Proprietorship account

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 January 2013 I want to open a bank account to pay the salaries to my staff for the outsource work.
I am getting the payments in dollars from my clients abroad.
Do i need to register my company(proprietorship)for this as i already have one proprietorship firm registered in my name.

Also i want to know if i will be liable for service tax also under that.

Jaydeep Parakh

Jaydeep Parakh (Expert)
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16 January 2013 1 )Outsource work is related to your proprietorship business???
2) nature of business
Required above information for solutions.

Querist : Anonymous

Querist : Anonymous (Querist)

16 January 2013 The firm is registered in USA and i am only paying salary from india.

We are providing IT services there.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 ### Opening a Bank Account for a Proprietorship and Managing Payments

**1. Bank Account for Proprietorship:**

Since you are operating a proprietorship firm, you can open a bank account in the name of your proprietorship firm. Here's what you need to know:

- **Existing Registration:** If you already have a proprietorship registered and have a PAN card for that firm, you can use it to open a business bank account. The firm’s registration should match the name on the bank account.
- **Documents Required:**
- **PAN Card** of the proprietorship.
- **Proof of Address** for the business (e.g., rent agreement or utility bill).
- **Business Registration Documents:** If applicable, including a certificate of registration.
- **ID and Address Proof** of the proprietor (Aadhaar card, passport, etc.).
- **Bank Account Opening Form** duly filled out.

**2. Receiving Payments in Dollars:**

Since you receive payments in dollars from clients abroad, you should consider the following:

- **Foreign Exchange Regulations:** As per the Foreign Exchange Management Act (FEMA), payments received from abroad should be routed through an authorized foreign exchange dealer (i.e., your bank). Your bank can assist in handling foreign currency transactions.

- **FCRA Registration:** If you are receiving funds as donations or grants, you might need to register under the Foreign Contribution Regulation Act (FCRA). However, for business transactions where you receive payments for services rendered, this is typically not required.

**3. Service Tax/GST Implications:**

In India, the Goods and Services Tax (GST) has replaced service tax from July 1, 2017. Here’s what you need to know about GST:

- **Services Provided to Foreign Clients:**
- **Export of Services:** Since you are providing IT services to clients in the USA, it qualifies as an export of services under GST laws. Export of services is zero-rated, meaning you do not need to pay GST on the export, but you can claim a refund of the input tax credit.
- **Documentation Required:** You need to maintain proper documentation to prove that the services were exported. This includes contracts, invoices, and evidence of payment.

- **Registration Requirement:**
- **If GST Registration is Required:** If your turnover exceeds the threshold limit set by GST laws (usually ₹20 lakhs or ₹10 lakhs for special category states), you need to register under GST. Even if your turnover is below the threshold, if you are dealing with export services, registering under GST could be beneficial to claim refunds.

**4. Payroll and Other Considerations:**

- **Paying Salaries:** Ensure that you comply with Indian labor laws and regulations while paying salaries. Maintain proper records and comply with statutory requirements such as TDS (Tax Deducted at Source) on salaries.

- **Accounting and Compliance:** Maintain proper accounting records for all transactions, including the receipt of foreign payments and payment of salaries. Compliance with the Income Tax Act and other relevant regulations is essential.

**Summary:**

1. **Opening a Bank Account:** You can open a bank account for your proprietorship firm with the existing registration and necessary documents.

2. **Foreign Payments:** Ensure compliance with FEMA regulations and receive payments through authorized dealers.

3. **GST Implications:** Export services are zero-rated under GST, and you can claim a refund of the input tax credit. Register for GST if your turnover exceeds the threshold or if required for exports.

4. **Payroll Management:** Follow Indian labor laws for salary payments and maintain proper records.

Consult a tax advisor or legal expert for personalized advice and ensure that you comply with all regulatory requirements specific to your situation.