TaxSavvy

TaxSavvy for clients abroad, developer or designer, paid from abroad

Code or design for clients abroad. Zero GST and the lowest legal tax.

Software developer or designer with direct foreign clients

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  • Freelancer return with foreign clients, Sec 44ADA
  • LUT filing RFD-11 for exporters
  • New GST registration, REG-01
  • Business or professional income return, ITR-3 (including F&O and intraday)

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  • Bank statement
  • Invoices
  • Contracts
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Questions, answered the CA way

Facts, Provisions and law, Analysis, Conclusion.

  • Sec 58 (old 44ADA) for freelancers: 50% of gross income is deemed expense
    Facts
    Under Sec 58, Income-tax Act 2025 (old Sec 44ADA), eligible professionals earning below ₹75L can declare 50% of gross receipts as taxable income, the other 50% is presumed to be expenses. No need to maintain detailed books or prove actual expenses.
    Provisions and law
    IT Act, Sec 58 (old 44ADA) | Eligible professions, notified list
    Analysis
    Eligible under Sec 58 (old Sec 44ADA): Legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, authorised representative, film artist, company secretary, information technology. "Information technology" covers: Software development, IT consulting, data analytics, UI/UX design, app development, most tech freelancers qualify. Tax saving example: ₹30L annual freelance income. Under Sec 58 (old Sec 44ADA): taxable = ₹15L. Old regime tax on ₹15L (after standard deduction) ≈ ₹2.3L. Without Sec 58 (old Sec 44ADA), tax on ₹30L (with limited deductions) ≈ ₹6L+. Saving: ₹3.7L+.
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  • Section 58 (old 44ADA): 50% Presumptive Income for Specified Professions
    Facts
    Section 58, Income-tax Act 2025 (old Sec 44ADA) is India's most valuable tax simplification for professionals. Declare 50% of gross receipts as income, the remaining 50% is automatically deemed to be all your expenses. No receipts required. No books needed. No CA audit needed. One condition: specified profession, receipts up to ₹75L, at least 95% through banking.
    Provisions and law
    Sec 58 (old 44ADA(1)); Sec 58 (old 44ADA(2)); Sec 58 (old 44ADA(3)); Finance Act 2023; Specified list
    Analysis
    What the 50% covers: All business expenses, internet, mobile, rent (home office share), travel, software subscriptions, equipment depreciation, professional development, professional indemnity insurance, accountant fees, bank charges, ALL deemed to be covered in the 50% deduction. You get ₹50 of every ₹100 receipt automatically as expense. Your actual expenses are irrelevant under this scheme. The real tax math for professionals: Gross receipts ₹36L. Taxable under Sec 58 (old Sec 44ADA): ₹18L. Tax at slab: ₹18L income → tax approximately: ₹12,500 (5% on ₹2.5L-5L) + 20% × ₹8L = ₹1,72,500. Plus 4% cess = ₹1,79,400. TDS already deducted by clients at 10% on ₹36L = ₹3.6L. Refund of ₹3.6L − ₹1.79L = ₹1.81L. Most professional freelancers with < ₹50L receipts: pay ZERO additional tax, in fact, they get a refund of excess TDS.
    Conclusion
    • Confirm profession is in specified list (legal, medical, engineer, architect, CA, technical, interior design, film, authorised rep)
    • Confirm gross receipts ≤ ₹75L in the FY
    • Confirm ≥ 95% of receipts are via banking/digital (not cash), for ₹75L threshold
    • Compute: 50% of gross receipts = taxable income. Apply slab rates. Compare with old vs new regime.
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  • LUT filing: how to export services with 0% GST
    Facts
    When you provide services to a foreign client and receive payment in foreign currency, it's an export of service. Zero GST applies, but only if you've filed a Letter of Undertaking (LUT) with the GST department.
    Provisions and law
    CGST Act, Sec 16(3)(a) | Rule 96A | LUT Form RFD-11
    Analysis
    Without LUT: You collect 18% GST on the invoice, deposit it, then claim a refund. Refunds take 30-90 days. Cash flow nightmare. With LUT: Issue invoice at 0% GST. Receive USD from client. Convert to INR. No GST to deposit, no refund to claim. Clean. Filing LUT: Annual. File on GST portal → Services → User Services → Furnish LUT. No fee. No stamp. Takes 5 minutes. Valid for the entire financial year. Conditions for export of service: Place of supply = outside India. Payment received in convertible foreign exchange. Customer is outside India.
    Conclusion
    • Login to GST portal → Services → User Services → Furnish LUT
    • Select FY for which LUT is being filed
    • Fill in details, submit with DSC or EVC
    • Download the LUT acknowledgement, keep for 7 years
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  • LRS, Liberalised Remittance Scheme: $250K Limit and TCS
    Facts
    Every Indian resident can send up to $250,000 abroad per year under LRS. But from October 2023, a 20% Tax Collected at Source (TCS) applies on remittances above ₹7L (except education loans). That's ₹4L TCS on ₹20L sent abroad. You can claim it back in ITR, but it's a cash flow hit. Plan ahead.
    Provisions and law
    FEMA, LRS 2004; Sec 394 (old 206C(1G)), TCS; TCS credit; Prohibited purposes
    Analysis
    The 20% TCS cash flow hit: Sending ₹20L for property abroad? TCS = (₹20L − ₹7L) × 20% = ₹2.6L upfront to the bank. You get it back in ITR, but it's locked for up to 12 months. Education loan exception: Paying university fees abroad via education loan from Indian bank: 0% TCS. Paying from own funds: 5% above ₹7L. Structuring through education loan saves 5% cash flow. LRS aggregation: The ₹7L threshold is per person per FY across ALL banks combined. Sending ₹4L through HDFC and ₹4L through ICICI = ₹8L total = ₹1L taxable at 20% = ₹20,000 TCS. Banks report to IT department, no splitting benefit. Minor children: LRS applies to minors too ($250K limit per person). Parents can remit through child's LRS for education. Child's PAN used, TCS collected against child's PAN. Child claims credit in their ITR.
    Conclusion
    • Determine purpose: 0% (education loan), 5% (education self/medical), 20% (all other)
    • Check annual total: all LRS remittances this FY across all banks, keep below ₹7L if possible to avoid TCS
    • If TCS unavoidable: budget for TCS amount at bank (bank collects it upfront)
    • For education: structure via education loan (0% TCS) rather than self-finance
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Code or design for clients abroad. Zero GST and the lowest legal tax.

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