Procedure to file income tax for freelancers
Are you a freelancer and struggling with filing ITR in India? Then you should know that It’s a little harder for freelancers and consultants because they earn money from multiple sources and usually have more than one client. Unlike salaried employees have a constant guide through the organizations they work in. But do not worry as filing income tax for freelancers in India is applicable and guided by the government.
Who is considered a Freelancer?
A freelancer is a self-employed person who has the freedom to choose their work, projects, and companies with which they want to be associated. Freelancers must also pay income tax on the income earned from their projects or freelancing work. Freelance consultants and professionals include software developers, blog consultants, content writers, tutors, web designers, fashion designers, and others.
Freelancers in India can save tax by claiming deductions and exemptions provided by the Income Tax Act. Business expenses such as rent, utilities, and office equipment, as well as investments in tax-saving instruments such as Public Provident Fund and National Pension System, are examples of common deductions and exemptions that freelancers can claim.
Applicable ITR for Freelancer
According to the Income Tax Act, any income generated by an individual through the application of their manual or intellectual skills is considered ”profit and gains from business and profession”. Freelancing is considered a business and a profession by the Internal Revenue Service.
Every freelancer must file either ITR 3 or ITR 4 depending on your situation. Because the freelance income will be considered business or professional income. Professionals who choose the presumptive taxation scheme, on the other hand, can declare 50% of their gross receipts as income by filing ITR-4.
ITR Deductions for Freelancers
Freelancers can deduct their earnings under Sections 80C to 80U. As a result,
freelancers can claim the following deductions when filing their ITR:
- Section 80C: Deductions for various investments such as life insurance premiums, ELSS, payments made to the principal sum of a home loan, SSY, NSC,SCSS, payments made to pension plans, NPS payment, and so on.
- Section 80D: Medical insurance premium deduction
- Section 80E: Education loan interest
- Section 80EEA: Home loan interest for first-time home buyers
- Section 80G: Income tax deductions for charitable contributions
- Section 80GG: An income tax deduction for paid house rent
- Section 80TTA: Savings account interest
- Section 80U: Deduction for disabled people
Steps to file Income Tax Return as a Freelancer
- Step 1: Determine the gross income from April 1st to March 31st of the current fiscal year.
- Step 2: Determine the expenses and deductions that can be claimed for the fiscal year in question.
- Step 3: Log into the Income Tax e-Filing portal and select the appropriate form, either ITR-3 or ITR-4 and fill out all of the required details on the form.
The tax on freelancers’ income in India is determined by their taxable income. During the fiscal year 2022-23, freelancers must pay the following taxes: Rs. 2.5 lakhs and above No tax Between Rs. 2.5 lakhs and Rs. 5 lakhs: 5% of the amount over Rs. 2.5 lakh to Rs. 7.5 lakh: Rs. 12,500 plus 10% of amounts above Rs. 5 lakhs Rs. 37,500 plus 15% of the amount exceeding Rs. 7.5 lakhs 10 million to 12.5 million rupees: 75,000 rupees plus 20% of the amount above 10 lakh rupees 12.5 lacks to 15 lakh rupees: 1.25 lakh plus 25% of the amount over 12.5 lacks Above Rs. 15 lakhs: Rs. 1.87 lakhs plus 30% of the excess amount.
Filings First make it simple for freelancers to file ITR. Filings First has pricing plans that are affordable for freelancers and independent consultants. We not only make it easy, but we also help you with all types of legal services for freelancing in India.