Income tax for freelancers is the tax that they need to pay on their earned income. Freelancers form a significant part of India's economy. Just like all other individuals who earn money, freelancers are also required to pay taxes on their income. Here is a comprehensive guide on filing the Income Tax Return (ITR) for freelancers.
Taxation for salaried employees is well-known and often discussed, but it can be daunting for freelancers. However, with a proper guide, the process is straightforward and simple.
Freelancers are people who work for themselves and make money through their skills. According to the Income Tax Act, they have to pay taxes on this income under the category "Profits and Gains from Business or Profession.”.
For the financial year 2022-23, freelancers need to file their ITR before the deadline of July 31st, 2023. If you don't want to do accounting, you can choose to file taxes under the Presumptive Taxation Scheme - section 44AD of the Income Tax Act, as long as your total income for the year is less than ₹50 lakhs.
If you're a freelancer, you can save money on taxes by using sections 80C, 80D, 80E, 80EEA, 80G, 80GG, 80TTA, and 80U. These sections let you save on things like investments, interest you pay on home loans, and education loans.
Use ITR-3 or ITR-4 to file freelance income tax. File taxes online at Income Tax e-Filing Portal. Choose a form, fill in details, and pay tax from home.
Depending on your income and the tax regime you choose, the following are the tax rates:
1. Calculate your earnings: Add up all the money you made from freelancing between April 1st and March 31st of the financial year.
2. Keep track of your expenses: Write down all the eligible expenses and deductions that you can take off from your earnings.
3. Choose the right form: Pick the right form (ITR-3 or ITR-4) based on your earnings and the type of freelancing you do.
4. Log in to the Income Tax e-Filing portal: Sign in to the Income Tax e-Filing portal to access the correct form and fill it out carefully.
5. Provide accurate information: Make sure you enter all the right details in the form, including your earnings, expenses, and deductions.
6. Check and submit: Look over the form for any mistakes or missing information. Once you're sure it's accurate, submit the form electronically on the e-Filing portal.
7. Keep your documents: Save all your invoices, receipts, bank statements, and other relevant papers to prove your earnings and expenses.
8. File your taxes on time: Submit your tax return by the deadline for the financial year to avoid any fees or extra charges.
Remember, if you have any questions or problems, talk to a tax expert or a chartered accountant to make sure you're following the income tax rules correctly.
Freelancers in India are required to pay income tax on their earnings and can file their Income Tax Return (ITR) before the deadline of July 31st, 2023. Deductions can be made using sections 80C, 80D, 80E, 80EEA, 80G, 80GG, 80TTA, and 80U. Tax rates vary depending on income and tax regime chosen. There have been many landmark changes in income tax slabs introduced in this year’s budget, and you can capitalise on those by choosing the tax regime that’s right for you.
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Freelance income tax is the tax paid by freelancers on the income they earn.
Freelance income is taxed under "Profits and Gains from Business or Profession".
You do not need to pay freelance income tax if you earn less than ₹2,50,000 per year.
You can claim deductions for things like investments, medical insurance premiums, interest on home loans, and education loans.
Keeping track of your earnings and spending, on your own or with an accountant, can help you stay organised when filing taxes as a freelancer. You can automate this using Fi Money’s expense categorising feature.