Apps revenue Tax handling in India

Dear friends,
Lets discuss indian Tax handling for the money made by games/apps.

I met CA 2 days ago and here is what he said.

  1. Starting from financial year (May) whenever total ads money is exceeding 10Lakh,we need to pay service tax of 14% every month.
    Service tax number has to be taken from your nearest authority.

  2. In the end of the finanicial year, Income tax will be calculated on remaining 86% income.

  3. Now we need to show savings on that 86% and finally net taxable income will be calculated.

  4. there are very least chances to avoid service tax completly. but income tax can be minimised with legal illegal ways.

  5. Tax audit is required for income more than 25 Lakh.

please share your discussion with CA here.

I read the same in some tax site. But did not get a chance to speak with any CA yet. Thanks for the info.

Even i was avoiding it. but then i realised that its beeter to be free to make apps/games further. because i can not develop anything in JAIL for sure. lol :smiley:

So i want to sort it first and i am on it. i have applied for service tax already and applied new bank account. I will be in compliance with Govt tax rules and with free mind i can work on apps/games.

i am leaving my regular Technical team lead job too very soon. may be in a month or so.

will try my luck for few months.

whoever has any info regarding indian tax,please share here.

Lol. Yes make it in a legal way to be in safer side :slight_smile: I just now started realizing the potential on this market and feel bad how did i missed this these many years :frowning: Will update here if I get any info regarding tax. Cheers :thumbup:

I dont think we need to pay service tax. Have consulted with my CA also. Service tax rule clearly says, end service should be in india (for my case most of users are outside), second payment is not in INR, third end service is provided by google to advertisers and so Google is liable to collect service tax from indian advertisers. And I think google has already started collecting service tax from indian adword users. Above is only applicable for admob. Hope this helps.

My CA is saying that ad long as money is crediting to account,its.taxable and service tax applies.

Yes,they pay in dollars not in INR.
But it comes as foreign remmittance and finaly credits to account in INR only.

though i will ask my CA again based on your points.

Have your income crossed 10Lakh ever for any given financial year untill now? With what percentage you are paying tax and how much tax on how much income?

please share it here. i do not want.to pay service tax unnecessarly it is not required.

That s not sound argument. Money comes to account in INR because your account is rupee account. If you open foreign currency account then your money will remain in USD. That does not alter the fact that you have been paid in foreign currency. And anyways, I am not providing service to Indians. Most of my apps users are non Indian users.

Also refer following rule for exemption
Rule 7.2.2 of Import and Export of Service says : ” These two conditions are:
(i) such service is delivered outside India and used outside India, and
(ii) the payment received for providing such service should be in convertible foreign exchange.

Note the word convertible foreign exchange.

Looks like you have done lots of research in this and i agree to you.
Afterall tax rules are same through out India irrespective of any CA’s saying.

I will definitely highlight these points to him and will ask if he has any strong reason to say that Service tax is required. I will share my next meeting points here.

I agree to you. still want to know if these points are your own research or your CA agree to them as well.

I am making more than 3 Lakh per month for last 4 months.

How much you making and whats tax on that?

I agree with you.

But how we can control users location and it can be proved? It always vary.
It might be the case that indian users are more/less/not at all on any specific day.

So when indian users are there, do we need to pay service tax?

I heard someone here from india saying that he is paying service tax.

my revenue is purely from ads. there is not IAP earnings.

You can go to admob reports section and see country wise revenue breakup - straight forward.

In any case you are not providing ad services directly to advertisers. You are providing services to Google (foreign entity) - payment is made by Google Singapore (see your receipt)

About someone is paying/or not paying tax should not be reason for your decision.

One more thing, opinion/views expressed here are my personal with the intention that it can be useful to others. Be adviced to consult CA/competent authority before taking any financial decision.

Thanks for sharing valuable facts avout income tax.

I have kept asking from beginning :D:D that do you pay service tax.

if you are following this tax parctice since long, i can take you as a practical example of section 7.2.2 and will proceed with this. ofcourse with CA consultation.

I never thought of tax as i dont have any knowledge on that.So i need to consult a CA now .Thanks for the great info on tax.

Yes. Go for a qualified CA nearby.

I have to start paying huge tax from next month.

Still i have not discussed Service tax points with my CA (the points which were highlighted by mdr).

i hope i could avoid it.

Thanks for the great thread. This service tax issue was killing me for the last two months, since it could be resulted in heavy loss for us if we didn’t collect/pay it properly. Even CAs can’t advice properly due to lack of knowledge about how ad networks work. At last i was managed to get some information which could conclude this issue.

  1. As MDR says, Service Tax requires your contract entity, has to be an Indian company/Person for getting the tax liability. Since Google Inc, US is the contracting entity for us, we are not liable to service tax.
  2. Even if your revenue through Indian user exceeds 10 lakhs, we are not liable to service tax. Because our control over the service stops at renting the ad space, It is Google Inc, US renting it to Indian users/advertisers where we have no control. Our service part ends at renting the space to Google , not for the advertisers . So we are not liable to service tax.

We are liable to service tax only, if we use Indian ad networks like InMobi or Vserv.

What your CA says after these facts?
I think if CA is conveyed about this fact that we provide services to Google which is non indian firm, he might also suggest for not paying service tax.

Lets get back after CA verdict.

Today i consulted with a new CA, he suggested me that if Our contracting entity is not Indian and the payment is done in foreign currency within 2 month period, then we are not liable to service tax. I guess everything fits in to skip the service tax for our case :smiley:

Please consult with your CA as well and share his views too.

Thanks for sharing your CA thinking and suggestions.

I will meet him day after tomorrow and will definitely share here.

Even if we are not eligible to pay service tax,still we need to minimise the income tax with the help of expenditures.

one more thing,if revenue goes above 25Lakh, we need to go through tax audit. CA told me its complicated. i said.complications are oki as long as its not suqueezing money. so get some ideas about tax audit as well next time.

Hi GCC,
Have you spoke to your CA? Any update?

Regards,
Venkat.

Hi Venkat,
I have my backlogs in filing income tax for last 2 years (service tax not applicable for that time income).

so i am clearing that first.
will take on service tax after that.
since my total revenue is still below 7 Lakh for this financial year. so i have another 1-2 months for handling service tax.
will definitely update here.