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Tax Filing for Freelancers – Simplified

Updated on :  

08 min read.

Salaried individuals have it relatively easy when it comes to filing their income tax returns. The company HR department sends Form16, reminders and guidelines about tax filing deadlines as well as tax saving obligations. However, it’s slightly more complicated for freelancers and consultants as they have income from multiple sources and usually have more than one client. In this article, we have tried to simplify the concepts and the process for freelance professionals.

Freelancer from a tax purview

When you earn from an intellectual or manual skill, your income comes under Profits & Gains of Business & Profession. From a tax perspective, you have to think of yourself as a businessperson. You have clients the way a business has customers and you have to pay taxes on the income earned from different clients. A list of professionals that qualify as freelancers is detailed here.

TDS is deducted from your payment

Every professional service rendered by you is subject to 10% TDS (Tax Deducted from Source) under Section 194J of the Income Tax Act. You can claim a refund of TDS as well, just the way your salaried friends do. To read more about how to claim and check your TDS refund, click here

Claiming expenses reduces tax liability

You may claim the expenses you incur towards your work to reduce your tax outgo. These expenses come under the heads of rent, repairs, depreciation, office expenses, travelling expenses and even meal, entertainment and hospitality expenses. Each of these heads have been further explained here.

The ITR-4 form applies to you

The income tax form that freelancers and consultants need to fill out and submit is either ITR-3 or ITR-4. ITR-3 applies to income from business or profession. From AY 2017-18 (FY 2016-17), professional can opt for presumptive taxation and declare 50% of their gross receipts as their income by filing ITR-4.

ClearTax offers affordable pricing plans for freelancers and independent consultants. Not only do we make it hassle-free, but also enables you to deduct our fees from your income and claim it as an expense.

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