Why foreign entities don't save taxes
Many Indian freelancers consider creating companies in the USA, Singapore, UK, or Dubai hoping to reduce their tax burden. This analysis covers why this approach is fundamentally flawed for Indian tax residents.
US LLC — Pass-through entity
A single-member US LLC is treated as a 'disregarded entity' by the IRS. This means the LLC's income flows through to the owner personally. For an Indian resident, this means the income is taxable in India under the individual's return, not in the US.
Singapore / UK Company
Creating a Singapore or UK company faces the same DTAA and POEM challenges as UAE entities. If you are the sole operator working from India, the company's effective management is in India. Additionally, these countries have their own corporate tax rates (Singapore 17%, UK 25%) which you'd need to pay on top of Indian taxes.
The bottom line
You will end up paying more taxes AND will have to shell out more money in compliance costs for maintaining the foreign entity. Don't do it for the money. Do it for the experience if you want to learn about international business structures. For tax purposes, Section 44ADA in India already lets you declare only 50% of your revenue as profit.
What actually works
Indian freelancers should focus on: (1) Using Section 44ADA to declare 50% presumptive profit, (2) Getting GST registration and filing LUT for 0% GST on exports, (3) Claiming input tax credit on business expenses, (4) Paying advance tax by March 15 to avoid interest under Section 234B/234C.