Sole proprietership questions

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Kiran

Self

24 Points Posted on 21 November 2011

Hi,

I would like to open Sole Proprieter Ship (Single Owner) for the following purpose.

Story:

I do software services work. The work comes to me from a US company. So, I need to raise invoice every month end to them. It will be around One Lakh per month. I am going to employe two more Juniors to do work. I will be paying fixed monthly salary to them.

Questions:

1). Both the Juniors come to my resindent home every day (Mon-Fri) and work in my residential apartment itself as I cant afford an office, so no office. It's my flat plus office as the no. of employees are only two or max three excluding me.

Is it OK to go for Shops and Establishment act with my reseidential flat as the Office address and as well Registered address of my Sole Propritership.

2). Every Month I will be sending an Invoice to US company around 1 Lakh which includes all the employees (either 3 or 4 max including me) salaries plus my service charges. My service charges are minimal say around 5K max per month. My salary is both my salary plus my profit from business of course after expenditure like computers plus internet charges.

What is the way to Invoice the US company? Can the amount be credited into my India's Current Account ? Which Bank is best to open Current Account

3). Do I need to open anything to deduct profession tax from my employess ? If it's need to be deducted then where to credit that ?

4). Is it mandatory to open the TAN to deduct income tax (TDS) from my employees? or Can I ask them to pay themselves directly ?

Thanks and Regards.

Replies (2)

Giridhar S Karandikar

Team Lead

7558 Points Posted on 23 November 2011

If you are staying in the rented premises or you are staying in your own house but you are not the actual owner, then you need to take an 'No Objection Certificate' from the Landlord/Father stating that they have no objection in you carrying on any business in the residential premises.

You can raise the Invoice in the US Company name by stating in the Invoice 'Fees incurred in respect of your software services for the Month...' & you will be also required to charge service tax if your total receipts exceeds Rs.10lacs during the current year.

if the taxable gross salary of any of the employees exceeds the maximum exemption limit of Rs.160000 in case of an male assessee & Rs.190000 in case of the female assessee and if there is any tax required to be deducted after considering the deductions then you will be required to obtain an TAN. you will also be required to file quarterly e-tds returns & also submit Form16 to your employees. please note that you are only required to make TDS from your employees salary paid each month & deposit the tax amount to the credit of the Cent Govt. before the specified due date You cannot ask the employees to pay on their own as it is not allowed by law.

Also if you are availing any professional service from any other person & the amount of the fees paid by you exceeds Rs.30k then also you will be required to make TDS & provide Form 16A to the service provider.

U S Sharma

glidor@gmail.com

21068 Points Posted on 23 November 2011

Originally posted by : Kiran

Hi,

I would like to open Sole Proprieter Ship (Single Owner) for the following purpose.

Story:

I do software services work. The work comes to me from a US company. So, I need to raise invoice every month end to them. It will be around One Lakh per month. I am going to employe two more Juniors to do work. I will be paying fixed monthly salary to them.

Questions:

1). Both the Juniors come to my resindent home every day (Mon-Fri) and work in my residential apartment itself as I cant afford an office, so no office. It's my flat plus office as the no. of employees are only two or max three excluding me.

- Get trade licence ( certificate of establishment) from local municipal body, which will contain, 1) name of business 2) principal business nature 3) address 4) name of proprietor

- Get Enrollment certificate from profession tax , and pay annual tax of PT, based on your previous year turnover.

- Get registration certificate of profession tax and deduct PT from employees and pay monthly to department.

Is it OK to go for Shops and Establishment act with my reseidential flat as the Office address and as well Registered address of my Sole Propritership.

2). Every Month I will be sending an Invoice to US company around 1 Lakh which includes all the employees (either 3 or 4 max including me) salaries plus my service charges. My service charges are minimal say around 5K max per month. My salary is both my salary plus my profit from business of course after expenditure like computers plus internet charges.

What is the way to Invoice the US company? Can the amount be credited into my India's Current Account ? Which Bank is best to open Current Account

- your invoice should be gross amount charged for job specific, no need to put breakups. any bank can receive foreign exchange on behalf of you, prefer any foreign exchange branch in your city, this will reduce the forwarding hassle.

3). Do I need to open anything to deduct profession tax from my employess ? If it's need to be deducted then where to credit that ?

- already replied

4). Is it mandatory to open the TAN to deduct income tax (TDS) from my employees? or Can I ask them to pay themselves directly ?

- unless your previous year accounts are subjected to audit u/s 44AB( 60 lacs gross receipt or turnover required in a year), you dont have to get TAN or deduct TDS.

Thanks and Regards.