Taxpayers who earn a living as a freelancer have the option of deducting expenses spent while working as a freelancer from their income.
New Delhi: With the advancement of technology, an increasing number of people are becoming interested in freelancing. However, there is still some uncertainty about the tax regulations that apply to freelancers and their earnings.
For tax purposes, freelance income is classified as ‘earnings and gains from company or profession.’ While this may seem surprising to some, it is because money is viewed as earnings from self-employment.
The following are the tax rules that will apply to freelancers’ earnings in India:
Filing ITR
A freelancer, like any other individual, must file an income tax return each year. They can, however, only select ITR-3 or ITR-4. Another thing to keep in mind is that if a salaried employee earns an income from freelancing outside of their employment, they will be required to fill out an ITR form that is only available to people having income from business or profession.
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Taxpayers who earn a living as a freelancer have the option of deducting expenses spent while working as a freelancer from their income.
Rent for the property used to do the work and any repair costs incurred on such property, repairs performed on electronic equipment such as a laptop or personal computer, office expenses such as purchasing supplies, internet bills, and phone bills, expenses related to travel undertaken for the work, conveyance bills of commute to office/co-working space, and depreciation value of equipment such as a laptop used in this regard are all deductible expenses.
However, freelancers are not eligible for the Rs 50,000 standard deduction when submitting ITR. Salaried taxpayers who additionally did some freelancing during the fiscal year are eligible for the standard deduction.
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Tax calculation for freelancers
Most employers deduct TDS from freelancer payments. Remember to include the TDS when calculating your tax liability.
If the net taxable amount exceeds Rs 10,000, freelance income earners are required to make an advance tax payment every quarter before the due date.
If the total tax on computation exceeds Rs 10,000, freelancers must pay interest on it.
