Taxes on money transferred to India

[bugsbunny]

Originally Posted by win_or_win

Hi Guys,

I need your help on this. My cousin is running this small IT company in india and he mentioned that when US client sends their money to India via Pay Pal or some secure money transfer , they are charging them 4 % of transfer amount.

He ask me that what could be the best way to avoid this fees , some of the option that we thought about,

1) If they (cousin's company) open an bank account in USA and utilize this to transfer the money to indian bank account - Would they still need to pay US tax as money is being deposited into the US account?

2) If I utlize my bank account - I think in this scenarion I have to pay the US tax for whatever money the client is depositing into my account in order to make this legal transfer

3)If US client utilize remit2india, ICICI to transfer money which I highly doubt

I appriciate your responce on this.

lol you are complaining about 4% tax?
1. not sure about this...normally you need a SSN or TaxID to open a back account here...however some banks dont require it...which is what illegal immigrants exploit.
so if its done without a SSN or TAXID then you may get away without paying tax.
However some companies wont pay you if you dont have a TaXID or SSN

2. worst of the 3 ideas...cause u will be paying individual tax rate...of around 30% or more

[sanju_dba]

i think paypal charges when the source funds are from credit card. ask his customers to pay thru their bank accounts to avoid that fee.

[GCVivek]

When you transfer money outside the USA, one of the questions that FDIC mandates the finanacial institution collect is: SOURCE OF FUNDS. If you put this as "salary" then you (and your employer) have ALREADY paid (or will pay by next year) on these funds. There are no additional US taxes on the money. If the money was not earned thru salary (which would not be legal since you are on H1B) then you will need to declare it while filing taxes. If the money was NOT earned "under the table" and was above $600 then, the payer will send you a for called 1099 which will show how much you were paid and you have to pay appropriate taxes on that amount. In your case it most likely looks like "salary", so you have nothing to worry about.

[GCVivek]

If your cousin's company is based in India and has no US subsidary or legal relation with any US-based company, the money is TAX FREE. If they open a US account, they would have legal relation to the US system and therefore have to pay income tax on it.

If they use your account, you will get a 1099 from their client and therefore will show as your earnings and tax will be based on the bracket you fall in (after you add the 1099 earnings). If you are on a work visa (like H1B), this is illegal except for interest earned (I-1099) or stocks/dividents. Other 1099s might affect your immigration process.

Client can use Remit2India, PayPal (charges fees), Creditcards (charges fees) OR just use their company bank (usually free if paid in US dollars).

Thing to keep in mind is: fees, foreign transaction fees, conversion fees are all different from US taxes.

Originally Posted by win_or_win

Hi Guys,

I need your help on this. My cousin is running this small IT company in india and he mentioned that when US client sends their money to India via Pay Pal or some secure money transfer , they are charging them 4 % of transfer amount.

He ask me that what could be the best way to avoid this fees , some of the option that we thought about,

1) If they (cousin's company) open an bank account in USA and utilize this to transfer the money to indian bank account - Would they still need to pay US tax as money is being deposited into the US account?

2) If I utlize my bank account - I think in this scenarion I have to pay the US tax for whatever money the client is depositing into my account in order to make this legal transfer

3)If US client utilize remit2india, ICICI to transfer money which I highly doubt

I appriciate your responce on this.

[snathan]

Originally Posted by GCVivek

When you transfer money outside the USA, one of the questions that FDIC mandates the finanacial institution collect is: SOURCE OF FUNDS. If you put this as "salary" then you (and your employer) have ALREADY paid (or will pay by next year) on these funds. There are no additional US taxes on the money. If the money was not earned thru salary (which would not be legal since you are on H1B) then you will need to declare it while filing taxes. If the money was NOT earned "under the table" and was above $600 then, the payer will send you a for called 1099 which will show how much you were paid and you have to pay appropriate taxes on that amount. In your case it most likely looks like "salary", so you have nothing to worry about.

I think you misunderstood. The OP is talking about his friend, his company and payment from clients. It has nothing to do with salary

[GCVivek]

ETIN is a MUST for any company to pay a different company. Remember, when Company-A pays Company-B, Company-A shows that amount as EXPENSE (or Loss) on their tax filing. So, if there is loss somewhere, there must be a profit somewhere. Therefore Company-A will show that the expense or loss was due to paying that amount to Company-B.

IRS does not care about names, it identifies companies and individuals only by numbers (SSN, ITIN, ETIN, etc.)

Originally Posted by bugsbunny

lol you are complaining about 4% tax?
1. not sure about this...normally you need a SSN or TaxID to open a back account here...however some banks dont require it...which is what illegal immigrants exploit.
so if its done without a SSN or TAXID then you may get away without paying tax.
However some companies wont pay you if you dont have a TaXID or SSN

2. worst of the 3 ideas...cause u will be paying individual tax rate...of around 30% or more

[GCVivek]

No, I did not misunderstand. That reply had no quote included and therefore was directed to the person who opened the thread (see very first post from AkhiChopra) and that has everything to do with salary.

Originally Posted by snathan

I think you misunderstood. The OP is talking about his friend, his company and payment from clients. It has nothing to do with salary

[furiouspride]

Originally Posted by win_or_win

Hi Guys,

I need your help on this. My cousin is running this small IT company in india and he mentioned that when US client sends their money to India via Pay Pal or some secure money transfer , they are charging them 4 % of transfer amount.

He ask me that what could be the best way to avoid this fees , some of the option that we thought about,

1) If they (cousin's company) open an bank account in USA and utilize this to transfer the money to indian bank account - Would they still need to pay US tax as money is being deposited into the US account?

2) If I utlize my bank account - I think in this scenarion I have to pay the US tax for whatever money the client is depositing into my account in order to make this legal transfer

3)If US client utilize remit2india, ICICI to transfer money which I highly doubt

I appriciate your responce on this.

Ask him to double check if his clients are using credit cards to do the transfers. Using a bank account has 0 transfer fee for domestic transfers. Not sure if the same applies to international transfers but good to double check.

Edit: Sorry, sanjudba already made a reply similar to mine.

[win_or_win]

Originally Posted by roseball

If you are working on H1, #2 is not an option. You will be violating immigration laws by accepting payment from unauthorized sources by doing so.

Thanks guys for your reply. This was tremendous knowledge that you guys dumped in.

Let's say if I am on the green card (EAD) , then still I can not evade this tax situation correct ?I mean if they pay me and I pay to the company in India who is really responsible for the service.

[bugsbunny]

if you are on EAD and they pay you...you will have to declare it on your taxes...so you will have to pay upwards of 33% tax on it...which is far far more than the 4% charge currently

[furiouspride]

Originally Posted by win_or_win

Thanks guys for your reply. This was tremendous knowledge that you guys dumped in.

Let's say if I am on the green card (EAD) , then still I can not evade this tax situation correct ?I mean if they pay me and I pay to the company in India who is really responsible for the service.

Right now, with the current setup, the company in India will have to pay corporate taxes on their overseas income. If I'm not mistaken, IT companies have a reduced tax rate in India. All in all, the 4pc should not be a big damper.

[abhi2207]

Hi
Is there any tax to be paid in India if remittance is made from my US account to my Indian account(non NRE, NRO account)? Tax is already cut in US from my salary by my employer.
Also if there is any tax to be payed, is it anyhow related to amount being transferred?

Thanks
Abhishek

[whiz]

Originally Posted by abhi2207

Hi
Is there any tax to be paid in India if remittance is made from my US account to my Indian account(non NRE, NRO account)? Tax is already cut in US from my salary by my employer.
Also if there is any tax to be payed, is it anyhow related to amount being transferred?

Thanks
Abhishek

No tax need to paid if tax is already paid in US. But if its an NRO account, any interest income will be taxed at 30%. With NRE, you can avoid that. And if the amount that you have in your indian accounts is more than $10000 dollars at any time during the year, you will have to report to IRS in US. Here is the link to that. http://www.irs.gov/pub/irs-pdf/f90221.pdf

[njverifier]

Originally Posted by whiz

No tax need to paid if tax is already paid in US. But if its an NRO account, any interest income will be taxed at 30%. With NRE, you can avoid that. And if the amount that you have in your indian accounts is more than $10000 dollars at any time during the year, you will have to report to IRS in US. Here is the link to that. http://www.irs.gov/pub/irs-pdf/f90221.pdf

That's true, you don't have to pay tax for transferring money to India. The interest earned in NRE/NRO accounts will attract taxes. If it is NRO taxes will be deducted when they are interest is deposited into your account(TDS) while in NRE you will have to declare the interest as an additional income and get taxed here in the US when you file your taxes. I would prefer to pay the taxes to the Indian Govt rather than paying it here in the US(it's only my opinion). You will still have to show the income earned in NRO account when you file taxes but you can take a credit for the taxes already paid in India so you don't have to pay double tax. Hope this helps...