Can I use presumptive taxation if all my clients are abroad?
The scheme is defined by what the business is and by the size of its turnover, not by where the customers happen to sit, so foreign clients do not by themselves take you outside it. Two things do complicate matters. The receipts arrive in foreign currency and have to be converted on a consistent basis to arrive at turnover at all. And the other country may tax the same activity on profit computed from books, which is a different figure from a margin deemed as a proportion of turnover. Settle both before the first filing rather than after.
What happens if I stop using the presumptive scheme?
Leaving is not a neutral decision taken one year at a time. The scheme carries consequences that run over several years: opting out after having opted in restricts your ability to come back for a period, and it brings with it the record-keeping and audit obligations the scheme was relieving you of. So the choice is better made with the next few years in view than on the basis of whichever route gives the lower figure this year. Where a year of heavy expenditure makes actual profit lower than the deemed margin, work out what the exit costs before taking it.
Do I still need to keep books under the presumptive scheme?
The scheme relieves you of computing profit from books; it does not make records pointless. You still have to evidence turnover, because turnover is the base the whole computation rests on, and that means invoices, bank credits and a conversion method where receipts are in another currency. You will also need records if you ever leave the scheme, if the other country you file in computes profit conventionally, or if turnover itself is questioned. Keeping ordinary books while filing on the deemed basis costs very little and removes the worst outcome, which is being unable to prove the figure you declared.
Will a foreign tax credit work on presumptive Indian income?
This is the real cross-border difficulty. The other country typically taxes profit computed from books, while India taxes a margin deemed from turnover, so the two systems are taxing different amounts of income arising from the same work. Relief mechanisms generally assume the same income taxed twice. Where the bases diverge, the claim has to be framed carefully — on the tax actually paid, on income identified so far as possible as the same income — and supported by a computation showing how one figure relates to the other. Prepare that computation when you file, not when a query arrives.
Is money received in foreign currency part of my turnover?
Yes, and the question that follows is which conversion rate and on what date, because that decision determines the turnover figure on which everything else rests, eligibility included. Pick a basis, apply it to every receipt in the year, and record what you did. The errors we see are inconsistency: spot rates on some invoices and a monthly average on others, or conversion on the invoice date for some receipts and the credit date for others. Neither is defensible when turnover sits close to a scheme threshold and a small difference decides whether the scheme applies at all.
Will another country accept a presumptive return as proof of income?
Not on its own, usually. A presumptive return shows a deemed margin rather than a computed profit, so it does not answer the question a foreign authority or a lender is actually asking. Expect to supply the underlying material as well: the invoices, the bank credits, and a reconciliation between turnover, the deemed figure declared and the profit a conventional computation would produce. It is worth preparing that reconciliation at the time of filing. Reconstructing it later, for a mortgage application or a foreign enquiry, is the same work done under pressure with older records.
Do American citizens living abroad have to pay taxes?
American expats and green card holders need to file US returns for life, and many of them pay little or no US tax once the relief is applied — but the filing is what unlocks the relief, so the two questions have different answers. The exclusion for foreign earned income, the credit for foreign tax already paid and the treaty between the two countries between them usually leave the total at roughly the higher of the two countries' tax rather than the sum. Skip the return and none of it applies. See Americans abroad.
Can an accountant in one country file my return in another?
Yes, where they are authorised to represent you with that tax authority and the filing is done electronically. What matters is not where the adviser sits but whether they can lawfully act for you and are competent in both systems — a return prepared with no knowledge of the other country is where the relief gets missed. We file on both sides, from offices in India, the USA, Canada and the UAE. See how we work.
