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

^^ Probably Gold Biscuits would be good appropriation of Black Money

@Sachin: Ofcourse all of us will consult CA's but its good to do our Homework and Brainstorm Ideas before we go there. *Good* CA's charge an obscene fortune, so no point going to them as "noobs"

So we have some answers now:

1) Avoiding/Saving Tax:

- Dealing via Cash through Western Union, Xoom etc.
Can do it within a limit though it's illegal

- Showing your Income as FreeLance (Which form to fill? What documents to be attached?)

No information yet

- Showing Expenses to reduce profits (How to do it?)

http://forums.digitalpoint.com/showpost.php?p=12871290&postcount=16

- PPF,NCS etc.

Can save upto Rs. 1 lakh Under Section 80C

- 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?

Yet to be clarified.

- Need for IEC?

No need with PayPal unless you receive Payments in USD

- Need for registration with FEMA

No need with PayPal unless you receive Payments in USD

- SOFTEX

No need with PayPal unless you receive Payments in USD

- Tax Holiday for dealing in Foreign Exchange (?)

Not applicable with PayPal unless you receive Payments in USD

- Any other information regarding Export of services/Generating Factor Income from ROW.

3) How does Paypal transfer funds?

- 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.

Other Information:

-Need to Pay Service Tax
-Can avoid Tax by routing funds via a Foreign Bank Account.


Please feel free to correct/add information.

Still looking for volunteers to ask questions regarding "Tax rules on Freelance Income" on Television.

One Person has claimed that he has received/knows people who have payments goings into Crores/annum and claimed it all to be Freelance Income to avoid Tax. This option looks promising if its true. See these:

- Helvetii

 

Thanks, I heard it was 49,000 , Thanks for clearing i am glad its 1000 more

 

whatever you do in india buddy, serve anyone in the world, but what ever you do on indian soil, is taxable by the Indian govt. There could be some service tax excemptions. Just check about that at your nearest service tax office, but income tax is definitely applicable at current rates.

If you make loads of money, like atleast 1k a day, you can get an offshore bank account for about $800 usd, and deposit your money in there. Untill recently, you could have saved your money without tax in a swiss bank account for about 6% interest a year, but now the swiss govt has decided to tax any money earned as interest.

What I do is, I receive money at an offshore bank, and after a few months bring the money into india and invest it in the name of the offshore company in property. No tax, and you have the appericiation for your money that you deserve.

 

Oh! my dear friend while i am India i also a paid some tax
But not 30% you need only to pay 4.5% as VAT and only if you income exceeds 9 Lakhs INR
So you need not to worry about the 30%

 

and one more thing.

don't forget to pay "Professional Tax".

many webmasters aren't even aware that such a tax exists....

 

it is tax levied by the municipal corporation and it varies from state to state.

 

BS we havn't opened our shops in locality/residential areas like these professionals(doctors/ca) do, so I don't think we are liable.

 

Yes you are correct mate but I think professional tax will be applicable if you are an employee of any reputed firm having more than 20 employees. They will always deduct INR 200/Month from their employee salaries because they need to pay professional Tax. It is not applicable to freelancers...

 

there is no condition in the professional tax act wherein only those with shops/offices have to pay the tax.

many states include all professions by definition.

e.g.

in case of Tamil Nadu, anyone who is employed (self-employed or otherwise), is subject to professional tax.

http://www.tn.gov.in/dtp/professional-tax.htm

In some states, the tax rates vary according to the profession.

In some states, there is no professional tax. I think Haryana has no professional tax.

 

This is best advice on this thread,there is lot of crap posted by some members,try to contact CA.

 

Yeah that's also my advice
Since Internet incomes can't be tracked mate
They are more virtual!!

 

and what is RBI and Tax Department there for ? everyone has knowledge about the deposits that come in your bank account.

 

Havn't you seen 16Dec(Film) ? They don't even have the time for smaller fishes.

 

Quoted for truth. Get a good accountant. And it matters a lot how far into the 30% bracket you are. The only real way to avoid tax is set up dummy/benami entities, but this is not worth it for dealing in lakhs.

 

If you show your income as a freelancer, you still have to pay tax. You will be taxed on all your income no matter how you earn it (business income, salary, professional income, freelance income etc). Withdrawing or depositing less than 50k per transaction won't help much. Being an ex-banker (with ICICI Bank) I know for a fact that all banks in India submit the details of account holders who have a summation of more than 10 lakhs per financial year. Summation includes the total of all deposits and all withdrawals made in that year. Obviously several thousand accounts will meet this criteria and the Income Tax officials won't check all these bank accounts. They'll randomly pick 1 out of 10 or so and check it for under reported income.

Also, if you have given your PAN card number while opening the account, with just a few clicks the Income Tax officials can get the details of all your bank accounts and also your investments/expenses (FD, stocks, mutual funds, bank transactions of 50k and above, real estate deals, rental income/payments and even your credit card expenditure).

As far as attaching the documents of paypal is concerned, you DO NOT have to attach any documentation while filing your returns. However, you need to file all documents and bills for your records. The IT dept can ask you anytime within 7 years from the assessment year to produce the proof. Only if they ask you for proof, you need to provide them. Paypal and western union come are liable to produce information about their clients as per IT dept's requirements. For ex the IT dept can instruct paypal to give them a list of all Indian paypal accounts that have done transactions above a certain limit in a year. While dealing with western union they ask for the proof of address. So even in that case, a trail is left behind.

Tax planning and Tax Evation are two very different things. You can try to reduce taxes by showing legitimate business expenses (whether the business is done as a sole proprietor, partnership, limited liability company or whatever). Unless you are an NGO, you have to pay taxes.

Remember, fiscal laws in India are very powerful. Unlike most other laws, the Income Tax Act provides for restrospective changes to be made to the act. Also, if caught for tax evation, you will be charged actual tax + interest + penalty + possible imprisonment for up to 7 years.

So the bottom line is that its very difficult to avoid taxes these days :-( unless you are willing to immigrate to Dubai, Monaco or other zero tax countries. Even if you set up a company in these destinations, it won't help much since you will be taxed when you repatriate the funds back to India. Only way out is to immigrate and reside there.

 

Excellent Info, a good consultant can help you a lot with filing the returns. One piece of advice is keep a log of all the bills

 

What is the penalty and Rate of Interest?