Individual Income Tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 June 2010 Hi,
I work as a freelance consultant for company overseas. Every month I get a direct remittance from my employer in to my account.

My questions is - How do I treat this Income whilst paying my taxes. Should this be still treated as Salary or is there any other clause for it. Please advice.

Any help with this is much appreciated.

Regards
TD

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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22 June 2010 In this case, you should have to contact with your employer. How he showing you in your books, as employee or as consultant.
If as employee, then you will treat it salary,
If as professional, then you will treat it consulatncy receipt.

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Rahul Gupta

Rahul Gupta (Expert)
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22 June 2010 Agreed with Mr. Bansal.
But the point came to my mind is that you are saying Freelance Consultant, then you might be providing the company with some invoice or so, in that case it will be professional income only, so it will be considered as consultancy services and so will be shown as Income from Business or profession.

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Querist : Anonymous

Querist : Anonymous (Querist)

22 June 2010 Thanks Mr. Bansal and Mr. Gupta for taking time to answer my query.

The company earlier had an office in India where they used treat me as an employee and salary used to get credited through a payroll account. But unfortunately they could not maintain the cost and decided to close their business in India. However, they did not let go off me, I still continue to work for them from here in India and they pay me every month through a direct transfer to my bank account.

I do not send them any invoice.

What would you suggest, If I treat this as a professional Income what is the rate of tax I should be paying. Please advice

Rahul Gupta

Rahul Gupta (Expert)
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22 June 2010 Dear Friend,

In your case, i would suggest you that it is better to take it as professional income. The basis and some benefits for my suggestion are >

1. You will be able to set up your own business or profession which will have regular income.
2. In this case, you will be able to claim set off for the expenditure you incur while providing such services like, telephone expenses, internet expenses, mobile expenses, petrol expenses, stationary, depreciation on computers etc.
3.Since you are working here, in case you have an opprtunity to more work form outside this company, you are able to do it and in that way can earn extra income. although this can be done in salary case also, but in fromar case, it will make the base your own firm more stronger.
4. From the taxability point of view, since the income will be calculated after claiming expenditure, certainly the tax liability will be less as against the salary.

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Querist : Anonymous

Querist : Anonymous (Querist)

23 June 2010 Thank you very much Mr. Gupta for calrifying and suggesting the alternatives.

I will take your expert advice.

In this case do I have to set up a business name like registering a business or something or do I just put this as Income from business (less expenditure) while filing the returns?

Hope, I am not asking for too much info - just want to understand what my due course of action should be.

Thank you once again for all your help.

Rahul Gupta

Rahul Gupta (Expert)
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23 June 2010 Friend, You are welcome any time.
In case, you want to set up a proprietorship business, then nothing special to register. Just create invoices, keep record of your expenses, open your bank account and apply for PAN for It return Filing.

No need fro special registration of business in case of proprietorship business. However, in case you go for a company then there are all formalities for registration and other, but I won't suggest that to you.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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23 June 2010 Agreed With Mr. Gupta, it is better to shown professional income agaisnt which you claim expenses and save tax.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 June 2010 Thank you for the suggestions