Under the head of “Profits and Gains from Businesses or Professions”, income from freelancing has to be reported.
Even the traditional job holders are seen freelancing on the side in all industries including education, sales, delivery, data processing, and IT, due to the unmatched versatility.
Under the Income Tax Act, the supplemental income earned through independent work had to be relevant to tax.
A freelancer’s income is assessed value to be no different than that applicable to a salaried individual, the standard deduction allowed from salary on income from freelancing.
Although, a multitude of expenses in reality incurred in a fiscal year in connection to the work undertaken can be claimed as deduction while computing taxable income.
For occurrence, rent paid in set by can be claimed as the deduction of a property used for carrying out work, depreciation on eligible capital assets, conveyance expenses, expenses incurred towards office supplies, internet bills, monthly telephone bills, etc.
Meanwhile, insurance of such expenses is for personal and professional purposes can have only a proportionate amount attributable to professional uses claimed.
Individuals obtaining income from a profession or business are in need to evolve the return of income in ITR3.
By the way, when the options of the presumptive taxation were chosen, except the same form shall apply to freelancers earning from independent work.
All persons generally engaged in profession or business including freelancing are obligated to maintain regular books of accounts and get them audited to correctly ensure the taxable income.
Hence, freelancers have a potion for the scheme if their gross receipts do not exceed 50 lakhs.
Under section 234C, adoption of an assumptive taxation scheme entails payment of the entire amount of advance tax on or before the 15 March of the FY.
Nevertheless, the choice for concessional tax regime is with effect from FY 20-21, an individual can opt for an alternate (CTR) concessional tax rate regime wherein offered the income can be taxed at a lower slab rate provided to the certain exemptions, stipulated deductions, unabsorbed depreciation, and brought forward losses are preceding.
A taxpayer can’t choose on the business or professional income to pay tax from among in every financial year. They only have one option to do so.
Once this option of switching back is unexercised, then the individual can’t choose the new tax regime in any of the future years.
A freelancer shall also have only one opportunity to switch over, which he will have to continue paying taxes under the chosen governance until freelancing work intervenes to be undertaken.
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