Ready to be your own boss and make money online?
Hold on a minute.
Do you have a way to get your hands on the actual money? It’s one thing to sell your services. You should be able to access the money you earned as well.
What do you need to make money in India?
In this post, you will learn more about what you need to accept money for online services in India.
#1: Payment gateway
When you sell services, clients pay for your time.
How do clients pay you? Using a credit or debit card.
You shop at a merchant. The merchant has a machine (POS) to swipe your card. You swipe the card and enter the PIN to authenticate the transaction. Money is withdrawn from your account. The money is then deposited into the merchant’s account.
Now, imagine how you pay for online service:
There is no POS machine. Instead, you enter your card details and it’s processed online with a 2-factor authentication. In this case, a payment gateway handles your virtual transaction.
If you want to accept payments outside India, choose one the following:
A) 2 Checkout
2 Checkout is a full-fledged payment gateway with very little limitations. You can request a direct credit to your Indian bank account.
Popular for receiving payouts from freelance websites. There is a limitation for Payoneer. Only companies that are whitelisted by Payoneer can send you money. Otherwise, the payment might get rejected.
Your balance in Payoneer will be automatically withdrawn to your bank account on a daily basis.
Paypal is one of the first wallets to offer convenience while paying online. Paytm, which most Indians will be familiar with, is a clone of PayPal.
Your balance in Paypal will be withdrawn automatically to your bank account every day.
Trivia: The daily withdrawal for Payoneer and Paypal is a result of RBI intervention.
RBI made these services illegal in India and forced them to comply with RBI rules to operate in India.
Money held in Paypal or Payoneer cannot be tracked and can be used for tax evasion. Hence, RBI took stepped in to regulate online wallets.
My Recommendation for payment gateway
Choose 2checkout or Paypal. Do not opt for Payoneer unless you deal exclusively with freelance websites.
What’s the best option if you want to collect money from within India?
If you are collecting money from clients who are located in India, choose one of the following:
A) UPI (Unified Payment Interface)
India is going big on digital payments. Register with your bank for a UPI handle. Using a UPI handle you can send and receive money.
UPI links to your bank account and works on top of the existing IMPS infrastructure.
A UPI handle is a unique payment address. Think of it as an email address. An example of UPI handle with HDFC bank could be yourname@hdfcbank.
The benefit of UPI is that money transfer is instant. You do not need to remember your account number, IFSC code, or wait for adding payee using Net Banking.
The only downside of UPI is that both you and your client need to have UPI handle. There’s also a maximum transaction limit of INR 1 Lakh.
Use any of the following apps to accept UPI payments
1) PhonePay – Built by the Flipkart team. Phonepay has the best user interface of all the UPI apps. Since only banks can offer UPI at the moment, Flipkart has partnered with YES Bank. You will get a UPI handle using the format: yourphonenumber@ybl
2) BHIM – Government promoted UPI app. Simple interface.
Instamojo is an Indian payment company and is quick to set up.
You can create a payment link and send to your customers via WhatsApp, SMS, or email. Your customers can pay using a debit card, credit card, net banking etc.
Paytm is famous in India for being a wallet and offering cashback. There’s a business side to Paytm as well.
Paytm lets you collect payments from your customers. Besides collecting payment via payment links, you can also add “pay via paytm” button on your website. When it comes to pricing, it’s cheaper than Instamojo.
My Recommendation for collecting payments in India:
If you are starting out, use Phonepay. If your client does not support payment via UPI, choose 2CheckOut or Paytm.
#2: Invoice software
Most clients would require an invoice to process your payment. Add credibility to your business by sending a professional looking invoice.
Invoicing software helps you automate creating and sending invoices to clients. Most software will also integrate directly with your payment provider. You can send automated reminders if the invoice is not paid.
Zoho is an Indian company based out of Chennai. They offer several software products for small businesses. Zoho invoice is their invoicing solution aimed at small and medium businesses.
Zoho Invoice is a very affordable solution which starts free for up to 5 clients. If you want to invoice more clients, it’s INR 2099 for a year.
The downside of Zoho invoice is that it does not offer time tracking or timesheets.
Wave app is completely free. There are no trials or limits.
I am always curious when companies claim something is available for free. As a business, offering something for free, forever, is not sustainable. You should always approach something that’s too good to be true, with caution.
It looks like Waveapp offers payment processing and payroll services in select countries. They might be using Wave invoicing as a way to acquire leads who could then be later sold their paid services.
Freshbooks is perhaps the market leader in invoicing software. It includes time tracking, invoicing, project management etc. in one software.
It’s ridiculously expensive at about Rs 1000 per month if you have to invoice 5 clients. The pricing goes up to 1650 per month if you need to bill up to 50 clients.
Freshbooks might be able to justify the high price because of all the extra features. Their rates are also not that high if you are earning in US dollars.
Zoho Invoice. It’s free to get started. Once you start getting more clients, you pay less than 200 rupees per month. Plus, it takes care of GST compliance. That’s ROI for me.
#3: GST Registration
You need to register for GST if your turnover crosses a certain threshold. The threshold is INR 20 lakhs for some states while it’s INR 10 lakh for others. Make sure to check your state GST threshold limit.
The current GST rate for freelance services is 18%.
If you provide inter-state services, you need to register for GST irrespective of your turnover. Let’s say you are in Bangalore. You have a client in Delhi for your web design service. Since you are providing service across states, you need to register for GST. The threshold for GST registration does not apply in this case.
If you provide services only to clients outside India, it comes under the ambit of export of services. For export of services, you do not have to register for GST.
#4: Credit Card
When you earn money from home, it’s likely that you have to pay for some services like web hosting or software. Credit cards are the most commonly accepted way to pay for these services.
There might be some services which accept debit cards. In my experience, most online services need either Mastercard or Visa powered credit cards.
Choose a credit card that accepts foreign currency transactions. Make sure it has low currency conversion rates. Go for cards that offer rewards which you will actually use like free movie tickets.
If you are self-employed, most card companies will not give you a credit card. You need to show the last 3 years income tax returns you filed to get a card. Most banks also provide pre-paid credit cards against a fixed deposit.
#5: PAN Card
PAN card is mandatory for financial transactions in India. You need to provide your PAN number while opening your bank account. It’s also mandatory while making investments.
If you don’t have a PAN card, you can apply one here.
#6: Bank Account
You need a bank account to receive money. Take the following into consideration while choosing a bank.
- Do they offer Net Banking services?
- Do they offer debit and credit card?
- How good is their ATM coverage in the city you live in?
- Do they offer personal/business loans at competitive rates?
- What’s the minimum balance? What’s the penalty for not maintaining the minimum balance?
- Doorstep banking services if you are physically challenged.
What you should ignore when choosing a bank:
- High-interest rates on savings bank account. These offers are mostly temporary and come with restrictions. Use a liquid mutual fund for getting better interest rate.
- Offers and cash backs. These are again temporary offers which can be withdrawn anytime.
- Physical branch presence. It’s OK if the bank does not have many branches in your city. If you have a reliable internet connection and net banking, you should be able to do almost everything online.
- ATM count. It doesn’t matter if the bank has a million ATM kiosks throughout India. All that matters is- how accessible are they to you in your city?
My Recommendation for a bank account:
Go with any of the banks like HDFC, ICICI, SBI, or Axis.
#7: Aadhaar card
Don’t be. Currently, it is not mandatory in India to have an Aadhaar number to earn money. However, Aadhaar is being made mandatory for almost everything.
From mobile phones to bank accounts to mutual fund investments, you need to link your Aadhaar. I wouldn’t be surprised if one day PAN card gets discontinued and replaced with Aadhaar.
To avoid nasty surprises, if you are planning to work from home and make money, enroll for Aadhaar.
While it’s great to make money online, it’s also important that you save your hard-earned money. Online income can be unpredictable. It can be very good one month and almost zero the next.
Maintain an emergency fund to tide over difficult times.