Direct Tax implication

888 views 7 replies

karthe

Analyst

31 Points Posted on 20 June 2011

Dear All,

I have a practical doubt in Direct Tax implication on an individual. Kindly clarify.

i) A salaried person who comes under the 5lakhs slab for last 3yrs, suddenly earns 1 crore through his freelance work from a foreign company.

Questions:
a) If he has to get the full amount 1 crore without paying the tax 30%, what should he do ? (eg. Invest in Government or Infrastructure Bonds, buy house etc)
b) If there is no option to avoid that 30%, how much can he save from the that 30% by using the available provisions ?
c) Will the full amount be credited to the individual's SB A/C from a foreign A/C without TDS or any kind of enquiry ?
d) If nothing can be done, can the individual ask the foreign company to split the payment (1crore in 3 or 4yrs) ?

Please advise.

Kind Regards,
Karthe

Replies (7)

suman

Auditor

388 Points Posted on 21 June 2011

He has to pay tax @ 30 % . he can avial deduction for expenditure after showing recepits as business income. Definately if amount can be deffered in no of years he will have lesser impact of tax. Bank will ask about source of this credit entry in your bank account. Than you can show them your Agreement with foriegn company or invoices of fees charged by you.

Guest

You have to give more detail.

1. DTAA (from which country it has earned)

2. Expenses incurred in earning the above income

3. What kind of freelance activity is this.

There are so many questions? If u can provide it i am happy to answer

karthe

Analyst

31 Points Posted on 02 July 2011

Originally posted by : kaushal (taxbykk)
	You have to give more detail. 1. DTAA (from which country it has earned) 2. Expenses incurred in earning the above income 3. What kind of freelance activity is this. There are so many questions? If u can provide it i am happy to answer

Dear Suman & Kaushal,

Thanks for your quick response . Well appreciated.

Sorry for the delay. Answers for Kaushal's questions.

1. It will be from United Kingdom / France / Malaysia

2.So far no expenses except purchasing computers and mobile phones.

3.This is a consultant work. Getting deals in India for foreign investors.

4. Also someone suggested me to set up an office (Consultant) and open a current account to avoid unncessary questions by the tax man. Is this advisable, if so what are the possibles / formalites to open such small companies.

Thanks in advance for all your valuable feedback.

Guest

Dear karthe

Whenever you do business you must route all your transaction through the bank. This is always advisable. And if the business if from foriegn sources then it is compulsory kind of thing since FX is invloved.

Since you will be doing business activity for the foreign company all business expenses can be claimed as deduction.

I think your contract period is spread for 4 years. That would be written in the agreement. Per year consultant fees shall be given. It automatically get spread.

As far as rates of tax is concerned it is slab rate. No need to refer DTAA. Normal savings options of 80C is available.

Thanks and enjoy hard earned money

kaushal

karthe

Analyst

31 Points Posted on 02 July 2011

Dear Kaushal, Thanks a lot for your valuable suggestions. Which one do you suggest as the best option among the below ? 1. Set up an office as a subsidiary of a foreign company (Even the parent company is a consultant) 2. Set up an Indian Pvt LTD. Kind Regards, Karthe

Paras

Mcom CA Final

122 Points Posted on 02 July 2011

Paras

Mcom CA Final

122 Points Posted on 02 July 2011

Sir watever you do still you have to pay 30% tax . options for deduction are 80C,80ccf ,80d ,80gga. available .

from my point of view , if you are earning as an individual then u/s 80GGA/B, doante the amount to local political party , and get it back by paying 2-3% to them .

and to your latest query , open Pvt . Ltd. company , less complicated when its doemstic company , n enjoy too many benefits