Tax on the income from outsourced work

You being RESIDENT of India your worldwide income is taxed. Your business income can be taxed only in India. However, if your service is regarded as a professional or technical  service, you may suffer tax at the foreign jurisdiction to some extent. You have to claim relief in Indian taxes (not amounting to refund) through your Indian Tax Returns.

The fees you receive are taxed as profit and gains from business and you will maintain the books of accounts etc and file your profit and loss account and balance sheet in the ITR4.

Marketing is usually a business activity and remuneration may be by commission or a lump sum fee. If you have organised it as a business you can claim expenses for internet usage and also depreciation for computer etc.

Your business activity is mainly with foreigners. You have to be careful that you are not a dependent agent of any foreigner. Dependents are those who are authorised to contract on behalf of the foreigner. Then foreigners income that deems to accrue in india on account of using your service is taxable in India. As dependent agent you are responsible to pay his taxes and recover it from him.

Independent agents acting during course of their own business as a broker or commission agent do not have this responsibility. However an independent agent working exclusively just for one client is treated as a dependent agent.

BPOs doing marketing activity normally market goods worldwide. Rather than trying to determine profits of what goods may have been sold in India through the BPO as dependent agents, Income Tax Department considers an income of foreigner to be accrued in India if the remuneration paid to the Indian agent is less than an arms length remuneration. That is say you ought to be paid Rs.100000 for some work done as arms length price and they pay you 80000, then 20000 is considered as the income of foreigner in India and tax is payable on this at rates applicable for foreign companies. The agent is responsible for paying this tax and collecting from the principal. Therefore you must structure yourself as purely an independent agent without authority to sign a contract on behalf of the foreigner. The business you get should be totally on principal to principal basis. If you are an independent agent, before considering you as a dependent agent department gives you opportunity to be heard. This is normally a basis for a particular assessment year and not a permanent basis and only to the extent of amounts that you are responsible for business through you.

It will be better you go to a professional if your receipts are over 10 lakhs a year. He will analyse the need of audit if it arises and help you seek proper relief for foreign taxes as calculations can get a bit complex.

There are recent judgements that does not extinguish the liability of the non resident principal even if he pays arms length remuneration. There are two taxable entities as far as Income Tax India is concerned. 1) Dependent Agent (You, presuming you are a dependent agent) as a real person and 2) Dependent Agent Permanent Establishment (Your foreign principal assuming you are their dependent agent) as a fictitious person caused by deeming. Both have to discharge liabilities of the Income Tax. In case you are a dependent agent, as per section 163, liabilities of both are responsibility of the agent. It is upto the agent to recover from principal.

If your transactions are small or one off you may not have a problem. Everything hinges on what sort of agreement you sign with principal. You may not get the advice in this forum for a matter that is usually solved on a case by case basis. You must check with your CA before entering into such arrangements as you may create a mess for yourself if handled wrongly.

Seeing your websites we cannot ascertain what agreement you have signed and how you are renumerated.