Tax savings options for proprietorship vs Pvt Ltd company

Hello,

I'm freelancer software developer providing services for offshore clients. My turnover is around 35Lakhs. I'm looking for a way to save tax. Which type of entity (LLP, PVT ltd or Individual) will give me most amount of tax savings for a turn over of 35Lakhs? I wish to expand my operation in next 2 years by hiring around 5 employees. Please advice me best option for me. I was told that I should continue as individual since individuals have tax brackets and I can also claim expense, salary deductions. So it will give best tax savings.
Asked 2 months ago in Income Tax from Bangalore, Karnataka
Dear Sir 

Continuing as an individual is a good option. However there are some more legal ways by which you can save taxes. 

We need to get into a call to make you understand those options.

Feel free to give me a call via call an expert option.

Thanks and Regards
Abhishek Dugar
CA CS B.Com
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
761 Answers
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Hi,
yes, as an individual you are required to pay taxes according to your tax slabs and at the same time you are eligible for deductions u/s 80C. But your liability will unlimited.

if you want to keep or give separate identity to your work and want to keep liability limited then you can go for OPC- One Person Company.
with OPC you are required to adhere to all the statutory compliances  like board meeting , AGM, statutory audit, ROC filing, etc.
Tax bracket of a company is 30% + cess
you can claim all the eligible expenses incurred to operate your Business as an individual also. 
Losses can be  forwarded in both the  cases.

 
Vishakha Agarwal
CA, Bangalore
210 Answers
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Hi,
If you are adopting the ‘presumptive taxation scheme’, you don’t need to maintain books of account. You don’t need to get it audited.

1) Moreover, the eligible professionals are allowed to compute income on an estimated basis. There is a minimum prescribed rate for estimation. The presumptive Assessment rate for the professionals is 50% of the gross receipt.

2) eligible professionals engaged in any of the following professions:
• Legal
• Medical
• Engineering
• Architecture
• Accountancy
• Technical consultancy
• Interior decoration
• Other notified professionals
o Authorized representatives
o Film Artists
o Certain sports related persons
o Company Secretaries and
o Information technology

3) All deductions from sections 30 to 38 (including depreciation and un-absorbed depreciation / allowances) shall be deemed as allowed

4) Assessee need not maintain books required to be kept u/s 44AA. • Assessee need not get the accounts audited u/s 44AB

5) If both the following conditions are satisfied, maintenance of accounts and audit are warranted: 
• Income from profession is offered at a rate lower than 50% of gross receipts AND 
• Total income of the assessee exceeds the basic exemption limit.

6)A  person  opting  for  the  presumptive  taxation  scheme  of  section  44ADA  is   liable  to  pay  
advance tax. 

7) Any person who is eligible to avail the scheme of Presumptive taxation can opt for the scheme any time.
 a person can opt out of the scheme at any time . however , if the person opts out of the scheme then he can not avail the benefit of the scheme for the next 5 years.
Suppose an eligible assessee declares his income under Section 44AD(1) for A.Y. 2017-18. Then as per new Section 44AD(4), he has to file returns for next 5 assessment years i.e. from A.Y. 18-19 to A.Y. 2022-23 by declaring his total income by applying section 44AD(1).

Now, if the link breaks in between and say in A.Y. 2020-21 assessee (having turnover below 2 Crores) do not opt for section 44AD(1) regime, then he shall not be eligible to take benefit of section 44AD for next 5 assessment years i.e. from A.Y. 2021-22 to 2025-26!

The decision as to whether this provision is to be adopted or not varies from case to case and the decision depends on the following parameters:

o Quantum of actual expenditure (i.e. not advisable for a professional having small net profit ratio)

o Interest on borrowings

o Depreciation available

o Quality of accounting systems etc.
Vishakha Agarwal
CA, Bangalore
210 Answers
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 you can contact me at this number +919538801976
Vishakha Agarwal
CA, Bangalore
210 Answers
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  Talk to Vishakha Agarwal
Dear Sir,

Section 44ADA benefit is only available in the case of individuals,HUF and partnership firm. It is not available in the case of company.

Section 44ADA allows eligible prodessionals to pay 50% tax on their gross receipts.

We can help you in this regards. You can mail me or call me via the facility of call an expert.

Feel free to give me a call via call an expert option.

Thanks and Regards
Abhishek Dugar
CA CS B.Com
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
761 Answers
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Hope your query is answered, if not mail us on modani005@gmail.com
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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