Freelancing & Tax Laws In India
Freelancing in India is highly untapped market
. With the advent of affordable broadband services, working from home is close to becoming a reality. Sites like oDesk, Get A Freelancer, Scriptlance & scores of other sites offer more than enough opportunities one can handle. Today, I have reason to believe, freelancing does pay. All it takes is a little bit of patience and lots of perseverance.
With all the dictionary definitions on one side, the term freelancing is normally associated with extra income. More fondly known as parallel income, something that you would do during your non-office hours and get paid for it too. If you are the type who would still do the same thing, even if no one pays you, then you just got yourself a hobby.
If you have had the experience of being associated with a startup, then I am sure you will be able to relate to the following scenario. First you burn your eyes out by making the right contacts & clinching the right kind of deals. Then you work your butt out at keeping the deadlines, and finally you wait with bated breath for the payment to get credited. Then its the same cycle all over again. Amidst all this frenzy you need to keep track of all administrative work, do the accounts, pay the salaries and last but not the least, file your taxes as well.
Things tend to approach this frenzy in freelancing once your clientele begin to grow. But, as freelancers we tend to forget that we earn, albeit marginally, it is still an income. Tell me, how many of us knew that Any income derived by way of freelancing job is taxable under the provisions of Income Tax Act. 1961. ( there, now you know)
I tired searching for over 8 months all over the internet for some pointers in tax laws that might provide some insight from a freelancers point of view ( note :- freelancer from India). http://www.incometaxindia.gov.in/ did not give me any relevant results & http://indiankanoon.org threw some case references at me. Not to be surprised, everything bounced off my head even before I knew it. Then I did what I knew best I could do. I began looking for lawyers in the blogosphere. And that did it for me.
I came across Mr.Ranjith Xaviers blog at http://indianlawyer.blogspot.com/, where he blogs about various legal topics. He is an Independent Legal Services Professional, and practicing in the High Court of Kerala at Ernakulam. All I had to do was ask and after few emails, Ranjith was hard at work compiling this extensive information about the various tax laws and the terminologies involved. He can be contacted at ranjithxavier(AT)gmail.com & has agreed to help to the best of his knowledge. Thanks! Ranjith.
He puts things under perspective as Tax Laws & FOREX laws ( i.e. Foreign exchange laws) Please click on the image to download the pdf document
If your annual income derived out of freelancing job alone; or if added to your other income(s), adds up to exceed the annual limit mentioned in the Income Tax Act, you are duty bound to apply for and obtain a Permanent Account Number (PAN).
Under the provisions of THE FOREIGN TRADE (DEVELOPMENT AND REGULATION) ACT,1992, anyone doing import or export is expected to apply for and obtain an Importer-Exporter Code Number (IEC Number).
Strangely though, he also put forth this query to us, before answering it for us
Import and export means respectively bringing into, or taking out of, India any goods by land, sea or air; In common parlance, Goods means merchandise or movable property in physical form.Now the question to be considered is whether a person who transmits digital files over internet is exporting goods from India to abroad.
Once services too are brought into the ambit (ie scope) of the said Section 7 of the Foreign Trade (Development and Regulation) Act, 1992,every freelancer who performs services to a foreign client would be exporting it and thus attracting the provisions of the said Act. In such a case, he/she should apply for and obtain the IEC Number.
These are snippets from the compilation that Mr.Ranjith Xavier has put forth for us. Honestly, I am getting intimidated by looking at the links listed in this document from where the relevant information has been handpicked by Ranjith. Few months back, I was all lost, be it the search phrase or which site to look. Now, Thanks to Ranjith, at least now I know where to start. From what I understand, the information within this document is only the tip of an iceberg.
by: Deepa Govind
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