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Indian TDS Tax Withholding on Upwork Earnings

lenaellis
Community Member

Starting October 1st, Upwork will begin withholding Tax Deducted at Source, TDS, from payments to freelancers and agencies located in India as part of a new tax law enforced by the Indian government.

 

As part of our continued efforts to remain compliant with tax laws in India, we are asking that our customers in India provide their Income Tax Identification number in the “Tax Info” section under “Settings”. For purposes of TDS withholding, the Indian government will accept either a Permanent Account Number (PAN) or an Aadhaar number. Please be sure to use the correct format for your PAN or Aadhaar number as defined by the Indian government:


  • PAN is a 10-digit alphanumeric entry, i.e., A A A A A # # # # A
    # = Numeric   A = Alphabetic 
  • Aadhaar is a 12-digit numeric entry


For those freelancers and agencies that have provided a PAN or an Aadhaar number:

We are required to withhold 0.75% of all your payments, starting with the first dollar you earn as of October 1, 2020, and forward it to the Indian government. The rate is scheduled to increase to 1% on April 1, 2021.

 

For those freelancers and agencies that have not provided a PAN or an Aadhaar number:

We will be required to withhold 5% of all your Upwork earnings and forward it to the Indian government. You will be able to claim a tax credit or refund from the Indian government should you pay more taxes than required. 



You will need to add a PAN or Aadhaar number in order to keep the withholding tax at .75% of your earnings.  Click here to Add Income Tax Identification.

 

To learn more about Indian TDS, click here

 

Let us know if you have any questions.



 

492 Comments
nitinsharma91
Community Member

Shouldn't Upwork share the burden, instead of passing everything on freelancer's shoulder. When you're deducting TDS at the Gross Income, Upwork is taking away 20% from it. So how about Upwork can be bit large-hearted and waive off the due taxes on 20% commission and pay it on their own (as Upwork is making 20% not the freelancer)

VladimirG
Community Manager

Hi Nitin,

 

Payments for Upwork's services are not subject to Indian withholding tax because Upwork's services are performed outside of India, and thus fall under rules in the US-India tax treaty. The treaty relieves the freelancers of any withholding obligation, and instead, Upwork is required to calculate tax on these services and remit directly to the Indian government (under the recently enacted Equalisation Levy).

exinox
Community Member

Hello Team,

 

Yesterday, i did mailed you about tax query still i did not get any resposne from your side.

 

Can you please check asap?

 

Thanks

g_vasilevski
Retired Team Member

Hi Gautam,

 

We are double checking this with our team and once we have more details we will post an update here. Thank you.

iaabraham
Community Member

The way the WHT amounts have been listed in our Reports is very confusing. For me, who works with the same clients almost every week, it's not clear which WHT amount is associated with which week of work. 

 

How do I ensure Upwork's not taking 5% instead of 1% from me when the pending dates of the WHT fees are marked for a future date? Can someone from the team please confirm that at least?

rupesh240289
Community Member

Hello Sir/Madam My latest payment is showing me 5% withheld which is is already in processed . If i provide my PAN can i get reverted with from 5% to 0.75% or it is not possible for this payment.?

 

Thanks

nitinsharma91
Community Member

Vladimir G wrote:

Hi Nitin,

 

Payments for Upwork's services are not subject to Indian withholding tax because Upwork's services are performed outside of India, and thus fall under rules in the US-India tax treaty. The treaty relieves the freelancers of any withholding obligation, and instead, Upwork is required to calculate tax on these services and remit directly to the Indian government (under the recently enacted Equalisation Levy).


Hi Vladimir! Thanks for your prompt response. However, I think you misunderstood my question. What I'm trying to ask is: Upwork is deducting TDS on gross income of the freelancer, so you're making us pay taxes even for the 20%/10%/5% amount that's going into Upwork's pocket. Shouldn't Upwork be sharing the load something like this

 

X made 500 USD on a project

Total TDS: 3.75 USD

 

Now what X actually got: 400 USD

What Upwork got:100 USD

 

So shouldn't Upwork pay 0.75 USD out of 3.75 USD to share the burden with freelancers. Not a tax expert but these are my thoughts

gagandp
Community Member

Joanne Marie P

 

That is fine. I have added pan card but the future deduction is 5%  https://share.getcloudapp.com/12ur1een instead of 0.75% .

VladimirG
Community Manager

 Hi Gagandeep,

 

Thanks for the follow-up. I've checked your account and will follow up with our team to investigate further. I'll provide more information as soon as possible.

sukanyapandiaraj
Community Member

TDS needs to be charged on the payment made to the contractor and not on the fees that Upwork withholds before paying the contractor. You cannot withhold the tax for the amount you are not actually sending into India, but are retaining in another country. Can you please explain?

 

The TDS explained on the Help page says this.

In India, Tax Deducted at Source (or TDS) is a means of collecting an income tax. Businesses are required to set aside a government portion for every payment they make in India, which is sent directly to the Indian government.

A law enacted in March and effective as of October 1, 2020, requires e-commerce operators outside of India (such as Upwork) to begin collecting TDS on payments made to service providers (such as the freelancers and agencies that use Upwork) based in India.

 

Upwork fees is not paid to the service providers, so why is TDS withheld on that amount?