Freelancers and Their Taxes

Not everyone is comfortable with a regular job where he/she has to attend the offices for fixed hours of duty. Some people have their own plan which they can't execute while being in a regular job and also can't pursue other interest such as giving a quality time to their loved ones while on the other hand there are also other folks who just don't want to follow such routines. Here comes the option of freelancing where one can earn their livelihood while being with their loved ones or at their comfortable places.

However, when it comes to paying taxes to the authority, as per the income tax laws, Freelancers are too liable to pay the same like any other salaried or business taxpayers.

Tax on Freelancing income

As per the income tax act, any income that a person makes by exhibiting his/her capabilities and skills is taxable. Such income will be taxed under the category "Profits and Gains from Business or Profession". Your gross income will be the sum of all receipts you receive while practicing your profession.

Freelancers can calculate earnings and expenses in two ways

Freelancers can calculate their earnings and expenses in two ways. This is done on accrual and cash basis of accounting. The accounting method needs to be followed continuously for years adopt by freelancers. They are not allowed to change this method on a regular basis to save tax.

Under 44ADA

Under 44 DA, their income can be easily calculated on discretionary basis, provided his total receipts are less than Rs 50 lakh. If any of the self-employed falls under this section, it does not need to be audited by tax professionals.

Maintaining accounts

If the total receipts exceed Rs 50 lakh per annum, or the freelancers is under impression that his net profit is less than half of his total receipts, in that case he or she can maintain the books of accounts.

Many employers deduct the tax

It is often seen that many employers deduct TDS from freelancers' fees. However, they can claim the deducted TDS while filing the return. They can easily obtain the details of TDS deducted from Form 26AS because these details are available on in Form 26AS on the Income Tax Portal. In the said form, if the tax amount is Rs 10,000 or more, then the freelancer has to pay every quarter. The tax being paid for every quarter is known as advance tax.

All receipts are added up at tax time

All the receipts are generally added up while paying taxes, while on the other hand, the expenses and TDS are subtracted. Now earnings from other sources like profit from property, gain from interest, profit from investment etc. are also added. Now, after adding these, the amount is calculated according to the tax bracket.

Self-employed persons are required to file an ITR-3 or ITR-4. Details such as all cell types and their sources, expenses incurred for sale and advance tax as well as total taxes paid and depreciation of real estate must be mentioned on the ITR form.

Freelancers and GST

Freelancers' works also comes under the ambit of GST and 18 per cent of the same is applicable on most of the freelance services. It doesn't matter whether the business is online or offline, like any other businesses or businessman, freelancers too have to register under the GST. If the total amount of services exceeds Rs 20 lakh per annum.

Also read:Per Capita Income of 9 States Falls by 6 Percent

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