As a CA trying to be active on reddit I see many people here struggling with understanding of finances and taxes and other applicable laws so its my attempt to help and simplify it.

(Please note that this is basic guide not an exact resource as that can vary based on case to case)

For freelancers in India who work for clients outside of India, there are specific considerations under the Indian Income Tax Act that you should be aware of for income tax planning. Here are some key points to keep in mind:

Residential Status:

1. Residential Status: Determine your residential status in India for the relevant financial year (April 1st to March 31st). Your tax liability in India will depend on whether you are a Resident or a Non-Resident in India as per the Income Tax Act.
   • Resident: A resident is further classified as:
     • Resident and Ordinarily Resident (ROR): You meet certain conditions regarding your stay in India.
     • Resident but Not Ordinarily Resident (RNOR): You have been an NRI in 9 out of 10 preceding years or have been in India for less than 730 days in the preceding 7 years.
     • Non-Resident: If you do not meet the criteria to be considered a resident.

Taxable Income:

1. Taxable Income: Income earned by freelancers from clients outside India is generally taxable in India if:
   • The services are rendered in India, or
   • The income is received or deemed to be received in India, or
   • The income accrues or arises in India.

Income that qualifies as "foreign income" and is not deemed to accrue or arise in India may be eligible for exemption or relief under the Double Taxation Avoidance Agreement (DTAA) that India has with many countries.

Tax Planning Considerations:

1. Tax Planning:
   • Double Taxation Avoidance Agreement (DTAA): Check if India has a DTAA with the country where your clients are located. DTAA provisions often provide relief from double taxation by allowing credits for taxes paid in the foreign country.
   • Tax Residency Certificate (TRC): Obtain a TRC from the foreign country to claim benefits under the DTAA.
   • Tax Deductions: Ensure you claim all eligible deductions under the Income Tax Act, such as business expenses incurred wholly and exclusively for the freelancing work.
   • Advance Tax: Freelancers may need to pay advance tax on estimated income if tax liability for the year exceeds Rs. 10,000.

Compliance:

1. Compliance:
   • Filing Tax Returns: File your income tax returns in India by the due date, disclosing all income earned worldwide.
   • Documentation: Maintain proper documentation of income earned from foreign clients, invoices raised, payments received, and any tax-related correspondence.

Freelancers are exporter of services as per GST so it is mandatory for them to get GST irrespective of the turnover/ receipts that they will get unlike people who provide services to Indian clients (for them the annual threshold limit is 20 lakhs) (**Very important to remember as many people ask many queries on this point***)

When exporting services from India, Goods and Services Tax (GST) and the Letter of Undertaking (LUT) play crucial roles. Here’s a breakdown of their requirements:

1. GST on Export of Services:

·        Export of Services Definition: Under GST, services rendered from India to a recipient outside India qualify as 'export of services'. This means the place of supply is considered outside India, and hence, these services are treated as zero-rated supplies.

·        Zero-Rated Supplies: Zero-rated supplies mean that the GST rate applicable on such supplies is 0%, effectively exempting them from GST liability. However, input tax credits (ITC) can still be claimed for inputs and input services used in supplying these exported services.

·        Invoice Requirements: When invoicing for export of services, the invoice must clearly indicate that the services are meant for export and include details such as recipient's name and address (if available), place of supply as 'outside India', and currency used.

2. Letter of Undertaking (LUT):

·        LUT Requirement: Normally, under GST, exporters are required to furnish a Bond along with cash security for each export. However, for ease of doing business and to reduce compliance burden, the government introduced the concept of furnishing a Letter of Undertaking (LUT) instead of a Bond for certain categories of exporters.

·        Filing LUT: To export goods or services without paying integrated tax, an exporter can file an LUT in Form GST RFD-11 on the GST portal. This LUT needs to be submitted every financial year before commencing exports.

Compliance:

·        GST Return Filing: File GST returns (GSTR-1 for outward supplies and GSTR-3B for payment of tax) on a regular basis, complying with all GST laws and regulations.

Conclusion:

Export of services from India under GST is beneficial as it attracts zero-rated tax status, allowing exporters to claim input tax credits and reducing the cost of exported services. However, ensuring compliance with GST rules, including the timely filing of LUT and GST returns, is essential to avoid penalties and maintain smooth business operations. However, note that this is a basic guide not n exact one based on person to person.