Tax info required to take up an IT consultancy job (for a US based company) from India?

Question

I am an Indian resident, wanted to know, if I take up a software consultancy job with a US based company what are the tax implications. If I need to work from India for a US firm(which has no office in India) is it legal to carry out this job? If not, what are my options?

Answer 1

It is legal to carry out this job.
The tax liability depends on your status.If you are resident of India; the income earned is liable to tax in India.
As far as tax planning is concerned; you have many options such as you can have your office in any of the SEZ in India.Income earned by SEZ Units is exempt from tax.Please refer to relevant provisions of Income tax Act on the link below.
http://www.allindiantaxes.com/income-tax-income-tax-act.php

Answer 2

First thing you should know that its purely legal to do consultancy job from India by a foreigner.

As far as Income Tax implication is concerned, its quite complex question raised by you. The government of India , has specifically , for this purpose set up Authority on Advance Ruling . You can apply to such authority and ask question , the decision of the AAR shall be final and binding on Income Tax Authority. Therefore , you better apply to AAR, New Delhi. As far as taxation of income of Non Resident, which you are , is concerned , you should note following points :

1. As long as you are non Resident, your income which is received in India or accrued in India or arise in India or deemed to accrue or arise in India, shall be taxable.2. The Deeming provision is given in Section 9 of the Act, which states :The following incomes shall be deemed to accrue or arise in India :

(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India.

........Explanation 2. For the removal of doubts, it is hereby declared that business connection shall include any business activity carried out through a person who, acting on behalf of the non-resident,

(a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or

(b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or

(c) habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident:

And You should also MOST IMPORTANTLY in your case should note that Section 9(1)(ii) states "income which falls under the head Salaries, if it is earned in India"

Thus if the Assessing Officer finds that the Consultancy Job you are doing for US company has been done on account of your presence in India and otherwise it was not possible, your SALARY earned even though received in US , shall be DEEMED as Income received in India .

Answer 3

enable's seem at it this type: you should keep in mind that those organizations recommend and help tens of millions of small organizations around the rustic. operating example, I artwork for a house city automobile dealership (and we are hiring). We acquire many "handouts" from the corporation. Our earnings greater very last quarter. those earnings are mixed with the thousand different dealerships around the rustic to make up this actual automobile corporation's economic statements. So, even as organizations are reporting list earnings, that is the branches of that corporation (owned by technique of persons or companions and easily recommended and/or supported by technique of the corporation) in small cities and massive cities throughout us of a that are reaping benefits from those earnings. The CEO's of those organizations, alongside with the Board of directors, are to blame for installation position the regulations that help and recommend small city organizations throughout us of a. more effective taxes= a lot less help. possibly those organizations outsource to different countries, in spite of the indisputable fact that it really is instantly ahead to locate and boycott those organizations at a human being's discretion.