22 March 2012
One of my client doing software business in India as a proprietor and He is is doing software development in India & job received from USA and He raised the invoice USA COMPANY and he got the money (as US Doll er) Now my question is in this case Income tax is applicable Or exempted? Please clarify me sir.
23 March 2012
Your client is covered under meaning of resident and income arises to an individual who is resident exceeded the exemption limit is liable for tax, so that in your case income tax is applicable.
24 March 2012
Thanks sir, And I have need to one more clarfication sir . suppose The client is Rgisterd in STPI afterthat Income tax Expemtion avilbable? .Proprietor Can apply STPI? Please clarify sir
31 July 2024
**Income Tax and STPI Registration for Software Business**
1. **Income Tax on Software Business from USA**
- **Income Tax Applicability:** - Income earned from providing software development services to a client in the USA is generally taxable in India. - The income received from a foreign client is considered as "Income from Business or Profession" under the Income Tax Act, 1961. - **Taxation:** The income will be subject to tax under the Income Tax Act at the applicable rates. The foreign exchange receipt doesn't change the taxability; what matters is that the income is earned from an Indian resident's business activities.
- **Tax Exemption under Section 10A/10B:** - If the business is set up in a Special Economic Zone (SEZ) or is registered with the Software Technology Parks of India (STPI), certain tax exemptions and benefits might be available. - **Section 10A/10B:** These sections provide tax exemptions to units in STPIs/SEZs for a specified period. The exemption applies to the profits derived from the export of software services. - **Eligibility:** To avail of these exemptions, the unit must be engaged in the manufacture or production of software or IT-enabled services and meet other conditions prescribed under these sections.
2. **STPI Registration and Tax Exemption**
- **STPI Registration:** - A software business can be registered under the Software Technology Parks of India (STPI) scheme. This registration provides several benefits, including tax exemptions. - **Benefits:** Registered units can avail of benefits such as tax holidays, exemptions from customs duties, and other incentives.
- **Proprietorship and STPI Registration:** - A proprietorship firm can apply for STPI registration. The form of the business entity (whether a proprietorship, partnership, or company) does not affect eligibility for STPI registration. - **Tax Exemption:** If the firm is registered with STPI and fulfills the conditions, it can avail of tax exemptions under Section 10A/10B.
### **Summary**
- **Income Tax:** Income from software services provided to a foreign client is taxable in India, but exemptions might be available if the business is in an STPI or SEZ. - **STPI Registration:** A proprietorship can be registered with STPI and avail of benefits like tax exemptions under Section 10A/10B. - **Tax Exemptions:** Ensure compliance with STPI requirements and maintain proper documentation to avail of exemptions.
**Recommended Action:** - **Consult a Tax Professional:** For accurate advice tailored to your client's specific situation, consult with a tax advisor or CA who can provide detailed guidance based on the latest regulations and your client's business structure.
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