Reply
cancel
Showing results for 
Search instead for 
Did you mean: 
Reply

How to deduct tax from payment

5828ecd4
Active Member
Rama S Member Since: May 7, 2016
1 of 16

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 

vladag
Community Manager
Vladimir G Community Manager Member Since: Oct 31, 2014
2 of 16

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.

Untitled
prestonhunter
Community Guru
Preston H Member Since: Nov 24, 2014
3 of 16

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.

f0bba6a2
Active Member
Raghav M Member Since: Nov 3, 2016
4 of 16

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

petra_r
Community Guru
Petra R Member Since: Aug 3, 2011
5 of 16

@Raghav M wrote:

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.


 Whatever taxes you as a client have to pay to your local government is your issue, and is not Upwork's problem or the freelancer's problem. You owe a tax, you pay it.

 

If that means it'll be cheaper for you to hire Indian freelancers, then do so.

 

8244ea26
Active Member
Shashank T Member Since: May 7, 2021
6 of 16

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?

f0bba6a2
Active Member
Raghav M Member Since: Nov 3, 2016
7 of 16

Hi Rama,

 

We're facing a similar problem. How did you end up treating this TDS?

 

Thanks

prestonhunter
Community Guru
Preston H Member Since: Nov 24, 2014
8 of 16

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.

soubhik_
Active Member
Soubhik C Member Since: Jun 6, 2015
9 of 16

You didn't even understand the question. Nowhere was it said that freelancer should pay money to client. Anyway.

arpitjain240188
Active Member
Arpit J Member Since: Sep 19, 2015
10 of 16

Hi Soubhik,

 

I also have the same query. Did you get answer to it yet?