How to deposit TDS on Upwork Commission

[#1]

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

[#2]

Hi Aleksandar,

Thanks for your reply. However, this still doesn't solve my query still. I've spoken to other advisors too but still there's no solution. Kindly have a discussion with your team and please help regarding the issue. To deposit TDS, we require the PAN number of the payee, which is not available to us. So either we get some access to it or even if we get something from Upwork that as a client we are not liable to deduct TDS as per some treaty or rule, that will also work. Please have a look and let me know.

Thanks

[#3]

Hi Pratyaksh,

Could you please clarify if you're referring to the payment processing fee you're charged as a client or the freelancer service fee which is charged to the freelancer? It sounds like you're referring to the latter in which case I can reiterate the information Aleksandar provided, that TDS applies to freelancers' earnings.

Is it possible you're referring to GST and not TDS? Upwork isn't currently assessing GST on transactions as we're not yet registered in India. We are collecting GST numbers from Upwork users in India in case they are needed in the future in order to collect the tax.

[#4]

Hi Vladmir,

Please find below my clarification for your query

I'm talking about the entire payment paid by me as a client to upwork. 

For example, if I hire a freelancer for 100$+ 3$ (Processing Fee) = 103$. I'm referring to this entire 103$. I've been advised to deduct TDS on the same.

Thanks

[#5]

Can someone please help with this query?

[#6]

Hi Pratyaksh,

I apologize for the delay in following up on your question. Please note that we'll definitely update this thread once we receive more information regarding the specific process you asked about. Thank you.

[#7]

---

Pratyaksh A wrote:

Hi Vladmir,

Please find below my clarification for your query

I'm talking about the entire payment paid by me as a client to upwork. 

For example, if I hire a freelancer for 100$+ 3$ (Processing Fee) = 103$. I'm referring to this entire 103$. I've been advised to deduct TDS on the same.

Thanks

---

Hi Pratyaksh,

I apologise about the delay in providing the information you requested. Regarding the scenario you mentioned, we can can confirm that, upon request, Upwork will provide following documents to

Clients/Freelancers:

• India Form 10F
• No India Permanent Establishment Letter
• US Tax Residency Certificate

[#8]

I request to please provide me the following:

• India Form 10F
• No India Permanent Establishment Letter
• US Tax Residency Certificate
• Declaration that Upwork is liable to pay equilisation levy to Indian Government and I (Indian Freelancer) is not required to do any TDS.

[#9]

Hi Krunal,

One of the members will review your request and assist you via a support ticket. You can access your ticket and coordinate with the team here once it's been set up.

[#10]

Hi, I'm an Indian client and have recently hired an Indian freelancer via upwork. Upon discussions with my CA, he is asking me to deduct TDS on the amount paid to Upwork for the contract as per some Income Tax Act Clause. However, I'm unable to understand the process. Can somebody from Upwork help resolve my query?

Thanks

[#11]

> deduct TDS on the amount paid to Upwork for the contract as per some Income Tax Act Clause

True. Upwork should provide some way to comply to this. This is the reason I, being an Indian, don't hire Indian freelancers.

[#12]

I agree,
I have avoided Indian clients till recently because of the Tax Issues,I have one now and his first payment will open a pandora's box for me.

1. The client is required to deduct GST and TDS for the freelancer and deposit it. For this he needs the freelancers GSTIN and PAN number...
2. Similarly the freelancer is required to record the outward supply of services, for this the clients GSTIN is required.
3. The clients GST filing will show a payment of Rs 100/- to me, My filings will show a reciept of Rs 80 (assuming 20% commission taken by upwork).
   1. I am not sure how the missing 20% will be handled by the system.
   2. I would prefer the client showed a payment of Rs 20 to Upwork and Rs 80 to me...

With the Indian government growing desperate for revenue and imposing heavy fines on the smallest mistake, Upwork needs to consult their CA and resolve these issues asap....

[#13]

Hi Vladimir,

The issue being discussed is not related to GST. It is about TDS (Tax deducted at source).

As per Indian Income Tax Law, whenever Indian Resident (in this case a "freelancer") pays anything to non resident (in this case "Upwork"), the resident is required to deduct Tax on the amount paid.

So, we (freelancers) want some clarity over whether we (freelancers) are liable to deduct tax on amount paid to you (upwork).

[#14]

Yes, we need more clarification on this

[#15]

Hello Did you receive any clarity on this? 

[#16]

Nope. I'd say, upwork isn't suitable if you are an Indian freelancer (or an Indian client hiring an Indian freelancer), because of Govt. legalities, like GST, TDS, and Softex P0807 remittence. For last few years I'm facing these issues. Upwork, we'd be happy to help you by providing all inputs to enable you to think of a model to solve this issue. Otherwise, honestly, I'm lconsidering switching to another platform.

[#17]

I finally have an answer to your question, Mr Sanjaya.

See, Upwork won't deduct 1% TDS on the gross invoice amount, if the gross service amount during the financial year is up to ₹ 5,00,000 and you have submitted your PAN number or Aadhar number.

But even where the gross service amount during the financial year exceeds ₹ 5,00,000 and Upwork deducts 1% TDS on the gross service amount, you can work with an Indian client and they won't deduct TDS additionally.

As per section 194-O of the Income Tax Act (the charging section in this case), an e-commerce operator i.e. Upwork is deemed to be the person responsible for paying to a freelancer.

10% TDS (under section 194-J) is applicable only when the client is the person responsible for paying a freelancer.

Hence, the client won't deduct additional 10% TDS before making a payment to Upwork for your services.  

[#18]

Hi Hardik , 

As you mentioned upwork is going to deduct 1% TDS under section 194O . Will we eligible to get 50% deduction under section 44ADA for this also ? I'm getting confused as 1 of my CA told me to get that 50% deduction , TDS should be deposited under 194-J section. Could you please help to share your view on this ? 

Thanks 

[#19]

I have a question as freelancer.

Since its taxing time in India. I noticed that Upwork is charging us on multiple places which is very scary.

e.g. My amount was $1062.5 on a specific date in 2021.

So UpWork has reported to tax authorities the paid amount to be INR 77,403.13 which it calculated as per that day's exchange rate i.e. 22nd Aug while the amount was not ready for payout till 2nd Sept. So, if I go by the rate of that day's payout it comes to be INR 75804.83

Now here UpWork has reported extra INR 1598 which i never ever got even if i include processing fees and commission. And i as freelancer will have to pay for this amount which upwork silently earned and kept to itself.

And then there is commission of $156.25 in this which again Upwork is earning and i have to pay tax on. 

As only ended up getting INR 63969.28 had i did payout on 2nd Sept when it was first available.  Hence UpWork is making me pay tax on INR 13433.84 which never ever reached to me.

And thats one transaction and INR 4000 extra tax i have to pay since upwork reported INR 77,403.13 in FORM 26AS.

Thats INR 80K considering i worked 20 weeks with such payout pattern.

In Summary:

1. The exchange rate used for tax caluclation is different from payout tax rate. Why are we paying more when we already pay commision. Why this hidden charge ?

2. Are we legally bound to pay tax on UpWork's Earning i.e. Commission charged by UpWork as techincally its UpWork's income ?

[#20]

I have a question as freelancer.

Since its taxing time in India. I noticed that Upwork is charging us on multiple places which is very scary.

e.g. My amount was $1062.5 on a specific date in 2021.

So UpWork has reported to tax authorities the paid amount to be INR 77,403.13 which it calculated as per that day's exchange rate i.e. 22nd Aug while the amount was not ready for payout till 2nd Sept. So, if I go by the rate of that day's payout it comes to be INR 75804.83

Now here UpWork has reported extra INR 1598 which i never ever got even if i include processing fees and commission. And i as freelancer will have to pay for this amount which upwork silently earned and kept to itself.

And then there is commission of $156.25 in this which again Upwork is earning and i have to pay tax on. 

As only ended up getting INR 63969.28 had i did payout on 2nd Sept when it was first available.  Hence UpWork is making me pay tax on INR 13433.84 which never ever reached to me.

And thats one transaction and INR 4000 extra tax i have to pay since upwork reported INR 77,403.13 in FORM 26AS.

Thats INR 80K considering i worked 20 weeks with such payout pattern.

In Summary:

1. The exchange rate used for tax caluclation is different from payout tax rate. Why are we paying more when we already pay commision. Why this hidden charge ?

2. Are we legally bound to pay tax on UpWork's Earning i.e. Commission charged by UpWork as techincally its UpWork's income ?

[#21]

I think you will get the deductions of exchange loss and commission amount paid or payable to Upwork. So in nutshell, you should be required to pay income tax only on the amount that you will receive in your hand. 

[#22]

But that's a big maybe. I don't want to get a tax notice just on some bad book keeping by UpWork and also, I already have my own expenses adding this will make liable to book keeping and auditing which is too much trouble and again extra cost. 

Someone from UpWork should at least acknowledge.

[#23]

Hello Sir, 

In my view, Upwork is just following the law, it cannot be pronounced as a bad book keeping. I dont think you will receive any tax notice if you show the gross receipts as your revenue and claim exchange loss and commission as your cost / expenditure.

As far as book-keeping and Auditing is concerned, I think it can add lot of values to any business in the long run. This is personally my view. Thank you.