My wife is running a small Proprietorship company from New Delhi.
Very recently, she has been advised to provide Consultancy services on Global IT Market / Technical Advise / Market Intelligence etc for a UK based company. They will sign a formal agreement to this effect with her company.
The UK based company will pay us in forex which shall be credited into her company account in INR.
She has the DVAT / IEC / Service Tax / PAN card registration. We want to comply with the Law.
Kindly clarify:
1. Is export of consultancy services is taxable as per Income Tax Law?
2. If the export income from consultancy is exempted from Income Tax, what is the documentation / contract required to comply to the exemption?
3. In case the export income realized through the export of consultancy services is taxable, is there any exemption is given to the exporter? Under what section of I T Act such taxation is done?
4. Do we have to inform RBI or get registered with RBI to receive the forex from abroad?
08 March 2015
1. Yes it is taxable as per Income tax but only exempted from service tax.
2.Declaration as regards export of goods and services :-
(1)
Every exporter of goods or software in physical form or through any other form, either directly or indirectly, to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in one of the forms set out in the Schedule and supported by such evidence as may be specified, containing true and correct material particulars including the amount representing -
(i)
the full export value of the goods or software; or
(ii)
if the full export value is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods or the software in overseas market, and affirms in the said declaration that the full export value of goods (whether ascertainable at the time of export or not) or the software has been or will within the specified period be, paid in the specified manner.
(2)
Declarations shall be executed in sets of such number as specified.
(3)
For the removal of doubt, it is clarified that, in respect of export of services to which none of the Forms specified in these Regulations apply, the exporter may export such services without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the Act, and these Regulations, as also other rules and regulations made under the Act. See link. http://rbi.org.in/scripts/BS_FemaNotifications.aspx?Id=177
Income tax is applicable on income earned by you. So it is taxable as per Income tax act. Apart it is necessary to mention what type of agreement you are entering into like partnership or the wife company act as permanent establishment , where the service would be provided, whether Dtaa provision would be applicable.. Apart complaince of Fema is also to be seen regarding the receipt of income in the business as the company is receiving the same.
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