Income Tax Return For Freelancers

By BankBazaar | July 18, 2018

Being a freelancer has its own benefits. Firstly, you get to be your own boss and don’t need to follow the daily 9-to-5 grind. A freelancer’s life is filled with creative freedom, but it comes at a price. You do not have the liberty of a fixed, regular monthly income from an organisation and you need to walk the extra mile to maintain your regular income.

Irrespective of whether you are a freelancing journalist, photographer, writer or a graphic designer, the common parameter that you need to give due importance to is filing your tax return. So, here’s everything a freelancer must know while filing his or her Income Tax Return.

Additional Reading: 5 Income Tax Changes For The Financial Year 2018-19

  • Calculate your freelance income:

You should start by calculating all your freelance income for the year, starting from 1st April to 31st March for the assessment year. This should include all the money that you received for your work in the financial year.

Your freelancing income should only include your earnings from your freelance work. Any other income like rental income or interest from a Savings Account should be added as a part of other income heads.

  • Deduct your freelance expenses:

All expenses related to your freelance work that you bear in the financial year can be claimed as deductions. These may include your electricity bills, phone bills and any travel expenses that you incurred for your work. If you work from an office, any rentals paid for the office, expenses towards stationery and office material, among other expenses, will come under this category. 

Additional Reading: 7 New Things The Income Tax Department Wants To Know About You

  • Don’t forget depreciation:

You may purchase assets like mobiles, cameras, computers, laptops or other equipment to furnish your day-to-day work. Since the equipment will generally benefit you for more than one year, you can avail its expense for more than a year. The total expense you incur to purchase your asset will, therefore, be divided over the lifetime of the asset instead of a single, one-time deduction. Keep in mind that you will have to show proof of purchase of all such assets if you want to claim depreciation on your assets.

  • Compute your total income:

Take all the calculations above into consideration and derive your final income. This will include your freelance income plus income from other sources minus the expenses and depreciation of assets for work.

  • Avail all available deductions:

As a freelancer, you can avail all tax deductions available under Section 80 of the Income Tax Act as available to salaried and self-employed individuals.

Check this: Your Income Tax Exemption Guide For The Financial Year 2018-19

TDS for freelancers:

Some of your clients may deduct TDS at 10% on payments made to you for your work. You need to get the details of all such TDS deductions by submitting Form 16A. You can request for a credit of the TDS amount if your final tax dues are below the threshold taxable limit.

Filing your Income Tax Return:

Many freelancers often wonder which ITR form is right for them to file their tax returns. Freelancers need the ITR 4/4S form to file their Income Tax Return. Keep all the receipts of your expenses and payments handy, as they may be needed if the Income Tax department seeks further information.

Income Tax Slabs:

General tax payers (including women) need not pay any Income Tax if their final computed income after deductions is below Rs. 2.5 lakhs. The tax rate is 5% for income between Rs. 2.5 lakhs to Rs. 5 lakhs, 20% for income between Rs. 5 lakhs and Rs. 10 lakhs and 30% for all income above Rs. 10 lakhs.

Tax obligations as a freelancer are quite simple provided you keep a regular receipt of all the income, expenditure, investments and other outflow and inflow of funds.

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