Hi I am currently an employee for a company getting salary each month. I am going to sign up a new freelance contract for a client in Australia. My Australian Client will give me Software Testing Work where I will work from India and send him the test results. This will be a 2 years contract starting from October 2020 till September 2022. The expected monthly invoices that I am gonna raise to my client is will range from Rs.75,000 to Rs.1,25,000 depending on the number of hours the work takes. Additionally I will be taking services from another 2 people in India to help me with the some fo the work and I will pay them a fixed amount monthly. These 2 guys are also freelancers who will provide their services to me. With this setup, below are my questions 1. Do I need to register for GST? 2. Does the 2 people who are assist for my work with their services need registration for GST? 3. Can I deduct the amount that I pay to these people from my total freelance income for Tax Calculation? Thanks Ram
Hi Ram
You will be required to register under GST if your annual turnover exceeds INR 20 lacs. Same applies to the other 2 people.
For income tax purposes, you will be eligible to claim deductions of payments made to the service providers. Alternatively, you can also claim benefit of presumptive taxation under section 44ADA whereby only 50% of your gross receipts shall be considered as income.
Thank you Lakshita! If my annual turnover exceeds 20 Lacs, is GST registration sufficient? Or do I need to pay collect and pay GST for the work I do? As the services are being offered out of India, will be liable to pay GST? Thanks!
Hi
Yes you & other two is required to registration under GST if your turnover cross 20 lakh.
In income tax you can have benefit of section 44 ADA presumptive taxations
Section 44ADA is a special provision for calculating the profits and gains of small professionals in certain circumstances. Section 44ADA was introduced to extend the scheme of simplified presumptive taxation to specified professionals. Earlier, the presumptive scheme of tax was applicable only for small business. The presumptive scheme of taxation reduces compliance burden on small professions and facilitates ease of doing business. Under the presumptive scheme of taxation, profits are presumed at 50% of the gross receipts.
The following Indian assessees are eligible:
Professionals mentioned under Section 44AA of the Income Tax Act, 1961, whose total gross receipts are less than Rs 50 lakh in a year are the eligible beneficiaries.
Or can you go for normal taxation
We can assist you in planning
If annual turnover crosses 20 lacs, firstly you need to register under GST. Once registered, apply for letter of undertaking and then you can export services without payment of GST. There would be no charge or payment of GST. However, return filings shall be mandatory.
Dear Sir,
Hope you are doing well !!
1 & 2.A service provider is required register under GST and file return only if their aggregate turnover exceeds Rs 20 lakhs. Even if, they provide services on Inter-state basis, they are not required to do GST registration unless the aggregate turnover cross Rs 20 lakhs.
So, all of you need to register under GST only once you cross the threshold limit of Rs. 20 Lakhs.
3.Yes, you can claim deductions for the same.
Once registration is done, you can apply for LUT and export services without payment of taxes (Assuming you receive Foreign Currency from your Clients).
We may assist you with the entire process and compliances.
Hello,
1. You would be required to register under GST if the gross receipts from the freelancing income cross the threshold of Rs. 20 Lakhs.
2. The other two people assisting you would also be required to register if their gross receipts cross the threshold of Rs. 20 Lakhs.
3. Yes, the amount paid to the person assisting you would be eligible for the business expenses and allowed as a deduction against the income.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
If your services qualify as export services, after registration, you can submit LUT for export services and supply such services without payment of GST. Return filing compliances would be required.
You need to register when your turnover crosses Rs. 20 lakh.
It depends on type of contract you enter. If you show them as freelancer then the same 20 lakh limit shall apply. If you show them as employee then no need to register.
Yes you can deduct.
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Thank you.
Not liable to pay GST if you apply for LUT and export under same.
You need to register in GST when your turnover crosses 20 lacs, This sale will be shown in export services in GSt return which is zero rated.
Same turnover limit applies to them also.
You can declare 50% income under 44ADA for income tax purpose. No further deduction will be allowed.
Hi
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