I am a non-IT person. I have a contract with a US based staffing firm X to provide 1 IT resource for their client Y. i hired my sister as employee in early Jan, billing is effective Jan 2026, but actual work started in late March due to background checks delay, laptop/access setup, etc. In early March, sister signed a contract on my behalf and i registered my firm via Udyam using NIC code for IT services, got shop act, opened current account, got GSTIN and LUT. In late march, I sent invoices to X for Jan and Feb hours. remittance for Jan, Feb was received in April first week. those invoices had SAC code and payment Purpose code for IT services. GST returns also used same SAC code. Now a junior CA told me that my business is actually providing manpower/staffing not IT services, because : i am not an IT professional, billing is time based (not project or deliverable based), client has full control over sister's day-to-day work, assignment and deliverables. i do not control outcome or deliverables, i don't even know what type of work she does at Y. i never had any contact with Y (i deal with X only). He said it will also allow me to file ITR under section 58 (replacement of 44AD) and pay tax on only 8% of the revenue. otherwise i will have to maintain books and do audit by CA because revenue will be above 75 lakh in the current FY. My question are: - does my business qualify as manpower/staffing? - will i be able to use 44AD? - should i update the NIC code in my Udyam and use different codes in invoices going forward, so that it aligns with 44AD? - if yes, provide appropriate NIC code, SAC code and Purpose code (client will use this for remittance). yesterday our bank received remittance for March and April services. they are asking for invoices for the same. so please advice ASAP, we want to make sure bank records and FIRA also use correct codes, so that there is no issue later on and everything aligns. - Any documentation i should create/retain now in case IT dept disputes the manpower/staffing nature and tries to categorise as an IT profession? - can i file ITR for FY25-26 under 44AD, given that Jan/Feb invoices and GST returns have IT related SAC code, purpose code? is there a risk? - if i file ITR under 44ADA now, will it contradict filing under 44AD next year? will IT dept flag it? Thanks Sharma
- It qualifies as a manpower/staffing services
- Yes
- Yes
- SAC-998513, purpose code P1019
- The invoice should be properly prepared. Working of billing amount can be attached as an annexure to the invoice
- The crucial aspect is an agreement with the staffing firm X and the invoice
- Your sister should not execute/sign any document on behalf of the firm
- Deduct TDS (if applicable) on the salary of an employee
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Dear Querist,
Based on the facts, your activity appears to be contract staffing/manpower supply, not IT professional services, as you are providing an employee/resource and not delivering IT work yourself.
You may use presumptive taxation under 44AD/Section 58, subject to turnover and other eligibility conditions. Going forward, align documents with manpower/staffing services.
Use SAC 998513 for contract staffing services and purpose code P1019, if accepted by the bank/remittance platform. Update Udyam/NIC accordingly after checking the exact activity code.
Keep the agreement with X, invoices, employee appointment/salary records, billing workings, GST/LUT/FIRA records, and avoid your sister signing documents on behalf of your firm.
Prior IT SAC/purpose codes may create some risk, but can be explained if the real nature of service is supported by documents. Filing 44ADA this year and 44AD next year may also invite questions, so consistency is advisable.
For a more detailed review of your case, you may book a phone consultation.
CA Shubham Goyal
Thank you Vivek and Shubham for your responses. A local CA said manpower/staffing is for unskilled or semi-skilled labor like security guard not for professionals like IT engineers, i should stick with "IT services" code and file as 44ADA, it is cleaner and less risky, compared to 44AD, given the brother-sister relationship. on the contrary, if filed under 44ADA, is there a risk that AO will characterise it as staffing/manpower supply, call it regular business, reject 44ADA? if that happens will i be able to refile/amend under 44AD and potentially get refund? or will AO disallow that also and make me pay tax on full revenue+interest+penalty? i am trying to calculate risk while keep it simple but also save on taxes if possible. Even with 44AD i plan to show 50% profit to avoid any headache later on. sister is a US citizen, not yet tax resident in india but this year she will be RNOR when she completes 183 days. does that matter here?
Dear Querist,
Manpower/staffing is not limited only to unskilled labour. If your firm is only supplying a resource and the client controls her work, 44AD can be considered, but it is not risk-free due to earlier IT codes/invoices and related-party employee.
44ADA is also not fully safe if you are not personally providing IT professional services. If questioned, genuine salary and business expenses should still be claimable; full revenue should not automatically become taxable.
Going forward, keep the contract, salary proof, timesheets, access-delay records, GST/FIRA records, and use staffing classification only if the agreement supports it. Sister’s US citizenship/RNOR affects her own taxation, not your business classification.
For a more detailed review of your case, you may book a phone consultation.
CA Shubham Goyal