I’m a freelance developer and have recently started working with a foreign client, receiving payments in USD. Do I need to register for GST in this case? Also, how should I report this income in my ITR? Is there a way to minimise the tax liability?
Hey @Siddharth_Jogi ,
This is indeed a very common scenario, as more and more individuals are offering professional services to clients abroad. I’ll try to address your questions one by one.
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Reporting freelance income
Income from freelancing or professional services is classified under the “Business and Profession” head in your ITR.
- If the payment is credited to your bank account in INR, you can directly use the amount received.
- If you receive payments in foreign currency, you need to convert them to INR using the appropriate exchange rate. You’ll have to use the SBI Telegraphic Transfer Buying Rate (TTBR) or the RBI exchange rate on the date of the transaction.
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Is a GST registration required?
Businesses and professionals need to register for GST if their total turnover exceeds 20 lakh.
Since, you’re working with clients outside India, the services you provide will be considered as export under GST rules. As exports are zero-rated, you do not need to charge GST to foreign clients and you can still claim credit for GST paid on work-related expenses.
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Is there a way to reduce the tax liability?
Well, you have two options. You can claim the expenses incurred while providing these services or you can also go for the presumptive taxation scheme.
Claiming business expenses
Since freelancing income is treated as business/professional income, you can deduct legitimate expenses like:
- Office rent or co-working space charges.
- Internet and phone bills.
- Depreciation on laptops, computers, or other work-related equipment.
- Subscriptions to software tools or professional services.
These expenses directly reduce your taxable income. For a detailed list of allowable expenses, you can refer to this guide.
Opting for Presumptive Taxation
If your expenses are minimal, you can choose the presumptive taxation scheme:
- Under this scheme, 50% of your total receipts is considered taxable income, with no further expenses allowed as deductions.
- This is available if your total professional receipts are up to ₹75 Lakh in a financial year.
Hi Sakshi,
Since he is providing the services to foreign client seating in India. this will not consider as an Export of services. hence need to charge the GST on the same.
Please check and correct me if i am wrong.
Regards,
Hasmukh
@Siddharth_Jogi
From Income Tax Perspective:
Report foreign income and Assets-
Schedule FSI (Foreign Source Income)
- Reports all income accruing/arising from foreign sources
- Divided by country-wise reporting
- Must include:
• Nature of income
• Income under each head (salary, business, capital gains etc.)
• Tax paid in foreign country
• Rate of tax in that country
• Tax relief available (as per DTAA if applicable)
Schedule FA (Foreign Assets)
- Reports all foreign assets, accounts and income
- Must include:
• Foreign bank accounts and peak balance
• Financial interest in foreign entities
• Foreign trusts details
• Any immovable property held abroad
• Any other foreign assets
• Signing authority in foreign accounts - Report even if no income earned from these assets
Schedule TR (Tax Relief)
- Claims relief for taxes paid in foreign country
- Details required:
• Country name
• Tax Identification Number in that country
• Total income taxed
• Tax paid abroad
• Tax relief calculated as per DTAA or Indian tax law
• Relief claimed under section 90/91
Important Notes:
- These schedules are mandatory if you have foreign income/assets
- Non-disclosure can lead to penalties under Black Money Act
- Keep supporting documents for all declarations
- DTAA provisions override domestic tax laws where applicable