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Re: How to deposit TDS on Upwork Commission

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Active Member
Sanjaya Kumar P Member Since: Jan 25, 2019
1 of 26

Hello Indian Freelancers and CAs,

 

As I gather, we must deposit TDS on Upwork commission amount. Otherwise Income Tax Department can scrutiny you and charge heavy penalty.

 

What you guys are doing? What percent, and under what clause? As I understand, it could be 40% under section 195.i ( https://www.incometaxindia.gov.in/charts%20%20tables/tds%20rates.htm ). May be the Indian CAs here in the community can throw some light.

 

Thanks,
Sanjay

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Ace Contributor
Vijayvithal J Member Since: Oct 24, 2017
2 of 26

The payment is between an Indian Entity(You) and a Foreign Entity(Upwork/Freelancer). IMHO TDS is not applicable.
If the freelancer is Indian, you can discuss TDS deductions before awarding the contract.

For a different Question. an admin had stated that the upwork fees is applicable only for cash transfer between client and FL, even if the cash transfer was for purchase of project related goods, but if the client directly pays for the goods(tool licenses, hosting fees, server fees, etc.) and has it shipped to the client the UW fees is not applicable. I believe TDS falls in this category.

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Active Member
Sanjaya Kumar P Member Since: Jan 25, 2019
3 of 26

Thanks for the reply. Actually the Indian Entity (me) is the Freelancer, and the Foreign Entity is Upwork. Upwark takes some amount (5%) from the Indian Entity as commission. My CA says that the Indian Entity needs to deduct and depositTDS on that amount. But we aren't entirely sure how much. Could be 40% + cess etc.

 

What do you think?

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Ace Contributor
Vijayvithal J Member Since: Oct 24, 2017
4 of 26

Interesting point,

Note UW is in USA and as per India's DTAA treaty the rate is 10-15% https://taxguru.in/income-tax/countrywise-withholding-tax-rates-chart-dtaa.html

I hope someone from upwork legal takes a look at this. and replies here.

I am not sure how one can make a TDS payment when UW proactively deducts the escrow fees(not commission) before remitting the amount? A related question would be deduction of TDS on the intermediate bank which charges some amount for wire transfer fees.

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Moderator
Vladimir G Moderator Member Since: Oct 31, 2014
5 of 26

Hi Sanjay and Vijayvithal,

 

Please refer to the information we provided on this thread as well as the information other freelancers located in India shared, and we'd suggest consulting a local tax advisor regarding any further questions you might have.

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Ace Contributor
Vijayvithal J Member Since: Oct 24, 2017
6 of 26

@valdamir,
The Thread is not applicable to the Q. raised by Sanjay, The thread is about getting a certificate from the bank for local transfer. Where as Sanjay's Tax Advisor has pointed out that

  1. Upwork needs to pay Taxes in India for the 20% commission charged by it.
  2. Since Freelancer's are paying this commission to Upwork, they are responsible for witholding 10% of the commission amount and ensuring that UW complies with the Tax Law's (TDS = Tax Deduction at source).

Please get in touch with your Indian Tax advisor and resolve this issue.

Active Member
Ajitsingh B Member Since: Jun 26, 2019
7 of 26

@Vijayvitha J, Sanjay,

 

It would be  of interest to know if any firm conclusion is reached on this TDS matter.

I have been on Upwork since a little more than month, and recently came across taxation discussions at some personal circle.

Since then trying to find clear modalities 'a freelancer' has to care for from taxation point of view, to avoid complex issues later from IT dept.

 

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Active Member
rajkumar y Member Since: Apr 26, 2016
8 of 26

Hi Vijay, Sanjay

      Did you guys found any answer for this? I was also checking for this issue and found your thread. Let me know if you found any answer for the TDS deduction on Upwork fee.

 

Thanks

 

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Ace Contributor
Vijayvithal J Member Since: Oct 24, 2017
9 of 26

No, There is no resolution on this matter yet!

Recently Upwork sent a mail informing that on top of the 20% commission they will start deducting TDS.

 

I assume that they have consulted a CA and are working on the CA's advice to ensure that the transactions including the commission is in line with indian law's

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Moderator
Vladimir G Moderator Member Since: Oct 31, 2014
10 of 26

Hi Rajkumar,

 

Just to clarify, are you asking about the GST or the TDS charge?

If it's the latter (TDS), the amount of tax we are required to withhold is dependent upon whether or not you have a valid PAN or Aadhaar number on file with Upwork:  

 

  • For Upwork users that have a PAN or Aadhaar on file, we are required to withhold 0.75% of client payments to users. 

  • For Upwork users that do not have a PAN or Aadhaar on file, we are required to withhold 5.0% of client payments to users.

NOTE: The withholding rate of 0.75% is effective from October 1, 2020, until March 31, 2021, and is  scheduled to increase to 1% effective April 1, 2021.

 

The withholding tax is calculated based on the gross amount that the user invoices their client, so it is calculated prior to freelancer service fees or any other fees that may reduce the amount credited to the user’s account. You can find more information in this announcement thread.

If you're referring to GST, Upwork is currently working with its tax advisors to determine under what circumstances GST must be collected on transactions between Upwork and its users. If it is determined that tax is to be collected, we will contact our users in India to provide an explanation of what transactions will be assessed and the date any collection will start. 

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