Hi,
I have a partnership firm (we are two partners, no employees as of now). We follow 44ad section for tax filing. My HDFC RM recommended me the following way to save tax. I am not sure if this is correct or not so asking here.
He said to make the investments in mutual funds in name of firm on behalf of partners. This will bring down the profits and hence tax. Is this true? Is this a legal way to reduce taxes?
If not, is there any specific ratio a partnership firm must follow to invest some idle capital? Let’s say there is 50 rs lying idle in the bank account. Rs 2 is the minimum balance required. For the rest let’s say 40 (keeping some extra amount for expenses), can one invest the whole amount in mf on behalf of firm? Will this invite scrutiny? Or one must follow some specific ratio for firm and partners?
My CA tells me not to invest on behalf of firm and better to invest in name of individual partners only.
Thanks.