The Sentinel

Freelancers and Their Taxes

15 Nov, 2021
Freelancers and Their Taxes
Not everyone is comfortable with a regular job where he/she has to attend the offices for fixed hours of duty. Some people have their own plan which they can't execute while being in a regular job and also can't pursue other interest such as giving a quality time to their loved ones.
Tax on Freelancing Income
As per the income tax act, any income that a person makes by exhibiting his/her capabilities and skills is taxable. Such income will be taxed under the category "Profits and Gains from Business or Profession".
Freelancers Can Calculate Earnings and Expenses In Two Ways
Freelancers can calculate their earnings and expenses in two ways. This is done on accrual and cash basis of accounting. The accounting method needs to be followed continuously for years adopt by freelancers. They are not allowed to change this method on a regular basis to save tax.
Under 44ADA
Under 44 DA, their income can be easily calculated on discretionary basis, provided his total receipts are less than Rs 50 lakh. If any of the self-employed falls under this section, it does not need to be audited by tax professionals.
Maintaining Accounts
If the total receipts exceed Rs 50 lakh per annum, or the freelancers is under impression that his net profit is less than half of his total receipts, in that case he or she can maintain the books of accounts.
Many Employers Deduct The Tax
It is often seen that many employers deduct TDS from freelancers' fees. However, they can claim the deducted TDS while filing the return. They can easily obtain the details of TDS deducted from Form 26AS because these details are available on in Form 26AS on the Income Tax Portal.
All Receipts Are Added Up At Tax Time
All the receipts are generally added up while paying taxes, while on the other hand, the expenses and TDS are subtracted. Now earnings from other sources like profit from property, gain from interest, profit from investment etc. are also added.
Freelancers And GST
Freelancers' works also comes under the ambit of GST and 18 per cent of the same is applicable on most of the freelance services. It doesn't matter whether the business is online or offline, like any other businesses or businessman, freelancers too have to register under the GST.