Do I need to pay Income Tax if i am running a escrow service in India
I am about to start a service which acts as a escrow service between two people (Keeping money for short amount time and paying once the deal is confirmed), Am getting about 10% the total amount. But the problem is, there is no payment provider in India who can take care of the these two transactions without transferring money back to my bank account.
If it is the case do I need to pay income tax for the full amount? If I do, Is there any different method for avoiding this?
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Income Tax would only be levied on the 10% commission that you earn and not on the total amount kept in the Escrow Account.
This may be closed as not quite PF, but really "startup" as it's a business question.
In general, you should talk to a professional if you have this type of question, specifics like this regarding your tax code. I would expect that as a business, you will use a proper paper trail to show that money, say 1000 units of currency, came in and 900 went out. This is a service, no goods involved. The transaction nets you 100, and you track all of this. In the end you have the gross profit, and then business expenses. The gross amount, 1000, should not be the amount taxed, only the final profit.
As JoeTaxpayer has mentioned, please consult a lawyer and CA.
In general you would have to pay tax on the profit you make, in the example on this 10% you make less of any expenses to run the business. depending on how you are incorporating the business, there would be an element of service tax apart from corporate tax or income tax.
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