The best thing about freelancing is that it doesn’t require any age limit and you can earn well for your own. This is the reason the hype is growing around it and it’ll only rise in near future. A plethora of opportunities are available to a freelancer in the fields like blogging, photography, software development, teaching, graphic designing where one can earn quite good and is not bound to attend office. Many freelancers usually work for short-term projects. Though freelancing is a rewarding career opportunity, a large fraction of people still shy away from it due to the many myths and misconceptions around income tax obligations for them.
Guide to Tax Filing for Freelancers
Whatever profession you are pursuing as a freelancer, the one thing that you need to be very careful about is filling your tax return. So, we’ve compiled a list of everything that a freelancer must know about tax filling. Calculate Your Actual Income To start with, you should calculate all your income that you have earned from your work in a particular financial year. The circle starts from April 1st to March 31 for a given assessment year. Here you can only add the income that you received from your freelance work and no other income including rental income, interests on saving account etc. You can add them in other income heads. Exclude Your Freelance
Calculate Your Actual Income To start with, you should calculate all your income that you have earned from your work in a particular financial year. The circle starts from April 1st to March 31 for a given assessment year. Here you can only add the income that you received from your freelance work and no other income including rental income, interests on saving account etc. You can add them in other income heads. Exclude Your Freelance
To start with, you should calculate all your income that you have earned from your work in a particular financial year. The circle starts from April 1st to March 31 for a given assessment year. Here you can only add the income that you received from your freelance work and no other income including rental income, interests on saving account etc. You can add them in other income heads.
Read About: Why E-filling Income Tax is Your Instant Savior
Exclude Your Freelance Expenses
All the expense that you make towards securing your business is not required to be included in your gross annual income. Your tax will be counted on your profit only. These expenses include phone bills, utility bills, travel expenses, rental paid for the office; if in case you work from an office, stationery expenses etc.
Don’t Forget Depreciation
The expenses that you have made on electronic gadgets can be availed for more than a year, as the asset that you bought will generally benefit you for more than one year. The total expense will be divided over the lifetime of the asset, instead of a single time deduction. To claim these expenses incurred, you are required to produce the bills.
Include Income from Other Sources
Needless to say, Tax Filing for Freelancers is mandatory whatsoever. This category includes all the income that you have earned apart from freelance work, such as:
- Rental return
- Income collected from saving accounts, FDs as interest
- Earnings from trading in shares, equity, debentures
- Income for extra hours that you work
- All kinds of other income
Read About: Common Mistakes to Avoid What Not To Do When E-Filing Your Income Tax Return
Benefits of Paying Income Tax
- Tax return is your valid proof of income, while only the income that you have disclosed in your income tax return is considered as your true income.
- It will help you in apply for a loan from any bank, because it is mandatory to show your tax return if you come under the tax slab on Income Tax Department.
- By paying your income tax, you are contributing towards government developmental activities. The Government incurs these expenses through taxes collected from the common people.
- By paying tax you are justifying your earnings
Being a freelancer has its own perks. While enjoying the full freedom of pursuing your passion, you should not forget to fulfil the legitimate responsibilities. Tax Filing for Freelancers is also mandatory and recommended too. Paying tax is one of them that you can’t deny. Filling your Income Tax is not a rocket science, but a few steps of awareness is all that you need.
Read About: Easiest Way for E-Filing Income Tax Returns in India
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