Established in the year 2016, we are an emerging chartered accountancy firm based in Bengaluru rendering comprehensive professional services which include audit, management consultancy, tax consultancy, accounting services and secretarial services.

Quote of the Day: "Greatness comes by doing a few small and smart things each and every day... it comes from taking little steps, consistently"

Sunday, 25 June 2017

Taxing Freelancing Income

Who is a freelancer?
Freelancer is a person who is self-employed, and have the freedom to choose their projects and companies they would like to be associated with. Some of the common profession for freelancing are: a writer who has the ability to submit their work to many different places, without being tied to any one company, a software developer, a photographer, an interior decorator, fashion designer, a blogger, a gym instructors etc. Freelancers don’t earn salary but run a business. The benefit that a freelancer gets while preparing tax details is that expenses of a freelancer are allowed to be deducted from freelancer’s income.
Income of Freelancer includes:
The sum of all the money one received against the work done is called gross receipt. If your receipts are received in a bank account, then sum them up from your bank account statement. If you have received some money as loan from relatives or friends than it does not count as your income. Payment received towards freelancing work is considered as income from freelancing. Income received from other sources such as interest on FD, rent from property are not included in the freelancing income. Such incomes are part of other heads of income in your return.

How is Freelancing Income calculated?
There are two methods to calculate the Income of the freelancer.
1.    Accrual Basis of Accounting- Here, the income is accounted when it’s due.
2.    Cash Basis of Accounting- Here, the Income is accounted only after it’s actually received.

How’s the Tax calculated on Freelance Income?
When it comes to the taxable Income in Freelance Income, here’s how it’s calculated:
[Net Taxable Income = Gross Taxable Income – Deductions]
You’re liable to pay tax if your age is less than 60 years and your total taxable income is more than 2,50,000.
Now, if the total Tax Liability exceeds Rs.10,000, the taxes are supposed to be paid every quarter.

Freelancing Expenses allowed as a deduction:
Freelancers can deduct expenses incurred exclusively towards the freelancing work. This could be anything from office rent, furniture or expense on visit to client. Personal expenditure of freelancer is not allowed as deduction. For example: If you are an app developer, you can deduct expenses on testing app and software purchase. If you have certain expenses like a cost of high speed internet connection that you use both for personal and professional purpose you can allocate a reasonable per cent to your freelancing work and deduct them.
Following are the Expenses allowed as a deduction:
·         Rent Expenses
·         Electricity Expenses/ Telephone Expenses/ Internet Expenses
·         Petrol/ Diesel Expenses
·         Travel Expenses relating to freelancing work
·         Local taxes and insurance of your business property
·         Meal, entertainment or hospitality expenses incurred on client
·         Depreciation on capital asset purchased for work (laptop, printers, car)
·         Office Expenses
·         Any other expenses incurred for the purpose of earning revenue
All payments in excess of Rs.20,000 must be made either by an account payee cheque or a demand draft. Keep a record of all your expenses and store all your expense receipts.

Deductions allowed under section 80C to 80U
Just like any salaried person, a freelancer can claim all the deductions listed under section 80, by fulfilling the conditions listed therein. For example if you have made an investments to PPF, NSCs or paid life insurance premium, you can avail deduction under section 80C.  In case of any medical premium paid by you, you can claim deduction under section 80D.
TDS for Freelancers
Government of India has made regulation by which an individual/company paying an individual or another company for services offered needs to deduct TDS. TDS in case of freelance should be deducted @ 10%. Individual/company from India having valid Tax Deduction Account Number(TAN) can only deduct TDS from your earnings. Unless your client has a TAN they are not eligible to deduct any TDS from your earnings. In many cases companies/individuals from outside India won’t have TAN, no TDS is applicable. In that case, depositing Advance Tax becomes freelancers’ liability. If any of your client have deducted TDS on payments made to you, you can take credit of this tax deducted from your final tax dues. If in a given financial year, your income does not exceed the basic exemption limit then deducted TDS from earnings can be claimed as refund from Income Tax Department. Since TDS was deducted at source without knowing how much your total income from the year would be, you can become eligible for refund in case the total TDS exceeds the amount of your tax liability.

What are the penalties for non-payment of advance tax?
Interest under Section 234B and Section 234C is applicable when you don’t pay your advance tax.
To avoid Interest Penalty under Section 234B and 234C –
Pay advance tax when your tax liability in a year is Rs. 10,000 or more
Advance tax payments done uptil 31st March of the year should be 100% or more of your total tax payable. Section 234B applies when Advance Tax has not been paid and since Advance Tax is payable as per dates set out by the IT Department, 234C is applicable when interest is not paid according to these due dates.
Need Expert Assistance in filing your returns? Please contact us at: info@preethamandco.com or Fill in the Work Request Form Click Here

10 comments:

  1. That's really awesome blog because i found there lot of valuable Information. we provide Hire Freelance Logo Designers at affordable prices. for more info visit our website.

    ReplyDelete
  2. synmac tax consultant in Delhi
    doing company registration in Delhi,GST registration in Delhi,Tax consultant in Delhi...
    if you have any requirement GST,ITR
    click the below link...

    tax consultant in Delhi
    company register in Delhi
    GST register in Delhi
    tax consultant in Delhi

    ReplyDelete
  3. Thanks for sharing such an informative.
    if you required any TAX and GST Consultants, plse visit
    synmac consultants in BANGALORE | CHENNAI | DELHI
    SYNMAC.IN | GST CONSULTANTS IN BANGALORE | GST RETURN FILING IN BANGALORE | TAX CONSULTANTS IN BANGALORE | COMPANY REGISTRATION IN BANGALORE | GST REGISTRATION CONSULTANTS IN BANGALORE

    ReplyDelete
  4. the information you have updated is very good and useful,plse update further. if you required any info regarding TAX & GSTR please visit
    Accounting Services in bangalore|Auditing Services in bangalore
    |Trademark Registration|Payroll Processing
    |GSTR for finance|

    ReplyDelete
  5. Thank you for writing so beautifully. There will be a lot of visitors. And to know more, click Blog commenting thanks.

    ReplyDelete
  6. Thank you so much for sharing this worth able content with us. The concept taken here will be useful for my future programs and i will surely implement them in my study. Keep blogging article like this.
    Expense Reports

    ReplyDelete
  7. This comment has been removed by a blog administrator.

    ReplyDelete
  8. Great share!

    I love this bucket list and you know you're right. sand blasting machine manufacturer. We all have the same amount of hours in a day so put them to good use. We all have to start somewhere and your plan is perfect. I understand the way of the attractive to the customer with the products sand blasting machine.

    Sand blasting machines like shot blasting machine, sand blasting machine, and grit blasting machines, Wood Working Machinery Dust Extraction unit, Abrasive Blasting Media and various others. Keep it works and share with us your latest information. My time will come but I know I'm on the right path.

    They are similar to small communities that you own - check them out if you haven't already. It's all got a lot better than before!t. Value that list of thousands but I'll get there.

    Thanks for sharing. Have a nice week ahead.
    Visit at : www.gritblast.co.in

    Also check
    portable shot blasting machine
    portable sand blasting machine
    sand blasting cabinet
    grit blasting cabinet
    shot blasting cabinet

    Regards,
    Ankit Manawat.

    ReplyDelete
  9. Su artículo contiene palabras valiosas como lenguaje fundamental. Un compromiso de agradecimiento es compartir esta distribución descuidada. desarrollador de aplicaciones moviles

    ReplyDelete