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individual or sole proprietorship which one is better

Kaptommy (owner ) (39 Points)

20 February 2010

I am looking forward to start exports, online over internet and the will be working for a firm situated abroad through internet & there is no exchange of goods and i will receive the proceeds in form of commission in US dollars depending upon my performance. They will pay me commission or incentive. I will be receiving the forex proceeds in my own name.

Now the question arises that i want to get the maximum tax benifit. Should i continue to receive the proceeds in my own name or shall i open a sole proprietorship in my own name (ie the name of the sole proprietorship will just be my first and last name).

Which is better ? and what i have to do to get 100 % tax benifit.. ie i dont have to pay any tax on my export earnings.. Please clarify on this matter.

Thank you

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3 Replies

CA.SKR (CA; CS-Final (One Group); DISA (ICAI); Insolvency Professional) (442 Points)
Replied 21 February 2010

Originally posted by : Kaptommy
	Hi I am looking forward to start exports, online over internet and the will be working for a firm situated abroad through internet & there is no exchange of goods and i will receive the proceeds in form of commission in US dollars depending upon my performance. They will pay me commission or incentive. I will be receiving the forex proceeds in my own name. Now the question arises that i want to get the maximum tax benifit. Should i continue to receive the proceeds in my own name or shall i open a sole proprietorship in my own name (ie the name of the sole proprietorship will just be my first and last name). Which is better ? and what i have to do to get 100 % tax benifit.. ie i dont have to pay any tax on my export earnings.. Please clarify on this matter. Thank you

The commission received by you will be taxable as Business Income. As far as income tax is concerned, there is no difference between the individual and his sole proprietorship firm. Both are same. Commission income received by a resident in forex is not exempt. You have to pay tax as per your tax slab.

It is better to have seperate entity for doing business, since you have to maitain books of accounts for your business and you have to make Balance Sheet and Profit & Loss A/c of your business.

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Kaptommy (owner ) (39 Points)
Replied 26 February 2010

Can u pls explain one thing .. that suppose i open my company a proprietorsip firm in STPI (software & technology park of india ) on 15th march 2010. and my profit for the year 1 april 2010 to 31st march 2011is Rs 1 crore . what is my tax incidence. can i keep 100 % of this profit ? or if i need to pay any tax then how ill it be computed or what type of tax will i b required to pay ?

Thank you