Tax on profits in US markets

[ndtrader]

Two of my US based friends are algo trading their personal portfolios. If I provide some help in algo development, they are ready so share the profit with me. However, the profit they make with their account will be taxed according to the US tax rates. If they share a percentage of profit with me, will I have to pay taxes on them? What will be the tax rates and what deductions can I avail? Is there any way to get this income tax free? Paying tax twice will rob me of all the profits !

 

[nac]

It will be more like service export, you will have to pay tax here in India. I guess they can show the money they pay you as expenses in their book.
Better ask an auditor about this.

 

[timepass]

Maybe if the amount is significant and they are showing your consultation fees in their books of accounts, then some US taxes too will be applicable.

 

[ndtrader]

This is rather frustrating actually. I thought US & India had a double taxation avoidance treaty. Doesn't that protect against such scenarios?

 

[timepass]

Ask your CA. And ask your friends in USA to ask their CA.

 

[canikhil]

This is rather frustrating actually. I thought US & India had a double taxation avoidance treaty. Doesn't that protect against such scenarios?

double taxation provisions will trigger only if there is a tax deduction against you as an Individual in USA. Then you can claim credit for the taxes paid by you (or withheld from the payment made to you) against your Indian tax liability.

You need to plan your business activities in the manner that is appropriate for DTAA benefits.

At present your model is not the best one to work with.

 

[ndtrader]

What other options can I explore? I am not going to be billing them formally, but can consider doing it if that helps. I am open to exploring practically any other option also. Just don't want to do all the hard work and have the meager profits taken away.