• US LLC, GST, and 44ADA

I run 3 online businesses, I receive payments via Paypal India and sometimes via NEFT/UPI if the customer can pay in INR(rarely), my gross for last FY is $25000 and I lost about $3000 in USD to INR conversions.

I have been using 44ADA to report my income, I say 50% is profit and pay tax on that.

Now I'm planning to start a US-based sole-member LLC, also known as a disregarded entity, the cost of maintaining this LLC is lessor than paying Paypals conversion fees on income (and expense), I'll be getting a Bank Account in my LLC name and will accept all payments via the LLC bank account.

I'm confused about expenses, for servers and other costs which I can pay in USD I will pay via my LLC bank account, but I would also have operational costs in India, eg co-working space, petrol, internet bill, etc. - I do not have any business entity in India, currently, I operate as a software professional and declare 44ADA
Q1: How do I account for this?
If on US LLC bank account if income is $100000 and expense is $20000, my profit is $80000, from the $80000 can I deduct expenses again incurred in India and then pay the tax in India?
Note : I know we do not need to pay tax in US as we are not physically established or hiring in US, only need to report to IRS via 2 forms, the tax is passed through to India in my LLC structure.

Q2: With a structure like this, with LLC can I continue with 44ADA if my gross in US bank account is less than 50Lacs?

Q3: Since I have a US LLC, on crossing 20L in gross would I still need GST registration in India being a resident of India?
Asked 24 days ago in Income Tax

1. If LLC is treated as a company like companies in India then foreign companies having turnover less than 50 cr in a previous year is treated as non-resident in India.

 

2. Only individual income will be considered for the benefit of 44ADA. 

 

3. No

 

For further clarification, you may consult telephonically.

Vivek Kumar Arora
CA, Delhi
4079 Answers
346 Consultations

5.0 on 5.0

Hi. Thanks for asking this. It's a good question.

Since you are an indian resident, any taxable income of yours is taxable in India.

A1. Since 44ADA is a presumptive taxation section, you can keep using the section till your gross receipts are upto 50 Lakhs.

As per the provisions of section 44AA(1), any person carrying on a specific profession should maintain books of accounts. As you mention that you have business, you would be covered under section 44AA(2), which states that if the income or turnover of an individual exceeds INR 2.5 Lakhs or 25 Lakhs respectively, the assessee must maintain books.

And then, a person carrying in business can be assessed under presumptive taxation u/s 44AD.

Now if you provide the exact nature of your work, it will be helpful in identifying which section you are covered under, whether 44AD or 44ADA.

Accordingly, we will go ahead with the counselling.

Anyway, assuming you are covered u/s 44ADA,

A1. As per section 44ADA, one needs to maintain books u/s 44AA and get them audited u/s 44AB if one prefers to disclose a lesser income than the mandatory 50% under this presumptive taxation. However, if he does not want to disclose a lesser income, then he can simply declare 50% and then, it will be assumed that he has been provided with all the exemptions and deductions u/s 30 to 38 and 28 to 43C wont be given effect. In this case, even though maintenance of books is still required u/s 44AA(1), Audit is not compulsory.

 

A2. Since 44ADA is applicable to all assessees carrying on profession referred to u/s 44AA(1), with gross receipts upto 50 Lakhs, 44ADA can be applied.

 

A3. Yes, you are bound to get registered u/s 22(1) of CGST A/c.. edit...But if you are saying that it's US LLC, it gets a non resident status and accordingly, the provisions applicable to a non resident will be applicable. As per section 5, any income of a non resident arising or accruing in India is taxable in India.

 

Pl seek clarification if required.

Kindly also share feedback. Thanks

Siddharthh Jain
CA, Gurgaon
28 Answers
1 Consultation

5.0 on 5.0

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