Income Tax For Freelancers

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  • 02 Feb 2023

You need to pay taxes if you are a freelancer too. That’s because the income you earn falls under the “Profits and Gains from Business or Profession” bucket.

1. Individual taxpayer

House Rent: You get tax deduction up to Rs 60,000 as House Rent Allowance (HRA) every year.

Health Insurance: Tax deduction up to Rs 25,000 for self, spouse and children. You can get further tax deduction of Rs 25,000 if your parents are senior citizens.

Educational Loans: There is no restriction on the claim amount. This claim can be made against the expenses incurred on higher education by spouse, children or self.

2. As a business owner

Office rent: You can claim rent if you have an office space. You can also get tax deduction if you work from your parent’s home. You can get this benefit by paying to your parents.

All you need is a legal agreement with them. But do remember that your parents will have to display this as part of their income. Office overheads: A business incurs a number of day-to-day expenses like electricity, telephone or internet bills, travel expenses, conveyance costs and so forth. These can be claimed as business expenses.

Salaries: Your business may require you to hire a few professionals. The salaries that you pay to your employees may also be claimed under business expenses.

You can file income tax for freelancers in India by following the below mentioned steps:

Step 1 - Calculate your gross income that you earned between April 1 of a year to March 31 of the next year.

Step 2- Deduct all the expenses incurred during a financial year.

Step 3 - Calculate the depreciation amount for that financial year. Photographers, for example, may calculate the depreciation on camera and writers may calculate depreciation on laptops.

The tax slab that income tax for freelancers in India have are:

  1. Annual income of less than Rs 2.5 lakh are exempt from paying tax.

  2. Those earning between Rs 2.5 lakh and Rs 5 lakh are taxed at 10%.

  3. Those earning between Rs 5 lakh and Rs 10 lakh are taxed at 20%.

  4. Above Rs 10 lakh income is taxed at 30%.

The correct tax returns form A freelancer needs to fill the ITR-4 form.

Do remember that if your income exceeds Rs 1 crore, it is mandatory for your account book/s to be audited. In such cases, you must file the ITR before September 31.

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