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Few fax queries for software business

Smita (ceo) (26 Points)

29 June 2012

Hi there,

I have few queries about income tax and I would be really great if someone can please answer them. I am sole properitor and have a software development business, we create web softwares and sell them online and 99% of our sales are from out of India. Here are some of my queries-

1. Do we have to pay Sales Tax or service tax?

2. I heard about section 44 ad, my turnover is approx 17 lakhs, does this mean I don't have to pay any tax as 8% of 17 lakh is 136000 which is under no tax slab.

3. What if my actual profit is more than 136000, can I opt for the 44 ad just to save tax?

4. Is it neccesary for me maintain books of accounts?

5. I paid tax of rs. 10k last year and if I won't pay any tax this year, won't it create any troubles for me in future?

Thanks for helping me.

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6 Replies

CA Sripal Jain (Associate Finance) (709 Points)
Replied 29 June 2012

hi,

1. your liable to pay sales tax

2. as per recent amendment you can opt for 44ad and escape tax

3. no need to maintain books of account

4 you can opt 44aD whenvr u require

5. no its good actually to pay taxes

regards

sripal jain

1 Like

Smita (ceo) (26 Points)
Replied 03 July 2012

Hi Sripal,

Thanks for replying to my queries. I want to ask why I am liable to pay sales tax since all our clients are from out of India? Shall I charge them sales tax when they buy our products?

Also, we do provide custom web development services too shall we charge sales tax on that too?

Thanks

CA Sripal Jain (Associate Finance) (709 Points)
Replied 03 July 2012

i think you wil not be charged tax,coz logic is india encourges exports,i think u must pay export duty and claim a refund

Service tax is applicable on taxable services, that is, a service falling under Section 65(105). If any service falls under any of the clauses of sub-section 105 of Section 65, it shall be a taxable service.

There is no specific category of taxable service as Web designing. There could possibly be two service categories — consulting engineer and business auxiliary — wherein the business of developing and designing Web sites for various companies may fall.

In the case of consulting engineer's services, taxable service means any service in relation to advice, consultancy or technical assistance in one or more disciplines of engineering but not in computer hardware or software engineering.

Since Web site development and designing involves software engineering, it will not get covered.

Providing content development to Web sites is akin to writing a book which is not subject to service tax.

In the case of business auxiliary service, designing, developing or maintaining a computer software, computerised data processing or system networking, or any other service primarily in relation to operation of computer system are excluded from the definition under Section 65((105)(19). In view of this, it can be said that service tax is not leviable in the case of Web designing under consulting engineer services.

However, Finance Act, 2007 has introduced a new category of taxable service w.e.f. June 1, 2007, that is, development and supply of content service under Section 65(105)(zzzzb). Accordingly, Web designing and content development and its supply shall be taxable from a notified date, that is, June 1, 2007, if it relates to development and supply of content on a Web site. Development of software will not be taxable but the content portion will be.

CA Garima (CA) (99 Points)
Replied 03 July 2012

i had the same query..so thanx

Smita (ceo) (26 Points)
Replied 29 August 2012

Hi there,

I have one more query. Till now my old CA used to file my ITR of Form ITR-4 and I hired a new CS this year and she filed it on ITR-4S. Is this because I opted for 44 AD?

Will I see any details on my ITR about 44 AD?

Let me know...

Thanks