Tax on Indian Freelancers!

Freelancers are self-employed working groups. Work on various projects from the comfort zone of their
home, park, or café for different clients. We can identify the freelancers from various fields like website
designers, content writers, marketing, consultancies, web developer, photographer, social media
handlers, etc. most of the freelancers opt for this field because of their passion and interest in the
concerned field.
Unlike other business persons and salaried employees, freelancers are also liable to pay tax for their
income to the government according to the income tax act. Thus this comfort doesn’t come for free.
This article gives us point information regarding freelancer tax payments and its consequences.
Freelancers income –
As per the income tax act, any earnings made from the person’s intelligence and manual capabilities
earnings from a profession. This earning will be computed under the heading “profits and gain from
business or profession”. Throughout the carrying of the profession, the gross earnings whatever you
have earned will be accumulated with all receipts you received or provided to others.
What are its accounting procedures? –
To evaluate the taxable income of their expenses and income there are two techniques to present.
Firstly, accrual basis and secondly, cash basis of accounting technique. If chosen one technique then
throughout the years should follow the same. We don’t have such permission to change the technique
frequently, as a way to save from huge taxes or staying away from taxes.
Computations of taxable income –
Presumptive tax calculation: Under section 44ADA of the income tax act the income of freelancers can
be calculated on this basis by providing their gross receipts which should be below Rs.50 Lakhs.
Therefore taxable income = 50% of gross receipts. If one is covered under this section then it is not
necessary to audit and keep books of accounts.
Net taxable income from profit and loss account: If the income of freelancers exceeds Rs.50 Lakhs per
annum or if net profit is less than half of gross receipts, then freelancers have to maintain the books of
accounts. Therefore taxable income = gross receipts – expenses incurred for business.
TDS deductions for freelancers –
While submitting the ITR freelancers can assert the TDS deductions from their fee. From form 26AS they
can obtain the information regarding TDS.
Advance tax –
If the amount of tax payable is Rs.10000 or more than that then each freelancer needs to pay advance
tax every quarter. Initially, all the receipts should be combined with expenses along with TDS deductions and earnings from other sources like income from house property, interest incomes, capital gains, etc.
the amount should be calculated as per recent tax slabs then if the amount is more than Rs.10000 they
need to pay advance tax by the due date.
Filing income tax return (ITR-3 or ITR-4) –
Freelancers need to declare their taxes under the given ITR form.
● All their sources and sales
● Spending incurred by the sales
● Depreciation on properties
● Investments asserted as deductions
● Points to be noted down before submitting ITR –
● Gross receipts to be listed
Claiming expenses: Expenses in case of performing the freelancing work, expenses incurred throughout
the year, and expenses of legal regulations.

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