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Indians: Tax On Money Received From Payment Processors? Please Share your Knowledge.

Discussion in 'Payment Processing' started by Helvetii, Nov 8, 2009.

  1. #1
    Hi,
    Since the last few months I have started to earn serious income via the internet and this has got me worried about what to do on 31st March. I currently fall in the 30% tax Bracket (probably surcharge too) I have read quite a few threads about Taxation laws on online Income but none seem to be reliable.

    So I have created this thread to discuss the topic. I'll, with the help of few members try to arrange for credible and reliable information on tax laws and possible ways of Tax Saving.

    Please Keep this thread crap free. Don't fight over here, it helps no one.

    Feel free to share your knowledge with us but please see to it that if you are unsure of the information to post then do let us know so.

    Please Provide any information you have about the following these:

    1) Avoiding/Saving Tax:
    - Dealing via Cash through Western Union, Xoom etc.
    - Showing your Income as FreeLance (Which form to fill? What documents to be attached?)
    - Showing Expenses to reduce profits (How to do it?)
    - PPF,NCS etc.
    - Any other way of avoiding/reducing Tax

    2) Requirements
    - If you file tax how do you show your Income from Paypal/AM etc.? Do you attach any screenshots/Print Outs from your Paypal account?
    - Need for IEC?
    - Need for registration with FEMA
    - SOFTEX
    - Tax Holiday for dealing in Foreign Exchange (?)
    - Any other information regarding Export of services/Generating Factor Income from ROW.

    3) How does Paypal transfer funds?
    - When we make withdrawals from Paypal, how does the funds reach our bank account? From what I understand PayPal converts it to Rs. first and then sends it to PayPal India which sends funds to our Bank via NEFT. But some people say that the payment is sent in USD via CitiBank Singapore through WireTransfer. I am confused as to which is correct.

    I'll be contacting Paypal Regarding how they route funds and update you all with it.

    Can we have some volunteer to ask this Question to Tax Experts on Zee Business/CNBC etc.? I would have done it myself but I have no experience and don't want to mess it up as we get only one chance at it. If you are willing to ask the question on behalf of all of us please post in this thread and we'll tell you what exactly to ask. We must get it right else the answer may not clear our doubts.

    -Helvetii
     
    Last edited: Nov 8, 2009
    Helvetii, Nov 8, 2009 IP
  2. AaRGeE

    AaRGeE Notable Member

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    #2
    Simple Steps:

    Saving Account
    Always Transfer Money Less than 50,000 INR
    Always Withdraw Money Less than 50,000 INR

    Applies to Each Transaction Only!

    It will be counted as Black Money (does this matter?) To make it White Money ..as you know so goto any Chartered Accountant and he will help to save fee!
     
    AaRGeE, Nov 8, 2009 IP
    merlinseo likes this.
  3. YTOLIA

    YTOLIA Peon

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    #3
    and Keep fund u withdraws from paypal below Rs.50000
    and also i think that first route of transfer is correct

    thanks
     
    YTOLIA, Nov 8, 2009 IP
  4. indiarahul

    indiarahul Peon

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    #4

    There are many points that you have not cleared
    1) What you deal in?
    Goods or Services ( I assume its Services)
    2) Where is the service provided
    India Abroad (I assume Abroad)


    Tax Saving


    You need to consider that there are two types of taxes that are applicable to you

    A] Service Tax (10.36%)
    B] Income Tax


    A] Service Tax (10.36%)

    When is it applicable?
    To be honest almost all services are now covered by service tax so I am 100% sure that you will fall in Service Tax basket

    If you have a turnover of more than 10 Lac in a given financial year selling services then you are liable to pay service tax @ 10.36% then comes the issue of Income tax. Note that if once Service tax limit is crossed 10 Lac from next financial year you have to pay service tax on every single rupee.

    Service tax Exemptions

    1) Export of service without payment of service tax permissible, if such service is provided outside India (Refer Export of Services Rules, 2005).

    2) Payment for such services is received in convertible foreign exchange

    Now due to rule 2 their is a problem receiving funds from Paypal
    Paypal makes a NEFT transfer to your account so its considered as a domestic transfer as paypal does not provide (FIRC Foreign Inward Remittance Certificate) all the income will be liable for service tax

    In a nutsell if your bank provides FIRC for the funds received then you are Exempted from Service Tax



    B] Income Tax
    Its stright forward calculate net income & pay as per the bracket you fall in there are few tax Exemptions E,g. PPF 80 C etc....

    Good news of this front too as per new slabls you pay less
    E.g.
    (1) Where the total income does not exceed Rs 1,60,000
    NIL

    (2) Where the total income exceeds Rs 1,60,000, but does not exceed Rs 10,00,000
    10 per cent of the amount by which the total income exceeds Rs 1,60,000

    (3) Where the total income exceeds Rs 10,00,000 but does not exceed Rs 25,00,000
    Rs 84,000 plus 20 per cent of the amount by which the total income exceeds Rs 10,00,000

    (4) Where the total income exceeds Rs 25,00,000
    Rs 3,84,000 plus 30 per cent of the amount by which the total income exceeds Rs 25,00,000



    Very Very Important

    Dealing via Cash through Western Union

    1) You are only allowed to received money for personal matters not for business
    2) 12/15 Transaction allowed in a calender year
    3) Large Transfers are made directly to your bank account.

    be very very careful in WU as voilation could land you in serious trouble not to mention central govt enforcement cases against you.

    If you are receiving cash then there is no need to pay any taxes ;)



    If you have any queries PM me

    Bye
    Rahul.

    Bye
     
    Last edited: Nov 8, 2009
    indiarahul, Nov 8, 2009 IP
  5. radhika.writer

    radhika.writer Active Member

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    #5
    Thanks for all this info, how ever i was familiar with all these details and to let you know all these points are enforced on me as my annual income goes above 10 lacs for this year.

    My most of the income is from CPA which I tackle on my own plus I also have one web development company but that's under partnership and CPA has nothing to do with it.

    I have bought few policies also to get tax rebate but that is not enough, can you tell me how can I save more tax. I am ready to pay some tax but the amount they are asking is not bearable.

    Any advice??

    Thanks in advance.
     
    radhika.writer, Nov 8, 2009 IP
  6. bhuvasona

    bhuvasona Guest

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    #6

    Contact any Chartered accountant and he will help u the best. Dont worry about their charges coz u will get cheap ones for cheap rates but prefer someone who has done some work for your friends or someone you know personally and take their advice about which CA is best.
     
    bhuvasona, Nov 8, 2009 IP
  7. bhuvasona

    bhuvasona Guest

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    #7

    YES very much right. Being an indian paying taxes in india means u paying politicians to fill their swiss bank accounts. :mad:
     
    bhuvasona, Nov 9, 2009 IP
  8. deluxdon

    deluxdon Catch Me If You Can...!!!™ Staff

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    #8
    You can invest upto 1 lakh (lic,nsc,ppf etc.) to save tax.

    DON.
     
    deluxdon, Nov 9, 2009 IP
    arpitagarwal82 likes this.
  9. radhika.writer

    radhika.writer Active Member

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    #9
    I did everything.... and still now if I pay tax according to gov regulations my tax goes upto 5 lacs. And this is the big amount to pay as a tax to Gov, specially when they don't do anything good to us.
     
    radhika.writer, Nov 9, 2009 IP
  10. Helvetii

    Helvetii Notable Member

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    #10
    Yes it works up to an extent. But when you receive funds which reach 7 figures then even that doesn't help. The last thing we need is a IT raid. Believe me, with amount greater than 10 lakhs and no Tax its very much possible.


    I deal in both Goods (intangible) and services. Is there any provision for any tax on that? If there's no tax then I can claim all of it to be for such goods.

    I'll have to confirm with PayPal regarding how they send payment and whether I can request it to be sent in USD?

    One option I have thought of is to open a Bank account in US, withdraw funds there and wire the money to my Savings account. What do you think about that? :)

    I had politely requested everyone to keep this thread crap free :(

    I'm afraid that it doesn't help much in some of our cases. Probably saves just a few thousand rupees in tax.
     
    Helvetii, Nov 9, 2009 IP
  11. indiarahul

    indiarahul Peon

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    #11
    radhika.writer
    I assume by tax means income tax then you can go for depriciation ( E.g. Purchase a car ) its better to spend on car than paying taxes

    Another way to reduce Income Tax is to show more business expenses
    E.g.
    add fake employees (your family members who have bank account & who might return your money) you will be able to distribute your profit

    or

    Pay rent to any of your close relative or friend ( & reverse it later on)

    contact your CA he will have more brillient ideas :)


    I deal in both Goods (intangible) and services. Is there any provision for any tax on that? If there's no tax then I can claim all of it to be for such goods.

    Goods i dont know as it again depends where are you selling them
    Services as I had mentioned if you see all the recent amendments in service tax almost all services are covered in service tax net




    I'll have to confirm with PayPal regarding how they send payment and whether I can request it to be sent in USD?

    I have already confirm with PayPal they do not provide FIRC ceritificate or money in USD


    One option I have thought of is to open a Bank account in US, withdraw funds there and wire the money to my Savings account. What do you think about that? :)

    That might be a good idea but is it possible to open a US bank account from INDIA ?
     
    Last edited: Nov 9, 2009
    indiarahul, Nov 9, 2009 IP
  12. ractors

    ractors Well-Known Member

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    #12
    This will not help in foreign earnings. Every foreign transaction monitor via FERA. No matter that is $10 or $10000.

    So better is take advice from CA and always fill your taxes within time.
     
    ractors, Nov 9, 2009 IP
  13. Helvetii

    Helvetii Notable Member

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    #13
    Not a Bank account but you can open a trading account with etrade.com etc. They can be funded via paypal and then they'll wire the money to your bank when you make a withdrawal.

    How can we show fake expenses?
    I mean which form will we have to fill?
    Will we have to register a company/concern/etc.?
    Will we have to fake cash vouchers/documents?
    What all will be have to attach while filing ITR?
     
    Helvetii, Nov 9, 2009 IP
  14. radhika.writer

    radhika.writer Active Member

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    #14
    I think these are good ideas to save some more tax...I can ask my clients to pay some money on my mothers name and the money that will come under my name can right off as such expenses.

    Thanks for the idea..
     
    radhika.writer, Nov 9, 2009 IP
  15. bhuvasona

    bhuvasona Guest

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    #15
    Yea dont pay indian tax. its a joke. all our tax money going to swiss bank and the only person who can help us is a CA who can giv millions of ideas to save taxes.

    Open up a company and transfer ur paypal account to your registered company name.
    everything u buy eg: car,ur phone bills, ur house rent, pay it frm ur company account and show it as ur company expenses.
     
    bhuvasona, Nov 9, 2009 IP
  16. indiarahul

    indiarahul Peon

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    #16
    >How can we show fake expenses?
    Just like what satyam did ;)

    Show people whom you trust on your payroll (make sure that they will return the money when your provide them the pay cheque)

    E.g. I can show cousine who goes to college but who has a bank account a salary of 10,000
    (10K * 12 Months = 1,20,000=00, as his annual income is below the incometax slab he does not need to pay incometax) you can show that your cousine works for you for which you have paid him salary of 1.2 lac per year so 1.2 Lac is your business expenses
    no proof is required as you are paying him by cheque do check if professional tax is appicble as in the case in maharashtra but dont you worry that nominal.

    Now demand your cousine to return the salary you paid so you have 1.2 lac of unaccounted money
     
    indiarahul, Nov 9, 2009 IP
  17. Helvetii

    Helvetii Notable Member

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    #17
    Thanks, but will it be safe to deposit those 1.2 lakh in a bank or would we have to spend it/keep as cash?
     
    Helvetii, Nov 9, 2009 IP
  18. deluxdon

    deluxdon Catch Me If You Can...!!!™ Staff

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    #18
    No need to deposit those 1.2 lakh in a bank account otherwise its same (taxable) :p Either spend it or invest it in kvp or something like that (black money) :D

    DON.
     
    deluxdon, Nov 9, 2009 IP
  19. indiarahul

    indiarahul Peon

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    #19
    Buy cloths, go partying, go on holiday or just buy gold

    you can do use that money for all your non business related expenses
     
    indiarahul, Nov 9, 2009 IP
  20. sachin410

    sachin410 Prominent Member

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    #20
    if you are in taxable bracket, you will need a CA sooner or later.

    don't waste your time on this forum, consult a good CA and he will do everything for you.

    don't try to evade taxes beyond a point.

    the guys at IT department aren't fools.

    they know more about tax evasion than any CA does.

    if they get the slightest hint that you are evading taxes in a big way, they can make life very very difficult for you.

    and also if you are going to file a return, maintain proper records of all transactions.

    sometimes, IT guys ask for such details....these can be from earlier years too for which you haven't filed returns.
     
    sachin410, Nov 9, 2009 IP