Are you a freelancer? Here’s how your income will be taxed

Are you a freelancer? Here’s how your income will be taxed

New Delhi: As people stay put at home, a little more time is saved on the day-to-day shuttle meaning a greater chance to look for freelance jobs in 2020. It is said that India has one of the largest workforces in the world. In the current situation where people are losing their jobs due to the economic slowdown induced by the nationwide lockdown and then followed by sporadic lockdowns, due to the outbreak of the pandemic, has led people to take up freelancing as their primary source of income.

Here’s how your income will be taxed

Income as a freelancer is taxed under the head “Profits and Gains from Business or Profession” whereas the salaries are taxable under the head “Salaries”.

As a salaried person, they are allowed to claim up to Rs 50,000 as a standard deduction to take care of expenses incurred by you against their salary income without having to submit any documentary evidence. There is no similar provision for claiming a standard deduction for a consultant against income received from freelancing.

Rishabh Singhal, Partner, Singhal & Agarwal, CA firm said: “Freelancing income is taxable as ‘Profits and Gains from Business or Profession’. All the receipts received by a person in the course of his freelance profession would form his gross turnover. The expenses incurred by a freelancer for the purpose of his profession are deductible to calculate the taxable income.”

Singhal further explains, “Say, Raj is a freelance photographer and earns approximately Rs 70,000 per month. The expenses incurred by Raj in relation to his profession, like repairs and maintenance of his equipment, salaries paid to assistants, transportation, the expense incurred on client meetings, etc. would be deductible from Rs 70,000 to calculate his taxable income. Also, he is eligible to claim depreciation on equipment/capital assets used by him for his work, like cameras, drones, etc.”

Freelancers are also allowed to claim expenses on an actual basis which have been incurred by you in connection with your work as a freelancer and which are not personal in nature. These may include expenses such as internet expenses, mobile expenses, printing and stationery, conveyance expenses, etc. Freelancers may also claim a small part of the home rental (if rented) and electricity expenses related to it. So, if they are living in a rented place, in that case, you can claim the same under section 80GG up to Rs 5,000 per month. The net income arrived at is taxed at the slab rates applicable to you. However, some capital gains are taxed at a flat rate.

In case you have any other income like interest, dividends, capital gains, etc. they are taxed under the respective head and then all the incomes are added up. In addition, if you have taken a home loan, interest paid on such a loan can also be claimed within specified limits while aggregating your income from all the sources.

From the aggregate of the income from all the sources, you are allowed to claim various deductions the same way a salaried can claim, like deductions under Section 80 C, 80CCD, 80D, 80TTA, etc.


Source: Timesnownews

Flexgigzz Editor

Author Since: June 19, 2020