May 7, 2016 10:11:37 PM by Rama S
Hello,
I hired a freelancer for my work and I am based out of India. The freelancer was also based out of India.
The due amount was deducted from account in full. However, my accountant came back to me and said this is not legal and I could face penalties for this. I am supposed to deduct 10% from the payment and pay it to the tax authorities here.
My question is: how do I set it up so that UpWork automatically debits 10% less from my account?
Thanks,
Rama
May 8, 2016 02:06:35 AM by Vladimir G
Hi Rama,
Clients are billed for the full amount agreed with the freelancer, on which a 10% service fee is applied. You need to speak with a local tax consultant regarding your country's tax laws.
May 8, 2016 07:35:27 AM by Preston H
I'm sure your accountant means well. But unfortunately he doesn't know what he is talking about. When you talk to other accountants or tax professionals in your community they'll probably get a good laugh out of what your accountant said and they'll be able to explain his mistake to you better then we could here.
Nov 3, 2016 03:54:31 AM by Raghav M
Hi it seems that I've been given the same advice - its called TDS in India (tax deduction at source) and doesn't look like it can be avoided, even for foreign freelancers working for Indian clients.
Can you please explain why you said the accountant didn't know what they were talking about?
Thanks
May 7, 2021 07:04:25 AM by Shashank T
Preston, it seems that your understanding of this topic is very limited. But that's understandable since you're not doing business from India, I suppose.
I've done extensive research on this topic and have consulted atleast 10 Chartered Accountants (aka CPAs in certain countries/ Tax Advisors). We work on the same lines with Google as well. It's a rule of the land and everyone has to follow that whether it's Google or Upwork or any company who does business with Indian clients.
As per section 195 of Income Tax Act, when we pay to ANY foreign entity, we need to withhold 10% Taxes in terms of Technical Services. There's no escape route to this and hence Upwork needs to provide that option to it's Indian Clients (atleast larger ones as if it's a sole proprietor firm then it's not applicable). Upwork can claim the same amount from Govt of India so as such Upwork gets 100% paid, not a single dollar less. The only question is now how Upwork can manage this operationally? Is there such an option to withhold tax amount while paying to Upwork?
Nov 3, 2016 03:51:19 AM by Raghav M
Hi Rama,
We're facing a similar problem. How did you end up treating this TDS?
Thanks
Nov 3, 2016 07:53:48 AM by Preston H
Freelancers are not going to pay money to Indian clients, or any other clients.
On Upwork, freelancers get paid by clients. Freelancers do not pay clients to work.
Upwork is not going to ask that freelancers pay money to clients.
So there are three possible outcomes here:
1) Clients in India can work with their accountants and figure out how to use Upwork while also complying with local laws
or
2) Upwork can make arrangements so that these things are worked out behind the scenes.
or
3) Upwork can block India as a country with which it does business. Meaning that people living in India will no longer be able to be clients or freelancers on the site.
Jan 4, 2017 09:10:45 PM by Soubhik C
You didn't even understand the question. Nowhere was it said that freelancer should pay money to client. Anyway.
Jun 10, 2019 04:34:24 AM by Arpit J
Hi Soubhik,
I also have the same query. Did you get answer to it yet?
Sep 22, 2017 11:57:35 PM by Archana M
Indian laws require to deduct tax in a contractor-contractee relationship, when a certain amount is passed. I am glad there is precedence to this and couple of fellow indians have asked same question. Were you able to figure it out?
I am only looking for help from people who have faced this and understand this.
Nov 14, 2019 11:15:48 PM Edited Nov 14, 2019 11:17:32 PM by Ashish T
Hi, I could not find any correct answer for this question.
The querist and her accountant are actually asking question concerning Sec 195 of Income tax act, India which is similar to and known as 'tax with held' in most countries. The query is not related to GST in India.
Now 195 states, in simple terms, that TDS (Tax deducted at source) needs to be dedcuted @10% (for technical services) when making a payment to a Non Resident. Upwork being a registered entitity outside will be covered in this definition even if the freelancer (payee) is in India, as when you hire a freelancer (payee) through upwork you are paying to upwork and upwork is paying to the freelancer (payee).
India also has Double tax avoidance agreement (DTAA) with different countries. Believing Upwork is registered in Australia, the DTAA with Australia, states that Income will be taxable in the country where the recepient is registered.
One can deduct TDS lower of the rate as specified in section 195 or in DTAA. In this case DTAA is lower so no tax should be deducted.
These are my views, if anyone has a different view please reaply.
Nov 15, 2019 02:47:27 AM by Petra R
Ashish T wrote:
India also has Double tax avoidance agreement (DTAA) with different countries. Believing Upwork is registered in Australia, the DTAA with Australia, states that Income will be taxable in the country where the recepient is registered.
Upwork is not based in Australia, but the USA.
May 7, 2021 11:45:04 PM by Ashish T
If a freelancer in India provides services to an Indian client, it is a service provided in India. If the client is a non-Individual or an individual with Tax audit applicable then they need to deduct TDS US 194J. As on Upwork freelancer is paid the entire amount, the contract should be of 10% less amount and this amount should deposited as TDS to freelancers tax account.
May 8, 2021 09:36:45 AM Edited May 8, 2021 09:37:13 AM by Preston H
I don't doubt that there are accountants and/or tax experts in India who know how to handle this within the current limitations of the Upwork software system and the requirements of Indian tax law, and will know how to handle this when Upwork's systems change in the future, and will know how to handle things when India's tax laws change in the future.
Oct 5, 2021 01:41:31 AM by Venkat A
Gee thanks, that is so insightful of you to point out... *eye-roll*
Dec 9, 2021 12:12:47 AM by Ajay K
Hi Ashish,
I am in the similar situation. I am a Pvt Ltd Company in India using Freelancers (from India). The solution you offered may not work as the invoice will be from Upwork and the payment is made to Upwork. There is no direct financial relationship between myself and the freelancer. TDS is for the payment made. I will need a valid PAN in order to pay the deducted TDS to the payees account. How will this work. Please share any information you may have.
Dec 9, 2021 01:20:43 AM by Ashish T
Dec 9, 2021 12:14:43 AM by Ajay K
Hi Rama,
Did you get a solution to your problem as i am in similar situation. Any info you provide will be very helpful. I have also written to their support. Lets see what they say.