Seeking Advice on Business Account for Freelance Income

[connection01]

Hey everyone,

I've been working as a freelancer for a while now, and my foreign remittance is currently around 50 LPA. Up until now, I've been receiving all my remittances in my personal savings account with IDFC, where I enjoy a flat 7% return on funds exceeding 5 lakhs.

However, I've recently decided to switch to a partnership firm. The challenge I'm facing is that banks don't allow businesses to open savings accounts; only individuals can do so. I'm looking for the best strategy in this situation.

I plan to regularly invest the funds in mutual funds and some in the stock market. Nevertheless, I'll still miss out on some interest benefits for the funds left in my bank account, as I won't be deploying all of it.

I'm aware of sweep-in fixed deposits, but they tend to offer low rates. So, I'm seeking advice on which bank to go with. Currently, I'm considering RazorpayX, which seems to provide some additional benefits compared to traditional bank accounts.

Any insights or recommendations would be greatly appreciated!

Thanks in advance.

 

[RadioactiveTabela]

Open a current account with Indian Overseas Bank or Bank of Baroda for best inward TT rates. Transfer excess cash to fixed deposit on monthly basis.

Transfer your profit share from partnership account to personal account and invest in stocks / MFs from personal account. Do consult a CA first for better tax planning about investments.

 

[connection01]

@RadioactiveTabela I use stripe as my payment processor does TT rate matter in my case, I assume stripe’s conversion rate get’s applied in my case as I receive forex in stripe and then it sends me the INR to my bank account and sends me FIRA on monthly basis.

 

[onlineramarao]

OP is not worried about the existing issues (Remittances , IT and GST) worried about non-existing issue (auto sweep FD).

 

[connection01]

@onlineramarao Why do you assume I am not taking care of the tax stuffs? And why are they an issue?
I am already filling income tax returns and all that stuff appropriately.

The switch to a partnership firm is also a part of my tax planning.

 

[onlineramarao]

@onlineramarao Why do you assume I am not taking care of the tax stuffs? And why are they an issue?
I am already filling income tax returns and all that stuff appropriately.

The switch to a partnership firm is also a part of my tax planning.

There are many things such as GST & IEC code and filing taxes as individual. How do you audit the savings account which is used for all types of credits and debits?
When you switch to partnership firm, you also introducing few more parameters such as PAN/TAN/TDS/IT fling for the firm.

Since you get only inward remittances and doesn't pay salaries for the staff (or pay less salaries), just keep minimum amount in your current account (you have already messed it up by using savings account for your inward remittances) and transfer the rest to your savings account.

Now coming back to your original query, the Auto-sweep remittances in savings account to FD is the easiest compared to the above.

 

[connection01]

@onlineramarao I am a CA final student, I failed to clear my CA Final exams but I have studied the CA and has appeared in final exams then I got interested in programming and switched careers. I have siblings who are Chartered Accountant and Company Secretary so I am all sorted on taxation side.

My only concern is about how to make most benefit from my funds which I asked here because people here have more knowledge on that front.
There is no law preventing you from using savings account for everything if you are paying your taxes correctl;y, it's just a misinformation from bank side to sell more current accounts as they do not make any profit from savings account.
It does not matter what your turnover is if you are individual and you are filling your taxes correctly and you do not need the benefits of a current account like high withdrawal limits, high number of cheqe's etc you do not have no need for a current account.

 

[connection01]

@onlineramarao I don't need to audit as I apply for presemptive taxation under section 44ADA where I just have to report at least 50% of my revenue as my income (I report a little higher than 50%) and then pay tax at applicable slab rate of the assumed income.

Even if I have to go for audit I have 2 saving accounts, one which is used for all work related transactions and another for my expenses / investements.

 

[Yugi]

@TechnoFino can help you out with this question. I believe he has foreign inward remittances for his business. He will the right person to give you suggestions on this matter.

 

[TechnoFino]

I think you should go for IDFC First/ICICI Bank current account, use payoneer to receive money in INR to your current account, you'll also get FIRC copy for free. then transfer your money from current account to partner's IDFC First savings account as profit.
BTW why do you want to switch to partnership firm, when you can get 44ADA tax benefit, not an Tax expert, so better consult with a CA

 

[j_s]

Hey everyone,

I've been working as a freelancer for a while now, and my foreign remittance is currently around 50 LPA. Up until now, I've been receiving all my remittances in my personal savings account with IDFC, where I enjoy a flat 7% return on funds exceeding 5 lakhs.

However, I've recently decided to switch to a partnership firm. The challenge I'm facing is that banks don't allow businesses to open savings accounts; only individuals can do so. I'm looking for the best strategy in this situation.

I plan to regularly invest the funds in mutual funds and some in the stock market. Nevertheless, I'll still miss out on some interest benefits for the funds left in my bank account, as I won't be deploying all of it.

I'm aware of sweep-in fixed deposits, but they tend to offer low rates. So, I'm seeking advice on which bank to go with. Currently, I'm considering RazorpayX, which seems to provide some additional benefits compared to traditional bank accounts.

Any insights or recommendations would be greatly appreciated!

Thanks in advance.

IDFC First has a variant called the First Booster or something like that that offers auto-sweep at 2L+. Maybe that helps?

They also have this other variant which may be of interest to you:




And lastly, businesses are allowed to open savings account. SBI can do it.

 

[connection01]

@TechnoFino I am current receiving funds as a Sole Proprietor and applying under 44ADA. Current year limit is 50LPA (next year onwards 75LPA), if I cross that threshold I will not be able to file under 44ADA and normal slab rate of 30% will apply.

I am hoping to cross the threshold limit very soon so I am planning to split my revenue, I have two different source of income. One being freelancing projects and another being SaaS subscription income. My plan is to move the SaaS business to partnership firm and keep my freelance projects on my own name so I can apply for 44ADA on both. I can withdraw my profit share from partnership without paying any additional tax.

Individual, Partnership Firm and HUF all can claim presumptive taxation under section 44ADA.

 

[connection01]

@j_s Are you sure about this? Do you have a savings account for your business? What type of business entity is it?
I think only specific businesses can open savings account.

Taked from hdfc website: https://www.hdfcbank.com/personal/s...nts/institutional-savings-account/eligibility

 

[Digita1Err0r]

You absolutely cannot open a savings account with a business KYC. You will need to go with current account only. I maintain current account and Wealth Management SB AC with ICICI. The current account is a digital current account I opened in 2018 which was a 0 balance current account (the product is gone forever now). I do freelancing too. I get the payment and just keep enough to pay GST and vendor payments and move rest to my SB AC as "Salary" at end of month. If you need to maximize interest, you can also transfer funds as soon as you receive a payment to SB and then do what you want to do with it.

Mine being a proprietary concern, I do not have to deal with fund movement since its all under same PAN and movement between accounts. But you will have to talk to a CA on how the "Salary" transfer would be treated for a partnership firm.

 

[onlineramarao]

@onlineramarao I don't need to audit as I apply for presemptive taxation under section 44ADA where I just have to report at least 50% of my revenue as my income (I report a little higher than 50%) and then pay tax at applicable slab rate of the assumed income.

Even if I have to go for audit I have 2 saving accounts, one which is used for all work related transactions and another for my expenses / investements.

Digital1Error replied about the current account. Lets leave that for now.
Any specific reason for using 44ADA instead of 44AD ?

 

[onlineramarao]

I think you should go for IDFC First/ICICI Bank current account, use payoneer to receive money in INR to your current account, you'll also get FIRC copy for free. then transfer your money from current account to partner's IDFC First savings account as profit.
BTW why do you want to switch to partnership firm, when you can get 44ADA tax benefit, not an Tax expert, so better consult with a CA

Yup. Thats the best method (even though there is an issue with payoneer/wise accounts (they keep changing rules as per updates from ITD).
The best bet would be to accept all inward remittances to Indian current account (either direct payments or via payoneer/wise accounts) and avoid crediting INR in to this account.

 

[connection01]

Yup. Thats the best method (even though there is an issue with payoneer/wise accounts (they keep changing rules as per updates from ITD).
The best bet would be to accept all inward remittances to Indian current account (either direct payments or via payoneer/wise accounts) and avoid crediting INR in to this account.

Payoneer and similar solution does not allow you to have a recurring payment setup. So Stripe and PayPal are the only option I am left with as I have SaaS business. Also I have tried to ask my clients many time to pay me via Payooner but PayPal is so much convenient for them that I think it's just the best option.
So what I have realised after 6-7 years in this industry.
Always try to use Stripe when you can, it's the best option. (Razorpay sucks badly when you want to receive international payments).
And keep PayPal as your next best option, (PayPal is super bad when customers want to cheat you and get back their money once the work is done).
Payoneer and any other options just add some hassle for the clients and either delay my payments or loose client. People in EU are already using PayPal and they do not want to signup for Payoneer or something to pay you.

 

[connection01]

Digital1Error replied about the current account. Lets leave that for now.
Any specific reason for using 44ADA instead of 44AD ?

44ADA is for professionals, gives you the ability to claim at least 50% of your revenue as profit.
44AD is for everyone else, gives you the ability to claim at least 8% of your revenue as profit.

The logic behind that is majority of the revenue of a professioanl is their profit, which is not possible for any other business like Transportation, Retail / Wholesale trader and so on.

 

[GGORDON]

I am on the same boat as you @connection01 and can share my viewpoint and a couple of questions:
- I am also a freelancer/professional utilizing 44ADA
- I am currently using Wise to receive foreign currency, and having it credited to HDFC bank's current account
- I am also about cross the threshold for 44ADA limit and pondering over whether to register partnership. I found that 44ADA is not applicable for LLP (Limited liability partnership). May I ask which partnership are you registering in?
- Also for your question, since you are >20L, I am assuming that you have GST registration and trade certificate. Please walk into any bank and provide these - and I am sure that you can easily open a current bank account.
- Not sure about how to open current account for partnership firm. Any leads on that?

 

[connection01]

I am on the same boat as you @connection01 and can share my viewpoint and a couple of questions:
- I am also a freelancer/professional utilizing 44ADA
- I am currently using Wise to receive foreign currency, and having it credited to HDFC bank's current account
- I am also about cross the threshold for 44ADA limit and pondering over whether to register partnership. I found that 44ADA is not applicable for LLP (Limited liability partnership). May I ask which partnership are you registering in?
- Also for your question, since you are >20L, I am assuming that you have GST registration and trade certificate. Please walk into any bank and provide these - and I am sure that you can easily open a current bank account.
- Not sure about how to open current account for partnership firm. Any leads on that?

- You can register a normal registered partnership by getting a INR 2000 stamp paper and getting a deed made between you and your friend / relatives. LLP cannot claim 44ADA but a normal partnership can.

- Also note partnership will not get the slab rate benefit. So if you can then try to keep around 10L income still on your own PAN card. This can be income from other source like FD income, savings interest or even a completly separate portion of your freelance business.

- For service export transactions there is ambiguity on when to register for GST. General limit is 20L but there is another view that for export of service the threshold does not apply and you should register as early as possible. For the partnership firm I will choose to register early.

- I have a very bad experience with HDFC and IDBI. IDBI randomly locks your internet banking and mark it as risk transaction then you have to visit branch to get it unlocked (In last one year I had to visit the branch 5 times to get my account unlocked and few times they too like 8-10 days to unlock it, during the lock I cannot use my funds to make any transaction). So I am never going for IDBI. HDFC is also extremly greedy and try to charge you for all stupid things they can. My father has a current account with HDFC they only allow to add 400 beneficiary for fund transfer and if you want to add more you need to pay them a yearly fee, they randomly upgrade you to some prime banking which costs money.

- I have decided to give razorpayX a try and opt for ICICI current account through razorpay. As RazorpayX provide additional tools above the traditional banking, API based access etc. If it does not work out good I will open a current account with IDFC Bank.

- For partnership bank current account you will need followinf documents: PAN card of partnership, Partnership deep, KYC of all the partners.