How to save Income Tax if you are doing freelancing with a regular job
July, 29th 2021
In the present era, especially in the wake of first and second coronavirus waves, undertaking jobs on a freelance basis has become one of the most promising patterns of working/work culture. So, if you are among those doing freelancing with a regular job, here are a few best options for saving income tax. Amit Gupta, MD, SAG Infotech, shares his knowledge citing various perspectives and specifically from the tax perspective on how people doing freelancing with a regular job can save some taxes.
"Freelancing connotes a situation wherein an individual has been temporarily hired to undertake and complete the specific assignment and instantly get paid on completion and submission of the assignment.
In such aforesaid cases of freelancing, An individual is not an employee of the company and so is not placed on its payroll. He is not entitled to get perks (like Provident Fund) as mandated by the Companies Act. An individual is not required to go to the office. He can complete the assignment at leisure (as per pre-agreed guidelines) from any place that is convenient to him.
Any income that is earned by displaying manual or intellectual skills comes within the purview of income from a profession as per prevalent income tax laws of India.And such income shall be taxable as “Profits and Gains from Business or Profession”. His gross income shall be the sum of all the receipts that he gets while carrying out his profession. To cull the information, the document taken into consideration is a bank account given the condition that an individual has received all his professional income through the banking channels.
Expenses Allowed as Deduction
As per the Income Tax Act 1961, freelancers can deduct those expenses that they have incurred to carry on the job from their income. And This could be anything that is directly related to the job of the freelancer ranging from the office furniture to expenses on visiting the clients.
Prerequisites to claim the deduction of expenses from the Freelancing Income
➔ The expense must have been incurred during the year in which tax is to be paid.
➔ The expense must have been spent fully and exclusively too for the purpose of carrying on the freelance income.
➔ The income must not be illegal.
➔ The expense incurred must not be personal expenditure or capital expenditure of the freelancer
Taxes payable for a freelancer
If the total tax liability during a particular financial year amounts to Rs 10,000 or more, then the taxpayer is required to pay the taxes every quarter which is called advance tax.