Service Tax for Software Freelancer?

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  1. Hi,

    I am a software freelancer in Bangalore and export softwares for clients located in US and UK. I obtain work through an agent who is a US national and his company is based in US.

    My queries are:
    1. Should I start a firm or should I keep taking freelancing projects as an individual directly?
    2. What are the service tax and income tax implications if I start a firm and if I do this as an individual freelancer respectively? Am I needed to pay any service tax at all since this activity is an export and I receive payments in convertible foreign exchange to my INR bank account
    3. If I buy services from other service providers online ( I have a designer who develops the screens on my behalf in US), can I show this as an expense and deduct it from my final income? What all documents I must furnish and how?
    4. Which would be best for me - starting a firm or do this individually if I want to save on some tax?
    5. What all I can do or cannot do if I do not start a firm?
    6. Do I have to register myself as an exporter in this case?

    Any help in this regards will be highly appreciated
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    1. Keep taking payments on your individual name as it is easy to manage payments on individual name.
    2. The Income Tax and Service Tax implications would be the same in case of both Individual as well as Proprietorship. To determine whether the kind of work you are doing is Export of Service or not - you'll have to apply the place of provision rules.
    3. Yes, you can claim such payments as expenses. However, to claim any expense - you should have an invoice for the same.
    4. In your case - the tax would be the same in case of both individual as well as firm
    5. There is nothing which you cannot do on your individual name
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