How Top Traders Avoid Tax
60sReveals insider tax strategies used by wealthy traders, sparking curiosity and debate.
▶ Play ClipAI Summary
This video explains tax-saving strategies used by high-income traders and investors in India, focusing on methods like using family accounts, forming a Hindu Undivided Family (HUF), and setting up a private limited company to reduce tax liability. The creator shares personal insights and examples, including a comparison of tax rates for individuals versus companies.
Chapters
[00:43]
Introduction to Tax Saving for High Earners
The video discusses tax-saving tricks used by people earning 20 lakhs, 30 lakhs, 50 lakhs, or crores from trading and investments.
[04:39]
Using Family Accounts
High earners often trade through multiple family members' Demat accounts to split income and stay below higher tax brackets, avoiding the 30% income tax slab.
[06:06]
Hindu Undivided Family (HUF)
Forming an HUF with family members creates another tax entity with its own 2.5 lakh basic exemption limit, allowing additional tax savings up to 5 lakhs without tax.
[07:30]
Private Limited Company
For incomes above 1 crore, a private limited company can reduce tax from 39% to 25% (including surcharge and cess), but requires compliance and regulations.
[10:00]
Tax Comparison Example
On a 70 lakh profit, an individual pays around 32.5 lakh in tax, while a private limited company would pay significantly less, illustrating the benefit for high earners.
[12:06]
Dividends and Loans
Profits in a company can be taken as dividends (taxed again) or as loans (tax-free if not repaid), but personal expenses must be managed carefully to avoid additional tax.
[14:42]
Expense Management
Companies can deduct business expenses (like office equipment) before tax, whereas individuals pay tax on all income and then spend the remainder.
The video concludes that high-income traders use legal structures like HUFs and private limited companies to minimize taxes, but emphasizes the need for compliance and careful planning.
Tutorial Checklist
1
04:39
Open multiple Demat accounts in family members' names to split trading income and stay below higher tax slabs.
2
06:06
Form a Hindu Undivided Family (HUF) with family members to create a separate tax entity with its own exemption limit.
3
07:30
For incomes above 1 crore, incorporate a private limited company with at least two directors (e.g., spouse and child) to benefit from lower corporate tax rates.
4
10:00
Ensure all trading profits are routed through the company account, not personal accounts, to avail the 25% tax rate.
5
12:06
Take profits as loans from the company instead of dividends to avoid double taxation, but ensure loans are not repaid to keep them tax-free.
6
14:42
Claim business expenses (e.g., office equipment, rent) as deductions against company income to reduce taxable profit.
Study Flashcards (6)
What is the basic exemption limit for an individual under the Indian income tax system?
easy
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What is the basic exemption limit for an individual under the Indian income tax system?
easy
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2.5 lakhs
06:19
What is the maximum tax rate for individuals earning high income in India, including surcharge and cess?
medium
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What is the maximum tax rate for individuals earning high income in India, including surcharge and cess?
medium
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39%
08:13
What is the corporate tax rate for a private limited company, including surcharge and cess?
medium
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What is the corporate tax rate for a private limited company, including surcharge and cess?
medium
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25%
08:25
What is the tax-free income limit for an HUF (Hindu Undivided Family) after rebate?
medium
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What is the tax-free income limit for an HUF (Hindu Undivided Family) after rebate?
medium
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Up to 5 lakhs
06:48
How can high-income traders avoid the 30% income tax slab?
easy
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How can high-income traders avoid the 30% income tax slab?
easy
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By splitting income across multiple family members' Demat accounts.
04:39
What is the advantage of taking a loan from a private limited company instead of a dividend?
hard
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What is the advantage of taking a loan from a private limited company instead of a dividend?
hard
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Loans are not taxed as income, whereas dividends are taxed again.
12:34
💡 Key Takeaways
🔧
Family Account Splitting
Reveals a common but ethically questionable practice of using family accounts to reduce tax liability.
04:39
📊
HUF as a Tax Entity
Explains a legal structure that many traders overlook for tax savings.
06:06
💡
Private Limited Company Benefits
Highlights the significant tax rate difference (39% vs 25%) for high earners.
07:30
🔧
Loan vs Dividend Strategy
Provides a practical tip for minimizing double taxation on company profits.
12:34Full Transcript
[00:00] If you think this video's audio is dull If you think I am speaking in a low voice But my body is not good
[00:13] If I am speaking in a low voice in between Just this one video, remaining videos will be better Usually people who earn money from the stock market
[00:30] Trading, investment or any other route If they earn in large amounts 20 lakhs, 30 lakhs, 50 lakhs or more than 50, or in crores
[00:43] Let's talk about that in this video Genuinely showing you the yearly income What are the best tax saving tricks they use
[00:57] When we first showed the profits So if we think that the number is We think it will be higher than that
[01:12] Why did we change to a company account? Then why did we have to change to a company account? My brother already answered this in question and answer session
[01:25] If it haven't heard about it People earning less than 50 lakhs or more How they can save tax in large amounts
[01:39] If you find our efforts related to videos valuable Maybe by the time this video gets uploaded If any of you are asking when will we get a profit video related to our channel
[01:55] Friends, I have been updating this video for many months Listen to me once We are not thinking of making this video if we get profit
[02:10] It's like we are saying that about ourselves When you ask us like this It seems like it is generating a greed
[02:22] It was to show you that options selling is the best We are not getting the logic The decision I took from now on is related to trading
[02:35] Because the rest of the world is elevating profits We are not getting the logic to keep it as a crore Tell us your opinion in the comment section
[02:49] If there is nothing like that We don't need to display it in public If your opinion is different from ours
[03:02] Still, in these recent days, we are getting so many comments Even in that video, there are so many comments saying it will be a motivation You definitely should keep yearly profits
[03:17] If you think we should show it for this year as well If you think there is no requirement Because we took that decision
[03:29] If you want to show it for this financial year as well It is getting more likes What you are saying
[03:43] And planning that video in the upcoming days Okay, let's go to our video Usually, what the people earning more money do is
[03:57] Usually, what they do is Let's say, let's stick to the stock market When they feel it
[04:11] They feel that they can generate money following the same strategy or methods They start giving loans to the people living at home Let's say, I can give money to the people living at home as loans
[04:26] They will be doing activities from their Demat accounts I am not saying that you should do it and save the tax Let's talk step by step
[04:39] One account, another account Mostly, family members accounts I can generate a profit of 10 lakhs
[04:55] I can generate a profit of 10 lakhs even in the lowest case If there is one person other than me Because of trading in both the houses
[05:10] I don't have to pay two taxes here and there I thought it would be more We don't have this 30% income tax
[05:24] We can balance it up to 15 lakhs in the rest of the accounts Even if I get 60 lakhs in a financial year
[05:36] If we manage to get 15-15 lakhs with 4 accounts Because, who is doing this? This strategy, follow this strategy
[05:52] There are people who teach them to follow this strategy So, if we ignore weather it is ethical or not This is one of the ways
[06:06] It's called Hindu Undivided Family You can form this HUF with your family members To tell you more
[06:19] We have a 2.5 lakh basic exemption limit Then, we follow some income tax related things It becomes another person
[06:33] We can all get an income tax related exemption limit Additionally, we have formed HUF Exemption limit and rebate
[06:48] Without paying any tax up to 5 lakhs We can keep that as another person When they are below 1 crore
[07:03] Or less than 70 lakhs Or we can create a Hindu Undivided Family We can save taxes through that
[07:17] Or expenses and depreciations If we want to get advantages related to the companies in India Like Praveet Limited Company
[07:30] Soul Proprietorship And each company has its own advantages and disadvantages Why Private Limited Company?
[07:45] Private Limited Company has a lot of regulations We have to pay more taxes to the people who take care of our income tax No, I don't want to follow all the regulations
[07:59] Both have different tax treatment According to the current income tax slabs I am telling you by combining it with the reduced surcharge
[08:13] If a person earns a high income The highest tax on him is 39% It will be 39%
[08:25] I am telling you all these along with the base tax structure 22% of the total surcharge and cess will be 25%
[08:38] So there is 39% So if you earn 1 crore, 2 crore, 3 crore in total Then you can form a private limited company by keeping aside the personal income tax structure
[08:54] If you don't give profits to another person because you are not having any connection Keep 1% of the profit on their name
[09:06] If we keep that on our people You have to start the company with 2 persons Mostly wife and husband or mother and son
[09:18] They are called directors They are the directors of the company Directors give money to the company as loan
[09:32] Me and my brother Remember this well Now we have a relative uncle
[09:44] He can not give it directly to the company So if someone wants to add a person related to the company Let's talk about the tax first
[10:00] So it will be official for you to understand Select this assessment here After selecting
[10:14] This is entering related to F&O Means if I get a profit of 70 lakhs If I had kept a private limited company
[10:28] This is if I get 70 lakhs Individuals have to pay tax of 55 lakhs Out of this 1,30,00,000
[10:43] Means nearly 32,50,000 he would pay his tax So people who earn money in the huge amount They have clarity
[10:58] they don't trade through the individual accounts In the form of tax If it comes to 2 crores or above
[11:12] Paying tax at 39% In the form of tax We have to understand that it is through a private limited company
[11:25] One crore But 1 crore or 80 lakhs or 90 lakhs Then we can start this private limited company
[11:37] We have to follow more regulations time to time Let's say you want to buy properties on your name You want to buy properties on your name
[11:50] Through that company I have earned a profit of 2 crores 25% tax has gone above 2 crores There is 1.5 crore left
[12:06] Or if I want to build a house If I want to buy it on my name When should the company give a dividend
[12:20] The company paid the tax on the money that came If I want to give that profit to the shareholders If we have the majority of the shareholding
[12:34] But the twist here is If you put that money in your account The profits coming from the company
[12:47] 5 lakhs or 5 lakhs or 7 lakhs Depending on the expenses you want to do on your name
[13:00] Whatever is left to do When you need it We can take it as a loan
[13:13] It should be on your name for life In your personal bank accounts Your personal income tax will be applied on it
[13:25] You take it to your personal account Properly You have to take salaries like that
[13:37] You have to take it as a dividend You have to pay the tax again If you think you can take it as a loan
[13:50] And you can carry it for years That the big profits people follow Or a company
[14:03] For example, if the income is generated through FNO Private limited company? Like rent
[14:15] And if we want to trade in the stock market We try to get tax related benefits for buying a TV For every office related thing
[14:28] Even for the profits we get from trading To refresh my mind All these are for me personally
[14:42] From the income that comes So a normal person is And spends the remaining money
[14:54] Earns and uses all the expenses And pays the remaining tax And pays 20 rupees as tax
[15:10] Let's add one tax for both Pay 25 rupees tax In 100 rupees
[15:22] And spends the remaining 50 Individual person In the second case
[15:34] Only 50 rupees Means he pays 12.5 rupees tax For the normal person
[15:47] If we keep it for that And the A to Z required for our business They try to pay tax on the remaining expenses
[15:59] In a direct conversation with you I tried to keep it in a normal conversation What is the difference between LLP and Pvt Ltd.
[16:17] If you keep it in the comments section And in the upcoming sessions, I will try to answer the important questions
[16:29] I asked you feedback in the beginning If you like it, please like our video Please share it
[16:43] Watch the content in our channel And click on the bell icon next to it Till then take care
[16:56] Jai Hind
