I am following this tutorial, and have wired Arduino using this diagram:

This is what it looks like:

These options are selected in Arduino IDE:

This is the program I'm uploading:
// the setup function runs once when you press reset or power the board
void setup() {
// initialize digital pin LED_BUILTIN as an output.
pinMode(9, OUTPUT);
digitalWrite(9, HIGH);
}
// the loop function runs over and over again forever
void loop() {
digitalWrite(9, HIGH); // turn the LED on (HIGH is the voltage level)
delay(1000); // wait for a second
digitalWrite(9, LOW); // turn the LED off by making the voltage LOW
delay(1000); // wait for a second
}
When I upload it, it's uploaded on the Atmega on arduino board, not the one on breadboard. Both chips are ATMEGA328P.
I also tried to put 10μF capacitor between GND and RESET pins of the arduino board, which led to following errors:
avrdude: stk500_recv(): programmer is not responding
avrdude: stk500_getsync() attempt 1 of 10: not in sync: resp=0x38
avrdude: stk500_getsync() attempt 2 of 10: not in sync: resp=0xe0
avrdude: stk500_getsync() attempt 3 of 10: not in sync: resp=0xe0
avrdude: stk500_getsync() attempt 4 of 10: not in sync: resp=0xe0
avrdude: stk500_getsync() attempt 5 of 10: not in sync: resp=0x00
avrdude: stk500_getsync() attempt 6 of 10: not in sync: resp=0xe0
avrdude: stk500_getsync() attempt 7 of 10: not in sync: resp=0xe0
avrdude: stk500_getsync() attempt 8 of 10: not in sync: resp=0xe0
avrdude: stk500_getsync() attempt 9 of 10: not in sync: resp=0x00
avrdude: stk500_getsync() attempt 10 of 10: not in sync: resp=0xe0
Problem uploading to board. See http://www.arduino.cc/en/Guide/Troubleshooting#upload for suggestions.
Note that I have a homemade ATTINY programmer shield for this arduino board and it works without problems.