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skpatel20
Community Member

How to deposit TDS on Upwork Commission

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

ACCEPTED SOLUTION
vladag
Community Manager
Community Manager

Hi Sanjaya and Vijayvithal,

Thanks for the follow-up. Please note that payments for Upwork's services are not subject to Indian withholding tax because Upwork's services are performed outside of India, and thus fall under rules in the US-India tax treaty. The treaty relieves the freelancers of any withholding obligation, and instead, Upwork is required to calculate tax on these services and remit directly to the Indian government (under the recently enacted Equalisation Levy).

~ Vladimir
Upwork

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46 REPLIES 46
hardikwriter
Community Member

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.  

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 

pssodhi52
Community Member

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 ?

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 ?

2c66d702
Community Member

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. 
pssodhi52
Community Member

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.

2c66d702
Community Member

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. 

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