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There are two similar questions have been asked before:

These two threads have helped me to understand a lot of things. Though I have a few other questions.

I am an Indian Citizen and a salaried employee of an Indian company and I work there as a software developer. My tax is managed by the same company and I receive my salary per month after necessary tax deduction.

Recently I have got an opportunity of freelancing for a US-based startup. They are going to pay me my wages per hour basis in US Dollar. And they are going to transfer the money directly to a bank account. I project that I could earn around 8 lakh (800,000 INR) per annum from this freelancing. They are not going to deduct any TDS.

Followings are my questions:

  • Is freelancing considered as consultancy?
  • If it is considered as consultancy then is this type of income falls into the category for service tax?
  • I am the one man army. Do I need to form a company and obtain a trade license?
  • Can I show this extra income while filling my taxes in the section "Income from other sources" and pay necessary extra taxes?
  • How can I pay these extra taxes and reference them while filling my tax return?
  • When the company is going to wire the money they need to provide a "Reason for transfer".
    • Is there any impact on the clearance of the money by the bank and/or tax filing for the given reason?
    • What reason is best suitable for my scenario?
  • The work order and the invoice that is going to be exchanged between us can be a soft-copy of a Word/PDF Document?
    • Do these documents need to be digitally signed?
    • Do these documents are mandatory at all?

Please advise.

closed as too broad by Pete B., Nathan L, JoeTaxpayer Feb 8 at 11:40

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