Freelance work with a regular job? You can always claim the standard deduction of Rs 50,000


Freelance work with a regular job? You can still claim a standard deduction of Rs 50,000

New Delhi: Self-employment income comes into play when you’re hired to work on specific assignments for a specific length of time and get paid for the work when it’s completed and submitted. You will not be an employee of the company or placed on their payroll.

Freelancers cannot claim the standard deduction of Rs 50,000 available for an employee. However, if you have had a full-time job, you can claim the standard deduction for salary income.

One can always claim the standard deduction from their element of salary. Even if someone has had a job for a month during a fiscal year, he can still claim the full amount of Rs 50,000. ITR-3 and ITR-4 have two separate heads of income for salary and independent income. “Under the heading salary, we can declare the salary income and claim the deduction of Rs 50,000.

Total taxable income and tax payable by freelancers: here’s how to calculate

One can reduce their tax expenditures by making full use of the deductions provided for in section 80. Section 80C of the Income Tax Act provides tax relief on certain expenses and encourages taxpayers to save for the future ( by granting deductions on investments in financial products).

Net taxable income = Gross taxable income – Deductions

You can reduce your taxable income up to Rs 1.5 lakh by claiming a deduction for the amount actually invested / spent under this section. If you are under the age of 60 and your net taxable income is greater than Rs 2.5 lakh, you are liable for tax on your income.

Taxes payable for a freelance writer:

If the total amount of tax payable in a particular financial year is 10,000 rupees or more, then the taxpayer is required to pay the taxes quarterly, which is called withholding tax.

How to calculate withholding tax?

Add up all of your total receipts, then figure out your total income. Subtract expenses that are directly related to your job. Add income from other sources, for example, home ownership or a savings account. Find out which tax base you belong to, then calculate your tax owed. Remember to deduct the TDS.

If the tax due exceeds Rs 10,000, you are required to pay withholding tax before the due dates. Penalties for non-payment of the deposit If the deposit is not paid by the self-employed person, the interest according to articles 234B and 234C is applicable.

Freelancers can save tax by claiming the expense deduction from freelance income

Prerequisites for claiming the deduction of expenses from Income Freelancing:

  • The expense is for self-employment performed on
  • It has been spent entirely and exclusively for the purpose of your work
  • It is incurred during the tax year
  • This is not a capital expenditure or a personal expense of the freelancer
  • He is not engaged for purposes which constitute an offense or which are prohibited by law

Expenses authorized as deductions: In accordance with the Income Tax Act 1961, freelancers can deduct from their income the expenses they incur in carrying out their work. It can be anything directly related to the freelance writer’s job, from office furniture to expenses related to client visits.

Expenses that can be deducted from income:

  • To rent: If you rent real estate for the performance of your work, the rent paid can be deducted.
  • Repairs undertaken: If you have agreed to pay for repairs to the leased property, these repair costs may be deducted. If you own the business building and make repairs, those can also be deducted. Any repairs to your laptop, printer and other equipment can also be deducted.
  • Depreciation: When you buy a fixed asset, the benefits of such an asset should generally last more than a year. These assets are capitalized and not expensed when purchased. Each year a small portion of its cost is expensed and may be reduced from your income. This expense billed each year is called depreciation. The type of assets, the depreciation methods and the depreciation rates to be applied are set by the Income Tax Act itself and these should be applied.
  • Office expenses: Expenses incurred to perform your work such as the purchase of a printer, office supplies, your monthly telephone bills, your Internet bills and transportation costs can be deducted.
  • Travel cost: The cost of travel to meet your clients inside or outside India is allowed as a deduction.
  • Meal, entertainment or hospitality expenses: It can be claimed when you set up meetings with clients, take your clients out for dinner or other outings, and the money was spent only with the intention of getting new business or keeping existing business.
  • Local taxes and insurance for your own commercial property
  • Domain registration and apps purchased to test your product are also allowed as expenses.

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