Hello, I have a US based service company that will extend its services to India. What are the tax implications for doing business with Indian clients. I will be paying the corporate tax, income tax and other taxes in USA as the company is registered here. Please note that there won't be any office in India as the service is provided by website. Thanks in advance!! Regards Ashish
There can be an element of service tax if the services are consumed in India, which is 14 % of Invoice value. This has to be examined in detail with facts to ascertain with place of provision of services rules.
If your services are treated as professional and technical services under Indian Income tax Act, then under section 9, such services income will be taxable in India even if services are rendered online. please examine with detail facts.
Thanks Mr. Kale. It will basically be an online tool that a person can use by paying a fee. Please let me know whether that will come under service or income tax? Am I right in assuming that there will be dual taxation - one in US and one in India ?
A foreign company can be taxed in India depending upon its source of income . The income can be characterized into three type - Income from Business & profession ( Applicable only if you have some presence in India , generally called permanent establishment ) , fee for technical services ( the definition is wide and it can be taxed irrespective of your presence in India ) and Royalty (( the definition is wide and it can be taxed irrespective of your presence in India ) . So nature of your business is much more important to understand the tax ability in India rather than the mode of payment like credit card or the platform of working .
Since your company is a resident of USA , the tax that you will pay in India , can be claimed as relief while paying the tax in USA under the India USA DTAA .
There is no dual taxation . The tax paid in India can be claimed as relief in USA as USA is the resident country of the company .
Its a query addressed to CA Kale.
If the income accrues in India and u have permanent establishment here then it will be taxable in India. In the present case u have no permanent establishment. Thus as per our view there will not be any income in India and thus you will not be taxed here. You need not take service tax, income tax
If it is an online tool then it may be termed as technical services and section 9 becomes operative and buyers will have to deduct tax from the service charges at source and pay to income tax department