Are Internet Website businesses eligible for STPI India membership

this scheme gives 100% tax holiday.

[arvindp]

Hi,

I am from India. I operate a couple of web sites hosted in the US and earn revenue through banner advertisements (Adsense, Tribalfusion, etc) like most of us do.

STPI [Software Technology Parks of India] has a STP scheme which is a 100% Export Oriented Scheme (100% EoU) for the development and export of computer software using data communication links or in the form of physical media including export of professional services. I believe my business (websites earning through banners) comes under this scheme.

I would like to know if anyone from India has registered with the STPI [Software Technology Parks of India] for the above mentioned 10A/B scheme offered by STPI which provides for a 100% tax free scheme.

The following business types can become members of STPI:

Businesses providing IT enabled products or services such as Back Office Operations, Call Centres, Content Development or Animation, Data Processing, Engineering and Design, Geographic Information System Services, Human Resource Services, Insurance Claim Processing, Legal Databases, Medical Transcription, Payroll, Remote Maintenance, Revenue Accounting Support Centres and Website services “provided payments for such services are received in free foreign exchange”.

Since it also mentions "Website services", I believe my business should also come under this scheme.

Are any WW members also STPI members.

Thanks and looking forward to some responses.

Best Regards,
Arvind

[McMohan]

It will be a good way forward though we haven't listed our business in there yet.
Is there any criteria regarding the business constitution that are eligible to get listed?

[arvindp]

Hi Mc,

Check out [stph.net...] which lists all the requirements. Definitely our business model also fits.

[vibgyor79]

Arvind, the answer is YES. You are eligible for STPI membership. My friend's internet marketing company in Bangalore is already a member. The whole exercise cost him around Rs. 80,000. I think he mentioned that there is a yearly membership fee too.

Your office need not be physically in the STPI complex.

When you are a STPI member, your business does have a tax holiday. But the 'salary' you draw from your business is taxable at the usual rates. You can avoid paying 30% tax by taking quarterly dividends (which is taxed at 10% only).

[sunandoghosh]

"The whole exercise cost him around Rs. 80,000. I think he mentioned that there is a yearly membership fee too. "

I think personally that this initial cost initself may well be a strong negative factor for people with small websites generating meagre income say couple of dollars through banner advertisement per month.

In my opinion this is suited for either those who operate many websites where although individually each website does not yield great revenure but cumulatively it does.

on the other hand, even if there is a single website but generating substantial revenues, then also it makes sense.

othwerwise, its not simple feasible.

just my raw thoughts prima facie,

regards,

sunando

[mil2k]

We had thought about this. Had a look at the procedure and then backed off. The list of requirements is huge! Unless your annual turnover is more than multiple crores, it does not make sense.

There is inspection of premises, Minimum Export obligation Reports to be submitted on Monthly, quarterly and annual basis.

Even I am interested to know if anyone has experience of registration process and subsequent enrollment for STPI?

[iThink]

I had a detailed discussion about this with my chartered accountant and his view was that any revenue sharing arrangement such as income from affiliate programs can't be covered by tax exemptions under STPI schemes. If you try to claim tax exemptions for earnings from revenue sharing deals such as affiliate advertising the income tax department is likely to contest your claim in order to recover tax from you. If you have a business where you are offering website design and maintenance services ONLY for overseas clients then STPI may be the way to go.

Also meeting the legal and regulatory requirements to get the tax exemption is not very cheap. You will need to hire someone to take care of legal requirements. If you are earning only a few thousand dollars per month then it is cheaper to run the business outside the STPI regulated areas and pay normal taxes to stay clear of government red tape. Our time is better spent on doing what we do the best and that is to work on our own sites or the customer's sites.

[sunandoghosh]

As very correctly and precisely pointed out in last two posts, it is simply not feasible for even medium sized websites leave aside small websites.

The benfit possibly is meant for really large businesses and we think its better to pay off taxes and focus on increasing our revenue so that the other part which is not taxed remains with us. This essentially means, as once again rightly pointed out, keep on doing what we r currently doing to our best and capitalise on it rather than divide our attention on lengthy cumbersome ( and sucking) red tapism which is so deeply permeated.

I WOULD ALSO like to take an opportunity here to address one more issue as tis thread seems to have revived its momentum.

Has anyone obtained any sort of trademark (or patent, copyright) in relation to his/her website in india and what have been the experiences.

Any comments and opinions would be highly appreciated.

good luck and best regards to all our fellow indian webmasters,

sunando

[oddsod]

arvindp's link goes to a page guiding you on seting up a software house. They should get one of their software experts to try that page in 1280x1024 or higher.

But, do change your screen res and read the War and Peace sized page. Get intimate with the various Acts they refer to - from the AP Shops & Establishments Act to the Minimum Wage Act - and get to the bottom: SO, GET, SET, AND GO…

That's the hilarious bit. Get set, and go; as easy as picking your nose. :)

[nakulgoyal]

Yes, STPI registration is worth. I am the cofounder of the company, that we setup in 1999. Apart from money and other things, the STPI Director or another senior official also setups a meeting with you where he tries to understand your requirements and whether you qualify or not. Your income tax returns from the previous years are also helpful.

The STPI fees is around Rs 50,000, but then there is a lot of paperwork. Be prepared to hire a CA. Also, after the initial registration, Custom Bonding (Inspection of the premises), etc, every month when you receive payments, you have to raise invoice against the people sending you money, and make 3 copies of it. One for STPI, second and third one STPI confirms receipt, and certifies the invoice, and then one of those 2 copies, u deposit with your bank, and when you receive money, in USD, you then deposit it with your bank, who will match it with the invoice, and forward the details to RBI.

For all this work, you do need a part time CA. Keep this in mind.

Our company is an STPI member for over 2 years now.

[gopi]

I know an indian orgin WebmasterWorld member who setup an STP registered company and moved from US to India ...I think he said that it took around 3 months to get.

Anyway ,remember the tax holiday is for your corp only and obviously once you took the money out you will be taxed (not sure about the dividend tax rate in india) .But as iThink said unless you earn substantial income (like say >1 Million USD/yr) , i think its waste of time/energy...

With various deductions/loopholes and a max income tax rate of just 30% , business dont pay that much tax in india anyway - so why bother :)

[newads]

Gopi is correct. for webmasters Getting few 100 dollars is not worth registering with STPI

[sunandoghosh]

please also consider visiting and express ur opinion

[webmasterworld.com...]

[shaadi]

Apologies for the late reply. STPI is good of any company, which is involved in IT services and/or products, and more than 70% of the income is from overseas.

A few years back getting registered in STPI was not so big deal, 10k and few papers to be submitted. But today the process is much complicated.

After getting registered for STPI, you don't have to pay any taxes to the Govt. of India - for next eight years. For all that 70% income which you get into the country is free of tax. So if you think that you will earn substantial foreign income, even in next few years, getting yourself registered for STPI is worth the investment.

HTH