Income from PayPal, is it Taxable ?

BlackJack 1
Viewed 5516

Hi,

I'm a Software Consultant. I get my Fees / Payments form my clients via PayPal. Then I withdraw the fund in any of my two Savings account (SBI or Axis).

Now my questions are:

  1. In which income category(as job) I actually fall ?
  2. Which form(ITR-1..4) should I fill-up for Income Tax Return ?
  3. In fiscal 2010-2011, my total withdrawn amount(PayPal to Banks) was Rs.3,20,000. So how much money will I show as my income and other categories too?
  4. How I can save maximum from tax? which ways you recommend for me? (I already have 6.5L FDs and a LIC of 4K premium/anm )
itr-4 professional paypal business-income income-tax
1 Answers

First of all let me inform you that you may run into issues if you are getting money through paypal this way.

Paypal recently had issues with RBI and had issued a public notice to all its users. You can read about notice here: PayPal India Notification

Now answers to your questions:
1. You will fall into income from business/profession.
2. You will have to fill ITR-4 return form.
3. As you have income from business/profession, you will have to maintain profit loss account and you may declare all expenses done (like electricity charges, internet charges, mobile bills, office rental, car maintenance etc) to run the business. You will have to declare income after all these deductions.
4. Once you declare income, normal tax slab rates will apply and tax saving can be done under various sections like 80-C, 80-D etc. Please read more about tax saving on folloing pages:
http://www.socialfinance.in/questions/45/investment-advise
http://www.socialfinance.in/questions/7/tax-saving
http://www.socialfinance.in/questions/118/tax-saving
http://www.socialfinance.in/questions/178/investment-advise

Pankaj Batra5212

Thank you Pankaj for your help! :)

I'm fully aware about PayPal India Notification and all issues with RBI. RBI just creating a lot problem for all P-Indian users. Don't know what's the problem with RBI!!

But one thing I don't understand. 1. What do you mean by "you may run into issues if you are getting money through paypal this way" ?? 2. Is it bad to use PayPal? 3. What issues you indicate?

Can I show some amount say, 1L as a Gift from someone ? as RBI then didn't know how I got that money in PayPal..it just know that the fund came from PayPal.

BlackJack•

RBI regulates all financial related matter in India. There are strict rules regarding foreign exchange inflows. In case the transactions are reported to RBI by paypal, RBI may issue notice to you.

Regarding gifts, income tax is 30% on any gift received of value more than 50,000.

Pankaj Batra•
Related