Should a Resident Indian pay Tax on Profits of hisForeign Company
Hi,
This is Raghu from Karnataka. I have a business in the United States which is doing quite well. I am looking to wire my foreign earnings to India. I see that the Tax policies here are very complicated & different CA's are offering me different advices. I need an expert consultation in this regard. I have described my situation below clearly. Please go through it let me know what exactly I should do so that my taxes are minimal.
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I have an LLC in the United States for which am the sole owner. I have tied up with an ecommerce Website in the US that takes orders from people Internationally (just like ebay). Am selling a product on that website. I have found this product in China, which am selling in the US under a brand of my own. My partner website is currently taking pre orders for my product & my sales have crossed over $40,000 in just 1 month. It will continue to take pre orders for the next one month. Of these $40,000, only 25% of the orders are from USA. The rest are from various countries like Australia, Singapore, Japan etc. So only 25% of the income is generated from the customers living in USA.
Since these are pre orders, I will have to ship the product only after 45 days. In the mean while, my partner website will transfer me the funds for these preorders to my business account in the US. Am planning to wire this $40,000 to my personal bank account in India as soon as possible as the situations are very volatile in the US as TRUMP was elected. Since these are pre orders, am planning to show the US govt that all the money has been used for manufacturing & there are no profits left. But the problem is with the IT people over here. The tax departments have tightened & am worried if I might have to pay the Tax on this amount. I have a 70% margin & I dont want my hard earned money to go into the pockets of the corrupt politicians here (as that is what happens to Taxes in India). So, is there a way I can bring this money to India & evade Taxes? Please advice.
Am aware that Taxation is based on Residency & am a resident Indian. Please advice me on ways to bring this money to India & ways that will not attract the IT people on me.
Thanks,
Raghu
Asked 7 years ago in Income Tax
Thanks for the answer Mam. I have gone through the section 44AD completely & have a few follow up questions.
1) The rule says "Any Resident Indian" can take advantage of this scheme. But I guess, if an Individual has to carry a business in India, he should have some license to do that. May be a Shops & establishments registration or a Vat License to carry out the business as a sole proprietor. I dont have any of these. Do you suggest me to incorporate One? Is it necessary? If Yes, are Sole proprietors also eligible in this scheme? Can't I show this transaction as business opportunity I received at an Individual Level?
2) I will be remitting about 40 Lakh rupees to my Indian Bank account of which 8% is considered as my income according to the section 44AD. Will it be sufficient if I pay the tax for this 8%? Wont I have to pay anything extra? The rule doesnt mandate that the additional income has to be declared. A few of the websites I read say its optional & there will be no questions about books or money withdrawl or deposits. So is it going to be a problem if I dont declare the additional income?
3) I have a margin about 70% on this product. Will I be able to keep all this money in my Bank account & use it as I wish? Am planning to purchase a 2BHK Flat with this money. Will the IT officials fall on me & ask to pay the additional 30% tax on these 40 Lakhs once I purchase the property?
Kindly clarify.
Thanks A LOT
Raghu
Asked 7 years ago
