Do i need to pay service tax & income tax

Queries 979 views 3 replies

praveen

software engineer

25 Points Joined February 2012

Hello,

I am a Software Professional providing software consulting services from chennai India to a Company, USA. I provide my services over internet from my home office and hence I will be physically present in chennai, India. They pay consulting fees in the name of individual on hourly basis in US Dollars...max is 40 hrs/week basis.

1) Since this service is being provided to a foreign company, Do I need to pay Service tax as my annual income will have potental of approximately 11 lakh/annum as I currently withdrawn money using Local Fund transfer method to my local bank directly on weekly basis , though I have option to withdraw on monthly basis as well?

2) Do I still need to register for Service Tax and get a ST number?

3)I also have option to register as a company and withdraw money on my company name....I'm not sure which is better in terms of Tax saving.

I did seek few opionions from my known circle and each have different perspective on this and I 'm totally lost.

Please do kindly suggest what is best way to handle. Do I need to pay both Service Tax & Income tax in my situation.

Please suggest me best way to handle.

Thanks for your time in advance.

Replies (3)

CA Suraj Lakhotia

IndigoLearn

4898 Points Joined May 2008

Service tax is levied on services provided and not on your income. Income tax is charged on income earned by you. Both are different in nature and can co-exist.

The receipient of service is located outside India and hence as per service tax rules in the given case, it qualifies as export of service.

As per Rule 4, of Export of Service rule,

Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax.

Thus, you can render services without payment of service tax.

Since the gross value of services are expecete to exceed the threshold limit, you need to obtain service tax registration number.

CA Suraj Lakhotia

IndigoLearn

4898 Points Joined May 2008

Income tax will be levied on your total income after deduction of expenses incurred for provision of services.

Whether to float a company or not would depend on many factors. It would be better if you approach a practising CA who can give you appropriate advise after looking into all details about nature of your job/service and other factors.