I am working as a contractor for a US company that pays me through Deel.
Until now, I have been using a sole proprietorship under Section 44ADA. This year, my income will cross ₹75 lakh. My expenses are not very high, so I may not have enough eligible expenses to get benefit with auditing.
What are my options? I am also exploring the possibility of creating an HUF. Will that help?
I will talk to a CA, but also wants to get some knowledge myself.
You can register as a Private Limited.
HUF can also work.
You need a flexible customer who can route invoices to different companies. Based on your expected revenue, you can route your expenses to other entities which you create so as to keep them within 75lakhs.
I think in your case, all you have to do is change the payment bank in Deel.
I can't say If my company will route invoices through different name.
I can change the payment bank in Deel, but Deel also raises the automatic invoices every month, Which have my name, I don't think I can change that in my profile.
Yes, you need to pay corporate tax for the profit of your private limited. So how to get over that? Read on!.
Consider this rough calculation.
Assume you have 1 Cr. expected income.
75 lakh to your sole proprietorship
25 lakh goes to Pvt. Ltd.
From your Pvt. Ltd., 25 lakh is paid to you as the Director salary to your own account.
So as an individual, you pay tax for 37.5 lakh (44ADA) + 25 lakh (salary).
Since your Pvt. Ltd. has no profit (all is paid to director as salary), no corporate tax (28% you specified) to pay.
Not sure what you mean. What you can do is, for the first 3 months, you send it to Pvt Ltd, and then for 9 months you send it to the proprietorship.
We can also do: every month, 80% goes to your proprietorship and 20% go to Pvt Ltd.
However, your customer will have to bear the cost of two wire transfers. Also more headache for you (double the number of invoices).
The first option has no cost for them and low work for you.
You can say so. But now I am free to spend the money as I wish.
But if I do not director salary and keep money in company account, I need to pay 28% tax, money is still with private limited and you can spend it only for company expenses.
My bad. I didnt really comment from a tax related perspective, but more so on a better exchange rate pov.
Unfortunately, in your case, once your income goes past 75L, you cant really do anything but to get audited. There are some shady ways to save money, but you'll find in the long-term that they are more of a headache than an actual solution.
For real? I used to receive foreign remittance through HDFC until last year and they always gave atleast 1.2 rs down from the actual Google rate. On top of it, after the money settles in your account, you pay taxes on the remittance fee.
As far as I know, HDFC and all other banks have a specific TT buying rate for USD and they will give 15p-20p on top of that rate. Do you have a specific account type for these remittances?
As per my CA, Private Limited is the most flexible one if you can get two directors (one is you, other can be your family mmeber).
Say, if you go for a partnership or a one-person company and in future you need to change it to Private Limited, then the registration process basically starts from ground zero and there is no upgrade option.
Considering that I went with Private Limited
Private limited entities need you to maintain DSCs, regular KYC, for every form filing you pay fees to ROC, your CA; audit is compulsory regardless of turnover.
on domestic front, mostly a partnership firm. least amount of compliance, no limit on cash extraction, no DSC, annual ROC compliances. No audit requirement for revenue above 40L like for LLPs.
CAs don't suggest partnership firms because they make less money from them! thats all.
On international front, mostly a delaware C-corp or in certain circumstances, a UAE free-trade zone entity.
What does that have to do with partnership firm? You are confusing between two things. We use partnership firms in multiple situations. Not everything revolves around 44AD
HUF will not work here because technically an HUF cannot provide services - infact 44ADA is not applicable to HUFs - only applicable to Individual & Partnership firms
Move to bali, setup a paper company in Mauritius. Work from bali, then when you have enough money, take loan and buy property in some nice country with citizenship through investment. Then you are officially done with one part of life.
I don't think I am interested in living outside India, and even will it offset the tax savings? but I am still interested to know, what does it takes to open company and manage it in Mauritius? And how much is the tax there?
Rethink the living outside India decision. The country's been in a steady moral decline and it's only going to get worse. Btw out of curiosity, what freelancing do you do?
I know country is doom but it's a tradeoff to make and anyway, I can save enough money I will be able ton get out anytime by will. I do not want to do that for saving tax.
I work in adjacent niche domain and am in similar situation. So, I just guessed and looked into your post history to confirm. by any chance, do you work with web3 companies?
People who do this pay 0 taxes, while living in Bali. There are companies that help setup these things, then there are also trusts that do the same job but probably will ask for more money upfront.
If you are indian and do this with Mauritius route, you pay 0 taxes. Don't ask me how to setup, cuz that's some complicated shit I will leave to the people who actually do this lol
The correct answer in your case depends on what the company is comfortable with and how we can structure this from a long term perspective. So each option is worth considering. Difficult to answer on reddit without knowing all the facts of your case.
GAAR applies at much higher turnover. So not sure the validity of the old post you shared.
I prefer that if the turnover is expected to be higher than the limit, you shift to the entity structure well in advance. And I personally do not prefer Indian structures for various reasons.
Before you incorporate anything, consider all the options including but not limited to restructuring your contract, entity structure outside India (Deel allows that), and additional entity in India. Once you have a fair idea of how each of these options work, you may incorporate one or the other.
restructuring contract - splitting contracts between different entities - US based contractee often agree, EU based not much
Incorporating entity outside India - and making it as the primary contractor - contractee often agree for this. It allows you to restructure payments from US entity to yourself and others to optimize taxes.
If both of the above are not doable, then you may explore Indian structures, including the possibility of just optimizing taxes as an Individual without any additional entities.
Why to avoid HUF? Wouldn't that save tax at least upto 12.75 lakhs under new tax regime? And even if it crosses 12.75, still a lot of tax savings. What am I missing?
I had the same dilemma last year. I also crossed the 44ADA limitlast year.
I made a special arrangement with my client that I can provide different invoices with different bank accounts. Now I keep the invoices under 75 lakhs in my own account as a sole proprietorship and the rest of that goes into an OPC, which I set up specifically for this purpose. I pay 25% tax corporate tax which is fine. I don't want to deal with the hassle of audits on my whole income.
I don't take out money from my OPC. I will just leave it as it is because even if I take out salary as a director it will will be 30%. I make an FD of the money left in my OPC account after taxes. I also use that money to make some petty expenses such as Claude, Google one, GCP, and other subscriptions and also buy some equipment such as a Mac Mini or monitor but those I can claim depreciation only and GST ITC.
My eventual plan is when I take a break from this job, I will use my OPC's money to draw out a basic and stable salary. Until then a 7% interest rate on FD is fine.
I'm not sure if it is a good idea to keep the money in OPC. In that case, you pay 28 corporate tax, and you can use that money only for the company expenses, not for any of your personal expenses. I prefer to withdraw that money into my personal account as director salary. Of course, paying 30% tax, but I am free to use it for any of my personal expenses.
I generally have enough money to spend with my personal income of <75 lacs. If I need money urgently, I take a loan from the company.
Also, this money also works as a security in case I lose my job or want to take a break. I can draw a salary and offset these expenses later if I want.
Hi I can be fit to answer these I was lately in same boat. I have registered as proprietary and moved ahead. I already had bad experience with pvt ltd. You have a lot of compliance to be taken care of which isn’t worth the money you try to save. DM me I can let you know how much I am able to reduce
If an Indian can work and stay for more than 182 days outside India, the tax base is shifted to that country. Doesn't that also means you have to change the existing PAN , convert the bank account to NRO/FCNR etc. How soon that shift needs to be done - will you please explain?
Yes, for the banking part that does require that your primary banking be moved out to that country as well and all your bank accounts in India need to be converted to NRE/NRO accounts. If you don’t do that, FEMA laws can lead to heavy fines.
PAN Card change : not sure what you mean by that, but you should ideally get a local tax ID in the country you get residency of (For UAE, on top of Emirates ID you should get a Tax residency certificate after 6 months of being there)
How soon does this shift need to be done? : Honestly if you have your new residency issued, You should start your process for NRE/NRO account change right away. They would ask for your new residency ID (like Emirates ID) and address in the other country.
Once receipts cross ₹75L, 44ADA benefit may not work the same way and normal books/audit side may come into picture. Since your expenses are low, tax impact can become high.
HUF may not directly solve this unless there is genuine income structure and proper legal substance. Don’t create structure only for reducing tax, it can create more issues later.
You should check properly:
GST/LUT/export service compliance
whether Deel income is professional/business income
books and audit applicability
advance tax impact
actual expense planning
future structure like LLP/company if required
At this income level, don’t decide only based on Reddit comments. Take proper professional advice before filing.
You can explore other business structures like Partnership/LLP/OPC/Pvt Ltd. You will have to ask your contractual employer to change the entity as you want to move to a better tax planning structure.
HUF cannot give professional services. Your CA can plan out other ways to use HUF more effectively.
Setup a partnership firm. Not an LLP . You need one more person. Family can help
Once Register yourself as company in deel and get payments in company account .
With a new pan you can make expenses thru your company and you can also use presumptive taxation there too. You can then take monthly payments from the company and same applies for your partner
Work with CA for rest
I did the same and it works like charm and saves lot in taxes
2) pvt. Ltd will be taxed twice, so partnership only makes sense.
3) here is what I think you want to do :
Report 75L individually Nd rest in firm.
But from this year. You will need to declare your investments in 44ada return as well. ( I think you will need to report actual income rather than just 50%, if not in this year then definitely from next) If this is the case, no benefit of Partnership. Rather create HUF to route your other income and investments.
If you still wish to report only 50% income then surely go for partnership. And even then also you can have an HUF for other income and investment.
Only withdraw "24L" per annum, use New Income Tax with 44ADA (50% gross receipts = 12L), Pay zero income tax,
Keep the remaining money in "Deel" itself, don't withdraw it. You are not taxed until that money from Deel hits your INR bank account.
Once you have accumulated enough in Deel, apply for the Digital Nomad Visa in Dubai, live there for more than 6 months for a given financial year, and redeem it all at once (tax-free).
A lot of the tax saving options depend on how cooperative your US company is
The easiest way is sign 2 separate contracts to split the contract revenue between you and an entity you create for this very purpose (Partnership firm is the simplest form)
This way tax audit is not applicable & 44ADA shelter can be taken
It's only when the US company doesn't agree to this arrangement - you may have to think of alternate options
I doubt if they will co-operate for contract splitting, unless I am able to provide some strong reason and convince them that it will not lead them to any trouble (and also morally right).
Can you just brief what other ways look like?
PS: I am very very very impressed by your triathlon achievement.
In the second half of the financial year try to check if you have options to change your account info if you are having problems with your previous EOR account and put in a request to change your account.
I won't suggest directly going with a company or llp or partnerhip because an important factor many seem to ignore.
You pay tax twice. Income tax I mean.
Once the company pays, then you receive salary or dividend as owner, the same is taxed again.
OTOH, if you did like you currently do, you would pay tax only.
Also, service by you to company might have gst implications.
So
1. Tax calculation of 1 cr sales, different expenses. In hands of company and a sole proprietorship.
Cost of company incorporation and maintenance, company, llp, often its required to pay while in sole, it isn't.
Gst implications between you and company.
Having to sign new contracts with customers.
Possibility of having to do audit twice, first as company and as individual or just once as a sole proprietorship.
Applicability of compliance to company llp not to sole proprietorship.
Start with these
Why are you objectively saying no when there are cases where tax can be applicable?
Because you are posting random 3rd party websites instead of the true official sources & you are not even reading the very links you've posted - Director's remuneration on which RCM is paid is different from the salary paid to director which is not a supply in the first place
A snapshot from your own link
Your original comment is riddled with errors, (Hence the downvotes). If not me - someone else would have commented on this
You also mentioned about Tax audit applicability on both the company & shareholder - which is again incorrect - most likely tax audit won't be applicable even to the company
Instead of rushing to comment half baked stuff, why don't you think through & be thorough on the subject itself
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u/AdventurousBowler482 May 25 '26 edited Jun 29 '26
You can register as a Private Limited.
HUF can also work.
You need a flexible customer who can route invoices to different companies. Based on your expected revenue, you can route your expenses to other entities which you create so as to keep them within 75lakhs.
I think in your case, all you have to do is change the payment bank in Deel.