R2I and Working as IC for US Company from India....

back2desh · Post by **back2desh** » Wed Dec 08, 2010 12:42 am

Dear R2Ied member,

Is there anyone in the forum who works as Independent Contractor to US employer from India (not through some company or middleman)? Is it possible to work as a independent contractor? If so anything specific that needs to be done to work like this (paying SS taxes, Federal Taxes, does one need to pay state taxes?)? This is for a person who is USC and has OCI.

I have seen posts where people work for US companies from India as a Full Time Employee, which may be different.

Appreciate your important guidance/advice on this.

post_r2i06 · Post by **post_r2i06** » Fri Dec 10, 2010 12:47 pm

I doing that for last 3.5 years.. COuple of things
1. Register shop/commercial establishment ( 1-2 days, fairly easy)
2. Get IEC ( import export code) ( 1-day, fairly easy but clerks can make to revisit office for even minor mistakes)
3. Register with STPI ( all can be done by email)
4. Service tax is NOT required , as foreign companies with no presence in India are not liable to pay service tax
5. Pay Income tax on the profit
6. If renting office space , paying someone salary, you may need TAN. But this is becoming pain, so I terminated my office lease and heading back to work-from-home model.

7. If you really want to save income tax - register as 100%EOU ( export oriented unit). But those savings come with their own set of headaches. So I chose, pay 30% and have peace of mind.

I am not USC - so not sure how dual taxation stuff works for you.

moneyIsNot_funny · Post by **moneyIsNot_funny** » Fri Dec 10, 2010 1:12 pm

post_r2i06;354554I doing that for last 3.5 years.. Couple of things
2. Get IEC ( import export code) ( 1-day, fairly easy but clerks can make to revisit office for even minor mistakes)

What is the need for this code? To establish the grounds for not paying the Service Tax?

post_r2i06;354554
7. If you really want to save income tax - register as 100%EOU ( export oriented unit). But those savings come with their own set of headaches. So I chose, pay 30% and have peace of mind.

From what I researched, it was not possible to set up a EOU or a SP(Software Park) unit in the first place - unless you really have quite a few employees, huge turnover, and a work location. Its not an option at all, for single person situation. Am I wrong in that assessment?

post_r2i06 · Post by **post_r2i06** » Sun Dec 12, 2010 9:55 am

IMO - IEC - is mandatory , as you are "exporting" services. And those services should certified on a SOFTEX form. in SOFTEX form IEC is mandatory. SOFTEX is mandatory for exports more than $25,000. So if you income per year is less than $25,000, no hassles. Otherwise, too much red tape.

You cannot export (or import) anything from India, unless Govt okeys it. Its not just for service tax. Service tax need not be paid, if you establish that your money is because of remittance from abroad and that you can as do that by FIRC well.

100%EOU - you are correct. Its pain and its almost impossible but still doable for any size, "pvt ltd" company. Please note that there are several small companies that export anything from safty pins, printer ink, cartridges, clothes,auto parts etc that dont have offices in SEZ and still are 100%EOU. Couple of years ago, it was possible to register with STPI and get 100% tax benefit.. that clause is being sunsetted from Apr 1-2011. There is some distinction between units in SEZ and outside SEZ, but you can still operate an 100%EOU outside of SEZ.

indiagoer · Post by **indiagoer** » Fri Jan 14, 2011 8:43 am

Ok, the above is fine for me, but what does my company have to do?

gcinindia · Post by **gcinindia** » Fri Apr 15, 2011 7:46 pm

Hello,

I am in a similar situation -
1. I am a green card holder
2. I work as an independent contractor(self-employed) to a US company
3. I pay my Indian taxes
4. US company sends me Form 1099
4. I pay my USA taxes after deductions using 'foreign exclusion - Form 2555'.

My worry is:
1. If I gave up my green card and got myself a business visa and the company sends me Form-1099 for the work that I do in India(I would only use the business visa for visiting purposes and not for working as it is prohibited), then,
1. Based on Form-1099, will the USCIS assume that I have been abusing the business visa even though I have not and the form-1099 was issued only for the work that I do in India.

2. Is there a form or something I should send to Uncle Sam that I am no longer a resident of the USA and hence not liable to pay taxes to the USA(apart from filing forms for returning green card, making sure all taxes are paid and completed before surrendering the green card).

Seeking your views,
Thanks in advance for your help.