Tanvi has been a full-time personal finance journalist and now leads a multi-faceted existence as a wife & mum, and now a Certified Financial Planner and wine sommelier.

Tax Filing for Freelancers 101

Working as a freelancer? Find out how you can compute your tax.

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Once you decide to go on your own, as a freelancer the world opens up to you. Having said that, there are a lot of changes you must embrace. You must now scour for work, your income varies compared to a fixed salary, there are no more employer contributions and you must foot your own expenses. To top it all, there are changes in the way you file your taxes. Fret not, we can help you out with that.

Account for all your income, professional first. Unlike a salary, which is bound to hit your account in the first week of every month, a freelancing income may not be such. You may have to make some calls to follow up on the payment but once the cheque is deposited, make sure you pen that down.

Thereafter, add up all your other income. Interest income from your savings account or fixed deposits, rental income from any property, etc.

Claim deductions. Lucky you, there are several expenses that are allowed as deduction from income when you are a freelancer. These must be legitimate expenses incurred for your profession, though.

Rent paid on the property: The space that you work out of.

Office expenses: This includes a printer, conveyance expenses, your telephone or internet bill, entertainment expenses spent on meeting a client, domain registration, travel expenses, etc.

Depreciation and maintenance of asset: If one has a vehicle and it is being used to get business, you can claim depreciation as well as expenses incurred on maintenance and fuel.

Claim Other deductions. There is a plethora of deductions you can claim U/S 80 C like investment into PPF, Life Insurance Premium, Tax Saving Fixed Deposits, ELSS Funds, to name a few. Check our write up on deductions to claim.

Fill the right ITR form. As a freelancer you are eligible to fill ITR 4, which is for those carrying out business of a profession. Next is to arrive at your taxable income

Add up all your income.

Subtract expenses directly related to your work.

Add other income.

Claim deductions under any of the 80C sections.

Find out the tax slab you belong to and calculate your tax due.

Remember to deduct TDS.

(Sit with your form 26AS and take credit of this tax deducted from your final tax dues.)

Or Opt for Presumptive Taxation! Yes, there is another tax filing process for professionals like you known as the Presumptive scheme of taxation. Confused? Don’t be. We shall simplify this.

You can opt for this if your income is ₹50 lakhs or less.

Your taxable income is calculated on an assumption instead of actual basis. Actual basis is when you deduct business expenses from business income and pay tax on the balance.

Your taxable income is assumed to be flat 50% of the gross receipts, there is no need to maintain accounting records and no expenses are allowed to be deducted.

This works great for those who find it difficult to keep track of expenses and receipts.

But if you are amongst those who can maintain your expenses, especially if they are more than 50% along with books of accounts, then you may opt for the first option.

Decide for yourself how sincere you want to be, in the quest to save on some tax!

Should you register for GST? Surely GST has created a lot of confusion in our lives, albeit short term. In the long run it is a more unified system of tax.

Exemption limit: If your freelancing income is within ₹20 lakhs, you needn’t register for GST. But if your income exceeds this amount you will have to get registered under GST and pay tax on the services provided. Further, if you are providing services out of your own state you will have to register for GST

Tax Rate: If you fall above the exemption limit the new tax rate is @18% under GST compared to 15% , which was the service tax earlier.

Disclaimer: The views and opinions expressed in this article are for informational purposes only. The authors and publishers are not responsible or liable in any manner for any actions you might take relying on the contents of this article.


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