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Save your Online Income by paying minimum possible tax [ INDIANS ONLY ]

Discussion in 'Payment Processing' started by sandrarocks, May 27, 2007.

  1. #1
    Hello All,

    Do you all wanna save your Online Income by paying minimum possible tax and doing everything as per regulations. if that is the case then your reading the right post.

    I will give you a TIP as to how you can SAVE TAX in fact get TAX EXEMPTED completely. Although nothing is assured without Hard Work and it may be tough as well for you too.

    There are two ways to save tax in India.

    1. Show the Online Income as your yet another source of Income and pay the regular 30% tax to the government of India.

    2. You can get your firm, an STPI (Software Technological Parks of India ) registered.

    I'm going to tell you about STPI here. Software Technology Parks of India (STPI), is a society set up by the Ministry of Communication and Information Technology, Government of India, with the objective of encouraging, promoting and boosting the Software Exports from India.

    STPI provides Single Window clearance to Software exporters. STP Scheme provides these units with lucrative incentives making it a phenomenal success.

    The concept of STP Scheme was evolved in 1991 and enunciated the following objectives:
    SEMrush
    • To establish and manage infrastructure resources such as Data Communication facilities, Core Computer facilities, Built-up space and other common amenities.
    • To provide 'single window' statutory services such as Project approvals, import certification software valuation and certification of exports for software exporters.
    • To promote development and export of software services through technology assessments, market analysis, market segmentation and marketing support.
    • To train professionals and to encourage design and development in the field of software technology and software engineering.

    The Software Technology Park Scheme (under The Ministry of Communication and Information Technology, Govt. of India) is a 100% Export Oriented Scheme for undertaking Software Development/IT enabled services for Export using Data Communication links or in the form of physical exports including export of professional services for rendering consultancy services and development of software.

    The unique feature of the STP scheme is the provisioning of single-point contact services for member units, enabling them to conduct exports operations at a pace commensurate with international practices

    Scheme Benefits & Highlights

    Approvals are given under single window clearance scheme.


    • A company can set up STP unit anywhere in India.
    • 100% Foreign Equity is permitted and approved by jurisdictional Director of STPI.
    • All the imports of Hardware & Software in the STP units are completely duty free.
    • Import of second-hand capital goods is also permitted.
    • Unit shall be a positive net foreign exchange earner. Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively in blocks of five years, starting from the commencement of production
    • Use of computer system for commercial training purposes is permissible subject to the condition that no computer terminals are installed outside the STP premises.
    • The sales in the Domestic Tariff Area (DTA) shall be permissible up to 50% of the export in value terms.
    • STP units are exempted from payment of corporate income tax up to 2010. (For assessment year 2003-2004 10 % of profit will be taxed).
    • The capital goods purchased from the Domestic Tariff Area (DTA) are entitled for benefits like exemption of excise Duty & reimbursement of Central Sales Tax (CST).
    • Capital invested by Foreign Entrepreneurs, Know-How Fees, Royalty, Dividend etc., can be freely repatriated after payment of Income Taxes due on them, if any.
    • Repartition of foreign currency for payments can be freely done.

    It is not as easy as it may sound like to obtain but it is not.

    Mandatory Sl.No. Description of items to be checked Required Before
    1 Registration fees Rs. 2500/- to be paid through Credit Card/Direct Debit/DD LOP
    2 The Following Details are required i) Introduction about the entity. ii) Background of Promoter. iii) Development Area/ Area of Expertise. iv) Marketing Strategy. v)Financial Projections. LOP
    3 Memorandum and Articles of Association (only in case of Ltd./Pvt. Ltd. Company) and check whether the ?Computer Software/IT enabled services is included in item of manufacture in the above said MOA.(Scanned copy of MOA is required) LOP
    4 Partnership Deed (only in case of Partnership Firm) (scanned copy of Partnership deed is required)(Branch Office RBI Permission). LOP
    * 5 Board Resolution with regard to setting up STP unit and authorizing the person for signing the documents on behalf of Company with his attested Signature or in other cases Authorized Signatory with his attested signature (scanned copy required). LOP
    6 List of Board of Directors/ Prop./Partners along-with their i) Residential address(s), ii) Telephone nos.,iii) Passport size photographs (scanned copy),iv) Saving Bank Account No. with name and address of the Bank,v) PAN/Passport Details of Directors (Scanned copy of PAN No and Passport. are required in a single document for all the Directors/Promoters),vi) Brief Bio-Data of the Director's/Partner's/Promoter's. LOP
    7 Web site address of the company,permanent email Id and details of digital signatures. Legal Agreement
    * 8 Floor area plan for the proposed STP Location. LOP
    * 9 Whether the Unit has opened a seperate Bank Account for STP Unit (Scanned copy of Bank certificate required in the format downloaded from this system after filling all the details of the proposed unit ). Legal Agreement
    * 10 PAN No. of the Unit.(Scanned copy of PAN No. is required). Legal Agreement
    * 11 Import-Export Code No.(Scanned copy required) Legal Agreement
    * 12 Rs. 100/- non judicial stamp paper in the name of STPI Zonal office for "Agreement". Legal Agreement
    * 13 List of Capital Goods proposed to be Imported/Procured Indigenously. Legal Agreement
    * 14 Service fee for three years in advance payable on approval and grant of LOP subject to minimum of Rs. 22500/-. Legal Agreement
    * 15 Lease Agreement/Sale Deed for ownership proof of the premises. LOP
    * 16 FCGNR/FIRC copy for foreign collabrator and Board Resolution from parent company. LOP
    17 IT returns of the promoters. Legal Agreement
    18 Copy of Form 18 for verification of registered office address. LOP
    19 In case of any Joint Venture viz. financial, technical etc. copy of the same(i.e. financial and technical details of JV along with JV agreement and MOA) should be submitted.

    After doing all this you may get an STPI license but only after a Inspection done by a Central Excise department or from STPI office themselves.

    This may easily cost roughly Rs 1 Lac and once your an STPI registered firm you need to work for a minimum f 5 years else you will be penalized heavily.

    So all those who are working from homes, i suggest you to pay tax normally (30% to government of India) as for others you may still decide would you be doing this for next 5 years. As this License needs to reviewed annually and requires you to show a annual growth of minimum 10% in your business else they will take it back.

    Feel free to ask me or Consult with your CA for any questions in this regard.

    Regards,
    Sandra
     
    sandrarocks, May 27, 2007 IP
    SEMrush
  2. MeetHere

    MeetHere Prominent Member

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    #2
    Thats a really long and informative article.

    Is it necessary to have a firm ?
    I am an individual doing part time work on internet and gets some good income. I think 1 lakh is too much..
    Whats the process of paying 30% tax ? What income proofs we have to show ?

    The CA's of India are not much aware of internet business. :(
     
    MeetHere, May 27, 2007 IP
    sandrarocks likes this.
  3. Kulwinder

    Kulwinder Active Member

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    #3
    Great Articles Sandra, more greens for you if possible :)
    You are really working hard :D

    And yeah, CA's in India are not much aware of the Internet Business, so would appreciate the info too.

    Thanks.
    Best Regards,
    Kulwinder.
     
    Kulwinder, May 27, 2007 IP
    sandrarocks likes this.
  4. sandrarocks

    sandrarocks Banned

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    #4

    Okay guys : For individuals working from home try the following

    1. Open a website and write down a short description of all the service you provide on DP (at least briefly about each service ). Please mention you ONLY export Professional Service abroad. And do mention your contact Information.

    2. To all your clients send Invoices through paypal so that you can later take it and show as a receipt of payment.

    3. Inform CA that through your website you receivied the following orders for which you raised the following invoices and he will then calculate the tax according and let you'll know about it.

    The above post was for people who runs FIRMS in India.

    Still have any further queries do let me know.

    P.S ; Repped the two of you to :)

    Sandra
     
    sandrarocks, May 27, 2007 IP
  5. MeetHere

    MeetHere Prominent Member

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    #5
    Do you mean i should create a website only for showing my online services ?

    It would be hard to send invoices to each and every person who sends payment :(
     
    MeetHere, May 27, 2007 IP
  6. getjimmy

    getjimmy Prominent Member

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    #6
    Excellent post sandra.Wanted to add rep but u r banned.
     
    getjimmy, May 28, 2007 IP
  7. seohunter

    seohunter Banned

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    #7
    sandra thanks for your good information , but u here forgot some main points about the tax and vat in India,

    If a person earns money less then 5 lakh in a year then he don't have any need to pay TAX or VAT.

    so friends if you are earning less then 5 lakh in a year then you don't have any need to pay tax or vat , but please remember that may be paypal want business detail from you . so every time when u sell any product on line and want to take the money by paypal then firstly send a invoice to the buyer and then accept his money and this will send a detail of your business to paypal also and then they don't disturb you for your business details.

    so send the invoice firstly to the buyer for every product . this will help you to maintain all your details and statement of your business and no one can easily put a finger on you . If your business earning is less then 5 Lakh in a year in India then you don't have any need to pay tax but also confirm with your CA may be the rules are different in your state for TAX and VAT
     
    seohunter, May 28, 2007 IP
    Kulwinder likes this.
  8. Kulwinder

    Kulwinder Active Member

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    #8
    Its sad to see you banned sandra, I hope you will be unbanned soon :)

    Hey thanks man for the vauable info. I wanna ask you 1 thing. I provide "Service" here on Dp, so do i have to send invoices to the customers? It will be difficult tho.. or do we only have to send invoices while selling products?

    Thanks.. BTW Repped you :)

    Best Regards,
    Kulwinder.
     
    Kulwinder, May 28, 2007 IP
  9. seohunter

    seohunter Banned

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    #9


    you have to send the invoice to the customer to whom you are providing the service it will help you to maintain your business details and also send the invoice through paypal , because some time paypal thinks that you are doing wrong business and ask for business details with every transaction did through paypal ,so if u send invoice through paypal to your customers , then they can't put a finger across you easily



    Enjoy~
     
    seohunter, May 28, 2007 IP
  10. Kulwinder

    Kulwinder Active Member

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    #10
    Thanks alot buddy, this will help alot.
    But it is very difficult to send invoices to customers, as I deal with mostly new customers.

    Best Regards,
    Kulwinder.
     
    Kulwinder, May 28, 2007 IP
  11. seohunter

    seohunter Banned

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    #11
    simply you can send the invoice by paypal and they will pay to you .
     
    seohunter, May 29, 2007 IP
  12. MeetHere

    MeetHere Prominent Member

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    #12
    No thats not true..
    If you earn more than 1.5 lakhs INR per year, you are eligible for paying tax.
     
    MeetHere, May 29, 2007 IP
  13. SEO Guru

    SEO Guru Peon

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    #13
    My brother is a CA, so he manages virtually all my stuff. :D
     
    SEO Guru, May 29, 2007 IP
  14. inworx

    inworx Peon

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    #14
    95% of Indian DPers earn less than 5 Lacs.
     
    inworx, May 30, 2007 IP
  15. samlocalguy

    samlocalguy Active Member

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    #15
    Agreed.

    But I am not selling anything. Earning my all income from affiliate marketing.
    What should i have to do? Becoz how I can give invoices for affiliate income? And to whom I can give invoices.

    Is it confirmed that their is no need of STPI registration for Indian who are taking payments from abroad?

    Are you assured if we pay regular 30% tax to the government of India then we dont need to worry from RBI or any another deptt.

    Becoz my friend told me it is necessary to inform RBI about your abroad payments otherwise you are in trouble.
    What you think about it?
     
    samlocalguy, Aug 8, 2007 IP
  16. anthonyn

    anthonyn Well-Known Member

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    #16
    Well, I think we have to know how to deal with our Abroad earnings, as far as tax is cincerened.
     
    anthonyn, Aug 9, 2007 IP
  17. gopalgkb

    gopalgkb Guest

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    #17
    Hello Indian Friends.. Such an important issue... we need to reach to a logical and correct conclusion.

    Here is the summary so far:

    1) No need to pay tax if less than 5 lacs per year
    2) Not correct, no need to pay tax if less than 1.5 lacs per year
    3) No need to pay tax at all
    4) Need to inform RBI or else we may get into trouble
    5) Need to raise invoices so as to submit proof of income.
    6) No need / Need to do STPI registration
    7) Need to pay 30% tax flat regardless of what amount you are earning in a
    year.

    WHAT COULD BE TRUE AND CORRECT......ANY EXPERT SUGGESTIONS FOR "WORK FROM HOME INDIVIDUALS" EARNING FROM ABROAD ????

    SEOGURU: You have mentioned your bro is CA and he is managing for you. Could you ask your bro and put in some basics here please??

    Thanks

    gopal
     
    gopalgkb, Oct 9, 2007 IP
  18. raje_2000_21

    raje_2000_21 Peon

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    #18

    I will try to answer one by one
    1. The starting slab for taxes is more than 1.10 lacs a year, 1.5 lacs for women payee only.
    2. No need to inform RBI If income is less than 25000 $
    3. Raise invoice to show your income : Right now i don't have any answer.
    4. If you are an individual no need for STPI registration.
    5. The starting tax is 10%, 20% and 30% with surcharge.
    The INcome tax slab is give below

    For individuals, HUF, Association of Persons (AOP) and Body of individuals (BOI):
    For the Assessment Year 2007-08
    Taxable income slab (Rs.) Rate (%)
    Up to 1,10,000 NIL
    Up to 1,45,000 (for women) NIL
    Up to 1,95,000 (for resident individual of 65 years or above) NIL
    1,10,000 – 1,50,000 - 10%
    1,50,001 – 2,50,000 - 20%
    2,50,001 – 1,000,000 - 30%
    1,000,001 upwards 30*
    *A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs 1,000,000.
     
    raje_2000_21, Oct 10, 2007 IP
  19. gopalgkb

    gopalgkb Guest

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    #19
    Raje_2000_21

    Thank you so much for a much clear answer.

    Just one question please. I am given to understand that there is option for investments upto 1 lac like PPF, LIC, Mediclaim etc for which there is no tax.

    For example: Let us say Mr. A crosses the benchmark of the first slab i.e Rs. 1,10,000. The Tax % is 10 %.

    Now is Mr. A going to pay 10% on reaching Rs. 1,10,000 or after Rs. 1 lac standard deduction i.e after Rs. 2,10,000 ?

    Please clear this basic doubt for me please.

    Thanks

    Regards

    gopal
     
    gopalgkb, Oct 10, 2007 IP
  20. raje_2000_21

    raje_2000_21 Peon

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    #20
    gopalgkb

    If A earns Rs. 2.10 Lacs in years. The taxable amount would be Rs. 1 Lac

    Annual Income : 210000
    Standard ded : 110000
    Tax Liability on : 100000

    Even in this 1 lac you can save paying tax by investing in PPF, LIC, and other tax saving bonds.

    Section 80C
    Section 80L used to allow deduction of interest earned on, say, a National Savings Certificate or a bank deposit up to a limit of Rs 12,000. But now all these are gone .In their place has come Section 80C -- "u/s 80CCC, & u/s 80CCD", as the Finance Bill puts it. Thus, the new Section 80C of the Income Tax Act proposed in Union Budget gives you a bigger tax break than what the current regime offers.

    * Deduction in respect of Life Insurance Premia, Contribution to Provident Fund, etc.
    * Rs 1 lakh can be invested under this section without any individual sub-limits except in the case of Rs 10,000 in pension funds.
    * Sections 88, 80L, 80CCC and 80CCD is clubbed in.


    Schemes eligible for Section 80C benefits

    * PPF
    * ELSS - Mutual Funds
    * NSC
    * KVP
    * Life Insurance

    Note : - Section 80CCC is for deduction in respect of contribution to certain Pension Funds. Section 80L is for deductions in respect to Interest on certain Securities, Dividends, etc

    I hope i answered your query.
     
    raje_2000_21, Oct 10, 2007 IP