you extrapolating your profit of these 10 days to 365 days and hence suggesting the 1Cr on-track XD

Deal Captain Deal Captain
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Everyone is earning in Crores through Stock market.

This will lead to inflation pensive

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Deal Cadet Deal Cadet
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Navigating tax liabilities, especially in the context of significant earnings from the stock market, can indeed be complex. Here are some considerations for reducing tax liability for an individual trader earning more than 1 crore to 5 crores per year from stocks and F&O:

  1. Tax Planning Strategies:

    • Consider engaging a tax consultant or financial advisor who specializes in taxation to help you develop a comprehensive tax planning strategy tailored to your specific situation.
  2. Investment in Tax-Saving Instruments:

    • Explore investment options such as Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), National Pension System (NPS), or tax-saving fixed deposits that offer deductions under Section 80C of the Income Tax Act.
  3. Capital Gains Tax Optimization:

    • Be mindful of the tax implications of capital gains from your stock market transactions. Depending on your holding period, capital gains may be classified as short-term or long-term, each with different tax rates. Consider strategies such as tax-loss harvesting or timing your trades to optimize your capital gains tax liability.
  4. Utilize Deductions and Exemptions:

    • Take advantage of deductions and exemptions available under the Income Tax Act, such as deductions for expenses related to earning income from trading activities, health insurance premiums, education loan interest, etc.
  5. Business Income vs. Capital Gains:

    • Depending on the nature of your trading activities, consider structuring them as business income rather than capital gains. Business income may be eligible for deductions and expenses, which can help reduce your taxable income.
  6. Explore Tax Treaties and Jurisdictions:

    • If you engage in international trading activities, consider exploring tax treaties and jurisdictions that may offer more favorable tax treatment for certain types of income or transactions.
  7. Forming a Business Entity:

    • Evaluate the possibility of forming a business entity such as a Limited Liability Partnership (LLP) or Private Limited Company to conduct your trading activities. This may offer certain tax advantages and liability protections, but it also comes with additional compliance requirements and costs.
  8. Stay Updated with Tax Laws:

    • Stay informed about changes in tax laws and regulations that may affect your tax liability. Being proactive and adapting your tax planning strategies accordingly can help optimize your tax situation.
  9. Consideration of Risk:

    • Before implementing any tax planning strategy, carefully consider the associated risks, costs, and compliance requirements. Ensure that the strategy aligns with your overall financial goals and risk tolerance.
Generous Generous
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Splitting trades between the family members and HUF is the most viable solution. Pvt Ltd/LLP/etc. will be a more costlier affair and difficult compliances to follow. Straight 30% Tax + compliances overhead. Not worth it for the 1-5Cr.

The money you will try to save will go into the CA fees and various charges.

Deal Cadet Deal Cadet
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What is your Total Turnover ?

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