Starting a Private Limited Company for tax saving purposes.

POSTED BY George ON November 22, 2012 6:56 pm COMMENTS (2)

Hi Manish,

 I currently work in a softare company and at the end of the year including the variable payout (if any) would be hitting the highest tax bracket. I have been reading articles on the internet regarding creation of a Private Limited company.

 I am aware that if I were to invest in a monthly/quarterly fixed deposit that income would be clubbed with my annual salary and be taxed.

 Assuming that I have a corpus of lets say 10 Lakhs, would it be appropriate to create a private limited company and have this money transferred to this company and then start a fixed deposit which will generate a monthly income.

 I would like to know if it would be beneficial in creating a private limited company to avail tax benefits on this income, the hassles of creating this company, etc.

 Woud appreciate you valuable response.

George.

 

2 replies on this article “Starting a Private Limited Company for tax saving purposes.”

  1. Bond Bhai says:

    My guess is, he wants to open a company. His current income + the income from his business will be taxed. If the company shows “losses” then he can claim “tax relief”! I have no idea if this can be done, and am just guessing here.

  2. But how will you save income tax that way ?

    First point is that the money you use for creating the company , that does not save you tax on the amount used . I mean you first need to pay tax on the money you have , then whatever is left, you can use that to build the company .

    Now when company makes any profit next year . still you pay tax on that . I am not sure of companies income tax laws in detail , but as far as i understand , they do not have lower limit for income taxes like 2 lacs in case of individuals .

    Can you give some examples on the SAVING TAX part on what you have thought ?

    Manish

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