new Delhi. In the changing work environment after the pandemic, the demand for freelancers is increasing in every field. If you earn a lot by working as a freelance, then this income also comes under the tax net. In this tax both Income Tax and GST are applicable. The last date to file ITR for 2020-21 is March 31, 2022.
According to the Income Tax Act, income earned on the basis of one’s intellectual or physical abilities is considered as income derived from a profession. In tax parlance, income from freelance jobs is treated as ‘Profits and gains from business or profession’. This is because such income is seen as income from self-employment. Know how income from freelance is taxed…
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A freelancer can opt for ITR-3 or ITR-4 only for filing Income Tax Return (ITR). If a salaried person has earned any income from freelancing outside his job in a particular financial year then he has to opt for ITR form eligible for those having income from business or profession. Like business income, taxpayers with freelance income also have the option of deducting such expenses from their income, which are incurred for doing freelance work.
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You can claim tax deduction here
Deductible expenses include rent on property that you may have acquired for work. The cost of any repairs done by you on such property, any repairs done on electronic equipment like laptops or personal computers that you have for work, internet bills and phone bills etc.
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In this situation, you can claim standard deduction
Apart from this, you can also claim deduction for depreciation of equipment like laptops used. Freelancer is not allowed to claim standard deduction of Rs 50,000 while filing ITR. However, if you have done regular job and freelance work in any financial year, then you can claim standard deduction on salary income.
This is how tax will be calculated
The taxpayer should determine his income from different sources in a financial year and deduct the expenses and eligible tax breaks to arrive at the tax payable. Most of the companies (employers) deduct TDS on payments made to freelancers, so include TDS while computing tax liability. People with freelance income have to pay advance tax every quarter within the due date, when the net taxable amount is above Rs 10,000. If you calculate the total tax, which is more than Rs 10,000, then you will have to pay interest on it as per the Income Tax Act.
Tags: income tax, ITR, ITR filing
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