Service Tax for Freelancers in India

In India, There are basically 119 services which are taxable and mentioned in Section 65(105) of the finance act, 1994.

I am not going to explore the 119 service, but I will explore one service which is mentioned in Taxable service 54. which is nothing but “Online Information & Database Access or Retrieval Service” or you can say Blogging, freelancing, online job, online business etc.

Whether you are a freelancer, Blogger or you are using any type of business in which you are transmitting or receiving information in electronic form online comes under this type of service.

Current accounting codes for this service are:



Accounting codes are used by Indian Government to know the type of service and to provide an exact percentage of tax applied to this type of service.

How to calculate rate of tax

It’s an interesting question to know “How to calculate the rate of tax”. Our government has not launched a single advanced version of service tax calculator till now and we have merged ourselves in the plethora of boring and time-consuming calculations.

Just check the points mentioned below:

1. Service tax is applicable on 10% of the value of services and it has code 00440153.

2. Education cess is applicable on 2% of the service tax payable. Just focus on the wordings, I am saying that It is applicable on 2% of the service tax payable. It means that after calculating tax in Step 1. You have to apply 2% on it. It has code no. 00440298.

For instance

Let us consider that you have offered services of 10,000. tax payable on service = 1000 Education cess = 2% of 1000 = 20

3. Secondary and H. is applicable on 1 % of service tax payable.

4. Other penalty/interest – As applicable and it has code no. 00440154

In a budget speech our Finance minister had announced that new tax on services after adding swachh bharat cess (clean India cess) will be 14.5% +.5% (Krishi Cess)

So, If you are unaware of the term export of service then be ready to pay the service tax 15 %

But, wait a second. I am going to explain you the Export of service in Detail which will be beneficial for my all Online brothers!!!

According to Rule 6A (1) of the Service Tax Rules, your service will be treated as export of service if it follows points a to f in the following manner:

a. If you are the provider of the service then you should be located in taxable territory.

For instance

If you are blogger, freelancer, digital entrepreneur in India then you are automatically following point no. a

b. Recipient of the service located outside India.

It means that the service receiver should be located outside India.

For instance. Bloggers are earning money by means of affiliate, AdSense etc. Google Inc. is automatically liable to pay service tax. You are free from service tax.

Freelancers are earning by means of their clients online. If your clients are situated outside India then there is no need to pay service tax. But if your client is situated in India Online then you are liable to pay service tax.

Digital Entrepreneurs

Digital entrepreneur is a new term that is surrounding in this new era. If you are doing business online and your Client is based outside India and you are receiving service from your freelancers based outside India via Online medium. It means that you are acting as an online contractor.

You don’t even to pay a single penny as a service tax. As Employment tax is a State tax, You are free from various other taxes also.

But if your client is situated in India and your employee are also situated in India as a freelancer.Then you are eligible for Service Tax Act.

In today’s scenario, Our Most Respected Prime Minister Shri. Narendra Modi had launched a scheme for India which is “Start Up- Stand Up”.

In this scheme, If you have new idea then you are automatically eligible for benefits such as:

1. Easy Loan Procedure.

2. Easy Patent Registration Procedure.

3. Easy Trademark Procedure.

4. Free from Income Tax – Other Employment Tax.

5. Easy exit.

and various other benefits which can’t explain by words.

The service is not a service specified in Section 66D of this act which is termed as negative list of this act.

d. The payment of the service has been received by the provider of the service in convertible foreign exchange and

e. The provider of the service and the recipient of the service are not merely establishment of a distinct person in accordance with item (b) of Explanation 2 of clause (44) of section 65B of the Act.


This post is for information purposes only and does not constitute any legal advice/suggestion etc. I am not responsible for any action taken by you after reading this post.

Source by Lokesh K

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