Hello,
I am a resident Indian and I file my IT returns showing P/L from trading F&O as business Income. My accounts are liable to be audited u/s 44AB. I have friend settled abroad, would be classified as non-resident as per IT laws. I executed few trades on my friend's behalf through my trading account and now I need to transfer the profits(more than Rs. 5 lakhs) to my friend. Now, the query is how should I show the transfer of profit to my friend's account so that I am not liable for the Income Tax for his share of profits?
Options considered:
1) Show the profits as payment made for consultancy/advisory services provided by my friend and transfer the amount to an NRO account maintained by my friend in India. In this case, since I am making payment to non-resident, I am not sure if I need to deduct TDS (194J is only for resident) or follow any additional documentation. Also, since this might be classified as foreign payment for services, should I try to avoid this route.
2) show the profits as payment made for consultancy/advisory services provided by my friend's father/mother. Here, parents are resident Indians. In this case, i think i have to deduct 10% TDS u/s 194J.
Please suggest if any of the above options are feasible or any alternate method to transfer profits to my friend.