Freelancer Tax India: A Complete Guide to Taxation, ITR, TDS, and More

Date : 27/09/2023
Read: 3 mins

Navigate the complexities of freelancer taxation in India. Read this article to learn about tax exemptions, ITR filing, and more.

Imagine a world where you can work from anywhere, anytime. A world where you have the freedom to create, explore, and grow at your own pace. That’s the world of freelancing! Freelancers, just like salaried or business taxpayers, have tax obligations under the income tax laws. In this article, we delve into the world of taxation for freelancers, exploring topics such as tax exemption for the freelancer, income tax return for freelancers, and more.

Highlights:

Freelancers follow self-employed tax laws
File ITR by July 31, 2023
Claim deductions for business expenses.

Also Read: 6 Income Sources that do Not Attract Tax

Freelancers enjoy favourable taxation benefits that can significantly reduce their tax burden. By recognising freelancing as a business, you can leverage tax advantages. Keep meticulous records of deductible business expenses, explore presumptive income options, and plan advance tax payments to avoid penalties.

Freelancing income

Income earned by displaying your intellectual or manual skills is taxable as “Profits and Gains from Business or Profession”. Your gross income is the total of all receipts you receive while working.

Do freelancers pay income tax?

Freelancers follow the same tax laws as self-employed individuals. Residents with taxable income over Rs.2.5 lakh must pay taxes based on their tax bracket.

Should freelancers file income tax returns (ITR)?

They must file income tax returns by July 31, including income from all sources. They may have to pay additional tax if their individual tax slab is higher than the TDS rate. To avoid tax notices, ITR details must align with Form 26AS and AIS.

Are freelancers entitled to deductions?

Freelancers can deduct legitimate business expenses or use presumptive income under Section 44ADA. Common deductions include office rent, equipment costs, travel expenses, and professional fees.

Should freelancers deposit advance tax?

Freelancers must pay tax (in advance) if their tax liability on forecasted taxable income is greater than Rs.9999, net of TDS, in a financial year. Advance tax is paid in four instalments.

Should TDS be deducted for freelance workers?

When freelancers work for clients or platforms that deduct TDS (@10%), it's taken from their earnings, like salary, commission, rent, interest, or professional fees.