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Tax liability on freelancing

Kaushik (Engineer) (25 Points)

15 April 2012

Hi Friends,

I am a software engineer; having worked in MNCs, I have recently started freelancing.

I am developing softwares for Indian IT Firms(only; nothing abroad)on their specific needs and charge them for the same. I do not expect the total annual (Financial Year) revenue to exceed 10.00 lacs and it is spread through the whole year.

Now, I have been given to understand that, if the total income does not exceed 10.00 Lacs, I need not pay any income-tax. Agreed; but, what about the service tax? My main worry is, I may have to pay the advance tax; in that case, how much I pay (%age) to the tax department and what is the periodicity of such payments?

I would be highly grateful if somebody can throw light on this.

Kaushik

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4 Replies

daya shankar singh (CA ,CS) (629 Points)
Replied 15 April 2012

1)You are liable to pay income tax when your income is exceeded the basic exemption limit i.e Rs 180000.

2)The installment for advance tax apply in case of individual are as under

On or before 15 September - not less than 30% of tax payable

On or before 15 December - not less than 60% of tax payable

On or before 15 March - not less than 100% of tax payable

3)IN respect of service tax, you are liable to pay service tax when your amount of services provided exceed Rs 10 lakh

Prasad (Sr. Manager) (617 Points)
Replied 16 April 2012

HI Kaushik

Think you are confused on many taxes.

you need to pay only income tax, which needs to worked out based on your income and exemptions avaliable, as per the dates provided by Daya

Service tax you will have to collect from your customers and pay, but since you are not expecting an income beyond 10L in the current financial year, you are not required to pay any amount.

Kaushik (Engineer) (25 Points)
Replied 17 April 2012

High Friends, Thanks a lot; this has taken a heavy load off me!, Kaushik

Rizwan Mirza (Software Specialist) (25 Points)
Replied 01 June 2015

Hello All,

My issue is same as Kaushik

I am in the same situation as him. But i take service tax of 12.36% on the invoice i create for my one and only client. Recently he told me that his accountant says that he(client) should not give service tax to me and so he wants all the money back that he given me as a service tax. Can someone in CAClubIndia forum help me with this. And yes my annual freelancing earning is not 10 laks it is about 2 laks(predicted amount)(This is my first year with the client, also its only 9 months with him).

BELOW IS WHAT MY CLIENT'S ACCOUNT SAYS:

""Service tax is not applied when the service are exported outside the territory of India. Since contractor is providing his services outside the territory of India he can not collect service tax as the same has been exempt from Service Tax."

Thanks In advance

Rizwan