How to Calculate Tax with the amount in Paypal? [Indian Users]

Hello!

We all calculate income on the basis of financial year income ie. April to March. And then pay taxes if applicable.

I have a query. Do we need to compulsorily withdraw each and every penny from Paypal Account just to compute total taxable income before 31st March?

I mean suppose I earned 1 lac rupees income till now and another 2K $ are in Paypal account. What if I do not require that 2K $ now and wait for better exchange rate?

Can I calculate 1lac + approx 2000 x 44 = 88000 i.e 1,88000 as my total Income? (I have taken 44 as exchange rate as it has been around that figure since last month.) OR DO I HAVE TO MANDATORY WITHDRAW THE WHOLE 2$ JUST FOR COMPUTING THE CORRECT INCOME?

I do file my returns and pay some tax too.. but do I need to withdraw.. is my Query please.. If yes, all of you here in the forum do not have ANY AMOUNT at all as on 31st March in Paypal? This sounds bit illogical and there has to be a way out.. Please advise experts...

Regards

Jeet

 

u put good query here, in fact i m also looking for this answer, i hope we will get it soonly.

 

I have no proper idea, but I think, since paypal has come under RBI watch, anything that you get in paypal is your income, and any amount you pay through paypal is your expenses. So calculate on overall basis.

 

Hello!

I got your point. Infact I was applying the same theory even before PP came under RBI scanner.

My query is different. I am asking do we need to withdraw every money out of Paypal before March 31st?

Time is running out.. Hope some experts pour their opinion here and what they excatly do in this situation

Regards

Jeet

 

to the OP if you are doing genuine business and want to be genuine with RBI then you should withdraw your whole amount form Paypal to your bank and then fill the taxes if applicable. and if you want to hide no one will going to ask you why you didn't withdrawal that amount? RBI always seeks big fishes.. so you ain't not to afraid about it.

Just imagine if you even withdraw the amount right now then your total taxable income ll be only 188000-160000= 28000. and according to current tax you ll fall in 160000-500000 range and you need to pay 10% ie. it ll be only 2800 INR and yeah you can even save that amount by showing some expenses like broadband, electricity, various office expenses etc.. so you don't need to afraid at all abt income tax mate.. and even if you withdraw and don't fill the taxes no one ll going to query you for just 2800 INR tax..

hope it helps.

 

There is something called windiow transactions which goes from March to April.
i.e the work you did but payments still not under books and may come next year.You have to show these transactions in past year and pay tax.

with paypal etc... there is no way to know clearly to any one.Just show few thousand INR you receive in April first week as income of past year.This way if IT dept . raise a doubt you can show them you already taken care of these transaction.

even people do it even no actual window transaction as it just avoid trouble with IT dept.

there is also a reverse way,the payments you receive in march but was advance payments for work,You can show them as Income of next year and avoid tax till next year.
Not worth to pain with them if small ammount but if you deals in millions it may save you several thousand in Taxes as you can earn interest on them for 1 full year.

 

Well tax is not applicable on income only it will be on total profitable income, when you earn money it's oblivious that you are spending money infrastructure and paying bills, wages and other. So when you file return show as much spending as you can to avoid taxes, you can also save taxes by doing investment in 80 C offers.

 

^^ well yes and we can also take rebates by investing in LIC policies buying some govt. funds investing in PPF etc..

 

safe idea : ask your accountant who files your taxes. However you can show the remaining amount on you balance sheet even without withdrwaing it to your bank account, since paypal is now validated so you can show that your remaining amount is still on your paypal account and calculate tax accordingly (Including the amount which is in your paypal account). In future if you withdraw that amount then you will be safe as you showed them in your books earlier. But still ask your accountant first.

 

Hi

Thank you everyone for your opinion.

In particular to your solution..it looks logical.. But there is one hurdle.. we can never predict the exchange rate It could be 44.xx or 44.yy or 45 etc.. So the exact income can only be known when you withdraw on a particular day before 31st March so you know what exchange rate you withdrew.

Any comments on this one please?

Regards
Jeet

 

Its safe to consider income withdraw to Banks as only real income.Rest of money is still in Air.Can be chargebacked,Paypal get corrupted,account hacked or whatever.

 

Only if u withdraw the funds then it will be taxable i mean u dont pay tax on ur paypal balance as its not an indian company holding ur money

 

Hi Bohra

Nice creative thoughts indeed Kidding!

It sounds too good to be true.


Are you sure we can do that. I mean whether PP is a foreign company or not..you have YOUR money in it.. I do not think RBI or the IT will buy that theory from you. If you think otherwise, please validate it. How many others support Bohra's opinion legally here?

That means if you have PP account balance of 10K$, you can still get away without paying any tax just because you have not withdrawn it... Can this be true? Come on people, please offer you thoughts.. After the recent scanner from RBI, this is issue is soon will be a concern for all of us.. regards

 

PayPal is Based in San Jose , California

So its under the United States & not India

PayPal funds at ur PayPal don't really affect anything ...

 

Its nice man that Paypal balance does not come under our tax income

 

So is it possible to spend the money from paypal like buying domain names, web hosting without showing them as tax income?

 

I think its possible to spend money online on domains or webhosting as your Paypal balance cannot be included as tax income.Only money which ypu withdraw to your bank account are considered as your tax income.

 

You all are true with the facts but the problem is that now paypal is approved by RBI that means there might be chance that RBI can ask paypal regarding balance in your account and then it would cause problem. Since RBI has forced paypal to take PAN Card details and paypal has to follow RBI rules, so who knows paypal will give your account balance information to RBI?

Also if a foreign bank operates in India then all your money in that bank doesn't means that your money is out of country so you can't show it. Paypal is also a bit similar though the only difference is that the money is not in India till it is deposited in your account, but that doesn't mean you don't own that money or havn't earned it. If you consider it in US then why you are not paying tax to US Govt. as money is in US??

The only safe way is to ask your accountant as he must have more information regarding this all. Don't go for speculations. You don't want to be penalized by Income Tax deptt, don't you?

After all, all the information given by other users are good but you can not hold any person responsible if anything happens after following their advice.