Ram and Sham want to start a business, the estimated profit of which for the year is Rs. 12,00,000 they

have two options for selecting a form of organization.

a) A partnership firm

i) 10% interest on capital of Rs. 10,00,000 each

ii) Salary of Rs 2,00,000 p.a each

iii) Equal distribution of remaining profit

b) A Company

i) Rs. 6,00,000 each as a share capital and Rs. 3,00,000 each as a loan at 10%

ii) Salary of Rs. 2,00,000 p.a. each

iii) Distribution of remaining profit as dividend equally

Which option is better for tax point of view.

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