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Kamal Verma (Financial advisor) (582 Points)

13 July 2019

Dear experts, Presently we are running business in partnership firm but rate of income tax chargeable to partnership firm is 30%+cess+sc @ 12%(if income more than 01 crore). But tax rate for corporate entity is 25% + sc @ 7% if income is more than 01 crore. Kindly advise whether we should create company for least tax purpose.

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4 Replies

rishi (student) (408 Points)
Replied 13 July 2019

yes, go for company

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Murugan Shanmugam (109 Points)
Replied 13 July 2019

Income Tax Rates for AY 2019-20 / FY 2018-19 for Domestic Company. For the assessment year 2019-20, a domestic company is taxable at 30%. However, thetax rate would be 25% if turnover or gross receipt of thecompany does not exceed Rs. 250 crore in the previous year 2016-17.Below are the types of tax assesses who can adopt the provisions of presumptive taxation scheme Under Section 44AD :

Resident Individual tax payers

Hindu Undivided Families

Partnership Firm (except LLP or Limited Liability Partnership Firm)

Below conditions are to be satisfied for adopting presumptive taxation scheme under Section 44AD of the Income Tax Act:

The firm or individual’s gross receipt or annual turnover in the previous year should not have exceeded Rs. 2 crores.

you can opt 44ad if the income is less than 2cr

don't go for company

there is a lot of procedures involved in it

u have to file

annual return

adt-1

dpt-3

if your income is less than 2cr don't go for company otherwise go for company

Suresh Thiyagarajan (Student) (3986 Points)
Replied 14 July 2019

1. The best advice would be to go for a company. To be more precise get it registered as One Person Company.
2. But there are other angles too in deciding which form of entity that needs to be set up beside Tax angle. However, one person company will not burden you much with respect to compliances aspects but still some of the advantages of setting up a firm as follows,
i) Lower compliances compared to company
ii) Easy Administration
iii) Share of profit will not be taxable in the hands of partners.
iv) Easy introduction of a Capital.
Some of the above are very basic and general benefits.
3. However, if you are looking for something big and have a plan for expansion in the future, setting up a company would be best suitable. The decision should be not entirely based tax angle and other aspects should be also be considered in deciding the nature of an entity to be set up.
Hope my views are helpful.