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How to deduct tax from payment

3c5a88a2
Active Member
Archana M Member Since: Sep 22, 2017
11 of 16

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.

 

 

aocumen
Moderator
Avery O Moderator Member Since: Nov 23, 2015
12 of 16

Hi Archana, 


You may find more information on India's service tax extensively discussed here, and here


~ Avery
Upwork
ashish-tulsian
Active Member
Ashish T Member Since: Dec 27, 2018
13 of 16

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.

 

 

 

 

 

 

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

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.

ashish-tulsian
Active Member
Ashish T Member Since: Dec 27, 2018
15 of 16

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. 

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

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.