Answer

International tax, NRI · DTAA and Foreign Income

Freelancer with Foreign Clients: Tax, GST, and FEMA Complete

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  1. Facts

    India-based freelancer earning from US/UK/UAE clients: three compliance layers. Income Tax: declare foreign income, pay at slab rate. GST: export of services = zero-rated, but registration needed. FEMA: receive payment in USD via AD bank, convert within stipulated time. Get all three wrong and you have an IT notice, a GST notice, and an RBI violation.

  2. Provisions and law

    • Sec 58 (old 44ADA)
    • Sec 393 (old 195), No TDS

  3. Analysis

    GST myth: Many freelancers think they must charge 18% GST to foreign clients. Wrong. Export of services = zero-rated. Charge 0% GST. File LUT (Letter of Undertaking) once per year on GST portal. No GST collected from foreign client. No refund to claim. FEMA receipt deadline: Invoice raised March 1: payment must reach India by November 30 (9 months). If client delays: apply to RBI for extension. Funds beyond 9 months without RBI approval = FEMA violation. Currency conversion timing: Income recognized when received (not invoiced). Use RBI rate on date of receipt. If received in EEFC account: recognized when converted to INR. Keep EEFC account if you have USD expenses (cheaper than converting both ways). The new regime advantage for freelancers: Foreign income ₹30L → Sec 58, Income-tax Act 2025 (old Sec 44ADA): ₹15L taxable → new regime tax ≈ ₹2.1L. Old regime with Sec 123 (old Sec 80C): ₹13.5L taxable → tax ≈ ₹2.5L.

  4. Conclusion

    1. Determine if profession is in Sec 58 (old Sec 44ADA) specified list (IT, consultant, designer, generally yes)
    2. Open EEFC account at your bank for direct foreign currency receipt
    3. File LUT (Letter of Undertaking) on GST portal before raising first foreign invoice
    4. Raise invoice in USD to foreign client, zero GST charged
    5. Receive payment in EEFC account within 9 months of invoice
    6. File GSTR-1 (invoice) and GSTR-3B (nil GST) monthly or quarterly

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