Anyone worked on 1099-MISC from India?

mrthiru · Post by **mrthiru** » Sat Apr 03, 2010 2:06 am

In next three months I planned to R2I. My current US employer don?t have any operation in India but agreed to continue to provide services thru one of their vendor who is also US based. The vendor company said they can pay me as an individual in India (wire the money to my Indian bank account) for the services I provide with a hourly rate.

I have been told that they would issue me 1099-MISC form for the US tax purpose at the end of each year. I would like to know whether this is a good solution to make the things easy? Is there any other way I should work out this? Do I need to pay taxes in India as well for the income I get after US taxes?

I'm not a GC holder/USC and lived in US for past 11 years.

dbs · Post by **dbs** » Sat Apr 03, 2010 6:17 pm

A resident in India, irrespective of the nationality, has to pay taxes in India. On Indian income certainly and on global income once you loose the RNOR status.
The vendor company will have to deduct tax(10.3%) on the payments to you. I expect that the income will be more than 10L, and that will attract service tax as well.
I believe that you may be able to take advantage of foreign income exclusion from the usa tax.

mrthiru · Post by **mrthiru** » Sun Apr 04, 2010 11:21 am

Thanks dbs for your answer. You made me clear that during the RNOR period atleast I don't have to pay taxes for GOI. That is what I was looking for. After that I'm sure I should pay taxes for GOI and take advantage of foreign income exclusion from the usa tax at some level.

dbs · Post by **dbs** » Sun Apr 04, 2010 8:04 pm

mrthiru;275735Thanks dbs for your answer. You made me clear that during the RNOR period atleast I don't have to pay taxes for GOI. That is what I was looking for. After that I'm sure I should pay taxes for GOI and take advantage of foreign income exclusion from the usa tax at some level.

I think you somehow decided that you heard the answer that 'you wanted to hear.'
I did not say what I think you haerd.
Even during RNOR period, you have to pay to GOI the taxes on your indian income. Only the foreign income will escape GOI taxation.

mrthiru · Post by **mrthiru** » Mon Apr 05, 2010 7:08 am

I was asking only for the income from foreign during the RNOR period and I do understand that I have to pay taxes for any Indian income even if I'm in RNOR period. I have asked this as I saw mixed answers from various thread regarding the income from foreign during the RNOR period. Thanks again for your time dbs.

dbs · Post by **dbs** » Mon Apr 05, 2010 11:34 am

mrthiru;275848I was asking only for the income from foreign during the RNOR period and I do understand that I have to pay taxes for any Indian income even if I'm in RNOR period. I have asked this as I saw mixed answers from various thread regarding the income from foreign during the RNOR period. Thanks again for your time dbs.

I think, may be, you are confusing income received in US $ for work done in India as foreign income. Income received in whatever currency or where ever; for work done in India is taxable by GOI. There are some exceptions, such as those of foreign diplomats, UN agency employees and a few others.
During RNOR, your income from investments abroad, bank/deposit interest, rental income and such like would be non-taxable or for work performed abroad.
______________________________________________________________________
Whenever things appear to be going better, you must have overlooked something.

RRK · Post by **RRK** » Mon Apr 05, 2010 1:28 pm

#1,
Try to read dbs message slowly.

If you live in India and do work for US clients, you have to pay tax to Indian authorities. It does not matter if you get 1099-MISC, W2. It is not India's concern. It also does not matter if you are RNOR or ROR. You are resident of India and is subjected to taxes on that income in India.

mrthiru · Post by **mrthiru** » Mon Apr 05, 2010 6:29 pm

I got that clear now. How about the taxes in US if the US company issue me 1099-MISC at year end and I do work from India. Should I be paying taxes like regular 1099 people do in US? As dbs stated, is foreign income exclusion applicable for all income paid by 1099-MISC? means I don't have to pay taxes in US for all income or at certail level. I have to set my rate based these factors. Thanks dbs and RRK!

RRK · Post by **RRK** » Mon Apr 05, 2010 8:16 pm

I am not a tax expert. So, check with your CPA.

To claim FEI from US IRS, your source of income should be foreign - meaning it should not origin from US. If you get 1099-MISC, IRS may not recognize that income as "foreign income". I would suggest you to write to US IRS on this subject and get an email confirmation.

blrblr · Post by **blrblr** » Tue Apr 06, 2010 11:25 am

Just show your income in India and pay taxes. Service tax does not apply to export (goods or services) and also no TDS is required to be withheld by your foreign employer if they don't have a presence in India (if I remember right, this was issued a circular in 2005 & later clarified in 2007)

Regarding your employer in US, give a W8-BEN and any supporting documents (including India IT returns) to prove you are a foreign consultant and are paying your taxes in India. They will not issue a 1099 in that case.

P.S: If the work (per my understanding, even if a part of it), is done on US soil for the same employer, W8-BEN is not valid. There may be penalties for misrepresentation.