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Software consulting sole proprietorship guidance needed

JP (developer) (24 Points)

20 November 2011

I am planning to start a software consulting business in Kerala as a sole proprietorship. I will be providing consulting business to an American company. I am also planning to rent an office and hire some employees. Could someone please provide answers to the questions below ? Thanks in advance.

1 . What are the legal formalities i have to cover ?

2. Can i put any name to my firm ? Do i need to register somewhere ?

3. Do i need to pay service tax ?

4. To deduct TDS and professional tax from employees what i have to do ?

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2 Replies

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 06 December 2011

1]. You will be required to apply for the Permanent Account Number for the purpose of your Income-Tax matters. Also you need to apply for obtaining your profession tax number for paying PT. if you carrying on your profession from an rented premises then you will be required to take an No Objection Certificate from your Landlord to carry on the consulting business.

2].Yes you can put any name to your firm which you like, there’s no restriction. For Sole proprietary concerns no registration is required to be made anywhere. However you can apply for the Shop Act Licensee under your respective state law.

3]. You need not pay Service Tax until your Gross Receipts exceeds Rs.10lacs in the previous year. After it crosses the threshold you will be required to obtain the Service Tax Registration no & collect & start paying service tax.

4]. If your gross receipts cross the threshold of Rs. 15lacs in the previous year, then from the subsequent year you will be required to apply for Tax Deduction Account number & will be required to deduct TDS on any payments made as mentioned below. You will also be subjected to Tax Audit u/s 44AB of the I-T act & will be required to get your books of accounts audited from a practising CA

Professional fees, Rent, Commission paid, contractor payment etc…

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Sofiia Shevchuk (6 Points)
Replied 21 November 2024

Starting a software consulting business as a sole proprietorship is an exciting venture! Here are some general points to consider:

Legal formalities typically include obtaining a business license, registering your firm, and setting up taxation systems.
You can choose a name for your firm, but ensure it's not already in use and complies with local regulations. Registration is usually mandatory for businesses operating formally.
Service tax applicability will depend on your country's tax laws and the services you provide.
For deducting TDS and professional tax, you’ll need to register for a Tax Deduction and Collection Account Number (TAN) and comply with local tax filing requirements.

As you're setting your business model, researching the software engineer consultant hourly rate can help you position your services competitively in the market.