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Here is what freelancers should know about filing ITR return Income Tax Return for AY 2020-21
October, 24th 2020

Compared to salaried individuals, income tax rules are slightly different for consultants or freelancers. A person who is working as a freelancer or a consultant cannot claim some deductions that are available to the salaried person.

A freelancer is a person who is self-employed or not committed to a particular employer for the long-term. Freelance workers are sometimes represented by a company or a temporary agency that resells freelance labour to clients, while others work independently or use professional associations or websites to get work.

Compared to salaried individuals, income tax rules are slightly different for consultants or freelancers. A person who is working as a freelancer or a consultant cannot claim some deductions that are available to the salaried person.

Freelancers are allowed to claim their actual expenses if these are done in connection to their work.

 

There is no difference in the income tax rates at which a freelancer or a consultant is taxed. The same income tax rates are applicable to a freelancer or a consultant as a salaried individual.

 

5 key points that explain income tax rules for a freelancer:

- Income as a consultant is taxed under the head "Profits and Business or Profession".

- Freelancers cannot claim the standard deduction of Rs 50,000 as applicable to salaried individuals.

- Consultants can claim work-related expenditure incurred on an actual basis. They are not allowed to claim any expenses which are personal in nature.

- Consultants can claim a very small portion of house rent and electricity expenses. Freelancers or consultants can claim depreciation on computers and printers used for their work.

- Deductions under Section 80C, 80CCD, 80D, 80TTA etc are available to individuals working as a consultant or a freelancer.

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