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Tax treatment for online income in India?

Discussion in 'Business & Tax Advice' started by webguru, Oct 21, 2012.

  1. webguru

    webguru Newbie

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    I am providing SEO services to my overseas clients from India since last few years. I also do affiliate marketing, site flipping, etc. I have a sole proprietorship firm registered and am paying income tax as per the rules. My clients pay me mostly via Paypal in foreign currency and the money reaches in my business account in bank in Indian Rupees. Paypal has my PAN card in their records and currently I am withdrawing the money from PP under "Software consultancy" purpose code.

    But I am not sure what kind of income it is actually which freelancers and small SEO companies like us are getting from abroad and what should be the correct tax treatment for it. Should we register the firm under service tax if it is a service? Or should we get a export license if its export of services? or VAT?

    I read somewhere that tax is exempted on export of services in India. Are we eligible for that? Someone on another thread pointed out that firms registered under SEZ are exempted from any tax for 5 years but I have no idea how it works. I am not sure what should be the best accounting option for me.

    My current receipts are about 11L and profits are like 2.5 Lakhs annually as per my last ITR and its growing each year. So I need to know how should I do it correctly from now onwards so that its convenient in long run if the business grows more and more from here. Can anyone of the Indian friends here give some advice on this please?
     
  2. tashrif

    tashrif BANNED BANNED

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    Looking for answer to this question.
     
  3. indianbill007

    indianbill007 Jr. VIP Jr. VIP

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    You can form a company and get it registered under STPI and get 5 years of corporate tax exemption.
     
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  4. creativepotion

    creativepotion Regular Member

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    I think its best for you to consult an accountant. Seeing your business is growing, you will eventually need one anyways right?
     
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  5. webguru

    webguru Newbie

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    I checked the STPI website after your advice. I think there are so many govt. procedures and formalities in this which needs to be followed to get registered under STPI, but in the long run it would be convenient. I am not sure if I would be eligible for this or not since mine is not so big company as of now and may not fit well with certain criterias. But I will research it further, thanks!!

    Yes, my current CA is clueless on the latest scenario in this field. So I would need a better accountant since this FY, I think I will make 3X of my last year's earnings.

    Any other options guys?
     
  6. domenic

    domenic Newbie

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    def contact a consultant
     
  7. virtual.indiano

    virtual.indiano Regular Member

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    You will not have to pay service tax or vat as your services are outside the boundaries of India. You can get exemption for taxes for being an entrepreneur and also bringing in foreign currency. My case is a little different than yours so I cannot explain you more but look online for consultants who help small business like you. You will get exemptions just make sure you lookout for a proper person.
     
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  8. ranga

    ranga Regular Member

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    Stpi exemption was abolished long time ago, right now the only exemption from income tax available is if you open a unit in SEZ and its a big hassle with Sez located long way from cities and is mainly for big companies.

    You full income is taxable in India, but you are not liable to charge service tax as the service is being provided outside India and is considered export of services. Also if the software you sell is not off the shelf like Ms Office then it is not liable to sales tax

    Payal is providing all info regarding transactions by Indians to RBI so don't think of hiding that Income. The only option left for you is intelligent tax planning but still be ready to pay some amount of taxes.

    I hope that clears some doubts.

    btw, I may not monitor this thread so if you have any other doubts pls PM along with writing on this thread

    regards,
     
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  9. indianbill007

    indianbill007 Jr. VIP Jr. VIP

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    I just renewed a 5 year contract with STPI for one of my companies, its registered as a 100% EOU(export oriented unit). STPI scheme has been extended till 2020 fyi. You can find more info at your city's STP office, if you have one in your city.
     
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  10. thewebduke

    thewebduke Regular Member

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    Anyone of you based in Bangalore?
     
  11. GauravJ

    GauravJ Power Member

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    Yes,
    STPI is really beneficial not only from tax point of view but also because of other benefits such as duty-free imports
    under EPCG scheme etc and also business allowances on foreign trips etc.

    But what is a most problematic one is dealing with excise officials and other compliance reports.
    Further, add to this Indian bureaucratic scenario and corrupt officials....really a big headache.

    What i advice you is that after you cross 2.5 Mn INR(current min limit setting up a star export house) start thinking about STPI
    otherwise costs will be more than benefits of getting into it.

    Also, If your gross receipts from domestic receipts doesn't cross 1 Mn INR then only you are required for service tax payment and it has no relation with export turnover.
     
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  12. nithinreddy

    nithinreddy Junior Member

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    Any idea of how much cost is involved in setting up one withSTPI?
     
  13. GauravJ

    GauravJ Power Member

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    Hey Buddy, You want to set up a STPI or unit in a STPI?
    Well for setting up a STPI you needs to be real estate developer and also has to get other necessary nods and clearances from various government departments and needs Crores of Investmtnet

    In case you are interested in set-up a unit in a STPI?
    cost of setting up one depends on STPI city in which you are interested in.
    Feel free to PM me to discuss more into this.
     
  14. Mr.Whitehat

    Mr.Whitehat Senior Member

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    sry to bump this. but could anyone tell the affiliate income m earning from outside India is taxable when it reaches my bank account? i dont run any businesses atm, i am an affiliate marketer making bit high amounts. could anyone shed some light? Thanks

    EDIT: never mind. i read some threads and got answer!
     
    Last edited: Mar 9, 2013
  15. Nagad

    Nagad BANNED BANNED

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    Please post the thread links.Would be helpful for me and others as well.
     
  16. desi_indian

    desi_indian Registered Member

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    2.5 L current non taxable income is 1.80L for men just use two paypal one on your wife name
    women have 1.90L non tax able so divide it and don't forget to file return
    i think you will +rep me for this info
     
  17. staycoolmen2006

    staycoolmen2006 Regular Member

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  18. paichuu

    paichuu Newbie

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    One of my friend doing CA ....Suggested me that I can avail benefits of Sec 44 AD of Indian contract act .....In nutshell if your earning belongs to "Income from Business and profession" head .....and your turnover is below 1cr ....thn you can assume your net profit to be 8% of your total turnover .....

    for example if your total turnover is 30 lakh thn just calculate 8% of it which is 2.40 lakh and pay the tax on this 2.40 lakh.....
     
  19. nitinsgrover

    nitinsgrover Newbie

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    Dear Friend
    There is No Tax Liability on you if you are providing Service Out of India. Its deemed under Export of Services. So, its exempt from payment of Tax.
    with this you may apply for Refund of Service Tax which you have paid in India for eg. Service Tax on Telephone Bill, Internet Bill, Maintenance Charges, Rent, Service Tax on any other Invoice.

    You also do not need to pay VAT / CST / Sales Tax.


    you just need to file Income Tax Return.

    Hope so its cleared to you.

    for further any details please ask to me.


    Thanks and Regards Always :)

    CS Nitin Grover
    +91 - 95 82 00 94 94




     
    Last edited: Dec 31, 2013
  20. Sristy

    Sristy Jr. VIP Jr. VIP Premium Member

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    Thought i will update this thread with some latest info on service tax exemption. You need to note two things in primary stage. 1) payment is made in convertible foreign exchange through proper banking channels 2) service is consumed outside the territory of india. If both criteria is confirmed then no service tax liability on a SEO or similar service provider.