Do I need to pay Income Tax if i am running a escrow service in India
"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. Income Tax would only be levied on the 10% commission that you earn and not on the total amount kept in the Escrow Account.
"Paypal linked with my bank account. 1.Can I use my Saving bank account to receive payments from my clients? Or is it necessary to open a current account? Yes you can get funds into your savings account. However it is advisable to keep a seperate account as it would help with your IT Returns. 2.I will be paying a certain % as commission on every sales to a couple of sales guys (who are not my employees but only working on   commission). Can I show this as an expense in my IT returns? As you are earning as freelancer, you are eligible for certain deductions like Phone calls, Laptop, other hardware, payments to partners. It is important that you maintain a book of records. An accountant for a small fee of Rs 5 K should be able to help you. In the Returns you have to show Net income after all these deductions, there is no place to enter expenses.   3.Since I will be receiving all the payments in Euros so am I falling under a category of ""Exporter of services""? The work you are doing can be Free Lancing.    4.Do I need an Import Export Code (IEC) for smoothly running this small business? You can run this without one as Free lancing. IEC would be when you grow big and are looking for various benefits under tax and pay different taxes and are incorporated as a company." I am a US citizen and I want to transfer some amount 10 lakhs+ to my brother from my NRE account in India to his account. My brother is going to purchase something for his business. He is going to return my amount after 3-4 Months From the description it looks like you would like to loan to your brother on repatriation basis. Yes this is allowed. See the RBI Guide here and here for more details. There are some conditions; (iv) Scheme for raising loans from NRIs on repatriation basis   Borrowings not exceeding US$ 2,50,000 or its equivalent in foreign exchange by an individual resident in India from his close relatives resident outside India, subject to the conditions that - a) the loan is free of interest;   b) the minimum maturity period of   the loan is seven years;   c) The amount of loan is received by inward   remittance in free foreign exchange through normal banking channels or   by debit to the NRE/FCNR account of the non-resident lender;    d) The   loan is utilised for the borrower's personal purposes or for carrying   on his normal business activity but not for carrying on   agricultural/plantation activities, purchase of immovable property or   shares/debentures/bonds issued by companies in India or for   re-lending. Although it is mentioned as Seven years, this is revised to one year. Since he cannot deposit into my NRE account I guess he has to deposit it into my NRO account. A repatriate-able loan as above can be deposited into NRE Account. Is there any illegality here doing such transaction? No. Please ensure proper paper work to show this as loan and document the money trail. Also once I get my money in NRO account do I need to pay taxes in India on the money he deposited? This question does not arise. "As the OP expressed their thought it seemed to me they were suggesting anyones (or rather anyone who is ""Rich"" however *that* is defined*) non-invested money be taxed at this high rate and that strikes me as hopelessly naive. You don't think they would leave the country or ""invest it"" in a savings account earning .05% (or most likely spread across many so it was FDIC insured)?   &gt; I bet the rich would find something to do with that idle cash overnight if it was taxed at a 75% rate or so.    They were basically suggesting the US government sieze the savings of wealthy people.   The question of whether the highest effective tax rate **on income** should be raised is  a completely different discussion. Personally I favor a higher tax rate and some new tax brackets for the very highest earners. I don't really think it's necessarily *fair* in a progressive system to treat the rich as a ""piggy bank"" but it is what it is. They benefit the most so they are called to contribute the most.   I think I'd favor some kind of Alternative Minimum Tax for rich people so they had to pay a minimum of 30ish% of their income above some sort of cap (5 million per year? 100 million per year?) and capital gains  applied. This would close the Buffet loophole.   My biggest reason for this though is not because I don't think they *deserve* their money. It's because bottomless coffers basically guarantee that the legislation will be written for them and by them. There is always this tension between the poor and middle class that want more services and the upper class that wants to pay less taxes.   I am starting to get to the point where I think it might be better to have a smaller government (and less services) because they abuse their power (and our money) so much. ACTA, SOPA, NDAA, warrantless wiretaps, Afghanistan and Iraq wars, etc. I *do* like the idea of social safety nets but perhaps those should be more local.   Anyways, sorry for the wall of text." Do I pay tax to the US and then also pay it in India for my income, or   does my American partner, who holds 15% of the monthly income, pay tax   in the US for his income? Of course you do, what kind of question is this? You have income earned in the US by a US entity, and the entity is taxed. Since LLC is a disregarded entity - the tax shifts to you personally. You should file form 1040NR. You should also talk to a tax professional who's proficient in the Indo-US tax treaty, since it may affect your situation. There is more than one kind of tax. It is a little confusing because in reality the tax revenues collected by the Government aren't earmarked to a particular usage based on where they came from, usually. Well, the Gov't often CLAIMS they do, but for all practical matters it all goes in a big bucket. So just because a business or individual isn't paying income taxes doesn't mean they aren't paying anything for the use of Government furnished infrastructure/services. You are limiting the scope of your question to Income Taxes, which are taxes paid on profits to a business or individual. It makes perfect sense that you wouldn't pay a tax on something you didn't get. However, you aren't considering taxes that ARE being paid even by a company that isn't profitable. For example consumption taxes, employment taxes, and other fees. That same company paid sales tax on all the supplies it purchased, and probably collected/paid sales taxes on anything it sold. To take one of your examples, it paid for its share of using the roads through Government imposed taxes on fuel.  Don't worry about the Government. They know how to get theirs. They might not pull it from your right pocket, but they will make sure to get it from the left. You have not mentioned the dates when you left India. Taxability is not depended on whether you transfer the funds to India or NOT. It is dependent on whether you are NRI for tax purposes for the given financial year. Refer to this question for more details Will it be taxable if I transfer money from UK account to India account? Edit: The lottery earnings are also treated in the same way. If you are NRI, you don't pay tax. Else you pay tax Assuming you are Resident Indian. As per Indian Income Tax  As per section 208 every person whose estimated tax liability for the year exceeds Rs.   10,000, shall pay his tax in advance in the form of “advance tax”. Thus, any taxpayer   whose estimated tax liability for the year exceeds Rs. 10,000 has to pay his tax in   advance by the due dates prescribed in this regard. However, as per section 207, a   resident senior citizen (i.e., an individual of the age of 60 years or above) not having any income from business or profession is not liable to pay advance tax.   In other words, if a person satisfies the following conditions, he will not be liable to pay advance tax:   Hence only self assessment tax need to be paid without any interest. Refer the full guideline on Income tax website Is it liable for taxation in India? Taxation does not depend on whether to transfer money to India or keep it in GCC. It depends on your tax status. In a given Financial year; 1st April to 31st March, if you are outside of India for more than 182 days, your are Non-Resident Indian, NRI for tax purposes.  If you are NRI, income earned outside of India is not taxable in India [even if you transfer the funds to India]. If you are not an NRI, you income in GCC will be taxable in India [Even if you keep the money in GCC]. We both send our salary into a friends account in India and then transfer an amount to our own accounts This is an incorrect practise, If you are NRI, you should not be holding a Savings account, it should be converted into NRO and you can if you want open an NRE account. For your friend where you are transferring money, if there is an income tax audit, there would be quite a few questions asked and your friend has to establish and keep records that this is not GIFT, but more of a convenience agreement.