Tax on selling online services

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2016 I'm planning to start website that will allow users to enroll and use online services on the website. The users will be paying the amount for using the services through online payment gateways. The users can be located anywhere in the world and will make payment through the online payment gateway. I want to know -
1) how incometax will be calculated on such income? This assuming I'm doing this as a proprietary business.
2) If there would be any difference if the online user making payment is located outside India?
3) What all other taxes do I need to pay on such income in India?

CA Sumiit B Nagpal

CA Sumiit B Nagpal (Expert)
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23 September 2016 The whole question is although incomplete yet i would try to solve maximum of your queries:
You will have to pay income tax on profits from the business by maintaining books of accounts i.e balance sheet and profit & loss account. As you are an individual, tax would be applicable at the rates in force i.e. slab rates( Upto 2.5 lac- NIL, 2.5-5 Lac- 10% , 5-10 lac- 20%, above 10 lac -30% plus education cess @ 3%.
There would be no difference if the user is paying from outside India as you are a resident and your global income is taxable in India.
Assuming that you will be providing the services and if the services provided are above threshold limit (Rs. 10 lac) ou would need to collect service tax from the Indian Clients @ 15%. No service tax needs to be collected from foreign clients as it will be export of services as the same will be utilized out of India and hence exempt from service tax.
If you would be selling goods, then you need to get yourself registered with VAT authorities of your state and also will be needing Sale tax Number. (GST from next year) No need to levy sale tax/VAT on foreign clients.
You can claim input of service tax /VAT/Sales tax on the services /materials utilized by you for providing the services/selling goods. Sale tax/VAT/Service Tax are all indirect taxes and you will be collecting the same from customers and will be paying to Government. Hence you need to get registered and comply with these laws (indirect ) and the only tax you would be paying from your own pocket will be income tax only.
Hope your query is resolved.