Question 1

YouTube / AdSense: GST, FEMA, and income tax treatment

Accepted Answer

YouTube pays Indian creators through Google Asia Pacific (Singapore entity). This means AdSense income is foreign income received in INR after conversion. Income tax: Taxable as business income at slab rate. You can deduct expenses, equipment, editing software, internet, studio. Sec 58, Income-tax Act 2025 (old Sec 44ADA) not applicable (not a listed profession for "performing arts" in the context of YouTube). GST: Export of service, 0% GST. But you must file a Letter of Undertaking (LUT) annually to export without collecting GST. Without LUT, you'd have to collect 18% GST and claim a refund, tedious. FEMA: Foreign income must be repatriated to India. AdSense deposits into your Indian bank account, your bank issues an FIRC (Foreign Inward Remittance Certificate). Keep all FIRCs, they prove source of foreign income. Maintain records for 7 years.

Question 2

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

Accepted Answer

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. 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.

Question 3

Section 245 (now 438): Refund adjustment without notice (what to do)

Accepted Answer

Sec 245 (now Sec 438, Income-tax Act 2025) allows the IT department to adjust your pending refund against an outstanding demand from a previous year, without first getting your consent, but after giving you prior intimation. Common scenario: AY 2024-25 refund of ₹50,000 is due. But there's an old 143(1) demand from AY 2021-22 for ₹30,000 that was never addressed. The department issues 245 notice saying they'll adjust ₹30,000 from your refund. You get ₹20,000 instead of ₹50,000. Action: You have 30 days to respond agreeing or objecting to the adjustment. If the old demand was wrong, file 154 rectification simultaneously and respond to 245 objecting to adjustment until rectification is settled.

Question 4

Composition Scheme: Rates, Eligibility, Filing, Exit

Accepted Answer

For small businesses below ₹1.5Cr turnover, pay GST at a flat lower rate on turnover instead of the standard 18/12/5% structure. No ITC, no B2B GST invoices, simplified compliance. Two returns a year instead of 24+ monthly filings. But once you cross ₹1.5Cr or make inter-state supply, you must exit. Who benefits most from composition scheme: Small retailers, kirana shops, small restaurants, local manufacturers, where most customers are B2C (end consumers). Since composition taxpayer cannot issue tax invoices, your B2B corporate clients cannot claim ITC, so if you primarily serve corporates, composition is not ideal. Tax payment under composition: No monthly tax computation on invoice-by-invoice basis. Just pay a fixed % of quarterly turnover. Pay via CMP-08 quarterly (by 18th of month after quarter). Annual return GSTR-4 by April 30. Much simpler than monthly GSTR-1 + GSTR-3B + quarterly GSTR-9. What composition taxpayer cannot do: Cannot collect GST from customer (tax comes from your own pocket on your turnover). Cannot issue a GST tax invoice, only "bill of supply" without GST. Cannot make inter-state sales. Cannot supply exempt goods without exiting.

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