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How to File ITR for Freelancer and Application of ITR Filing

India ranks as the fastest-growing freelance market in the world. Freelancing is now more fruitful as income tax for freelancers in India is very lucrative with many favourable tax rules and savings opportunities. Just like any other person earning income has to pay tax, the freelancer has to pay tax and file an income tax return according to IT law.

The process of filing income tax returns for freelancers in India is slightly different from that of salaried individuals. In this article, we will learn more about tax implementation for freelancers, the freelance income tax process and ways to save tax.

What is 'freelancing' according to income tax rules?

Under Indian income tax law, any income generated by an individual executing their manual or intellectual skills is considered "business and profit in business". From a tax standpoint, freelancing is considered a business and a profession. Various consultants and business freelancers like Blog Consultancy, Software Developer, Content Writer, Web Designer, Tutors, Fashion Designers etc. are qualified.

Filing income tax for a freelancer can be a bit complicated due to the income from many sources.

Application of tax and ITR filing for a freelancer

Freelancers in India come under the ambit of income tax and GST (goods and services tax). If the total turnover of a freelancer in one year is Will be more than Rs. 20 lakhs (Rs. 10 lakhs for northeastern and hill states) must be registered under GST. For most services, an 18% GST rate is applicable. Depending on the goods and services offered by the freelancer, GST rates may vary.

Freelancers will also have to pay income tax at the applicable rate. The following income tax rates apply to freelancers under the age of 60:

According to the old tax system

 According to the New tax system

Depending on which tax system the freelancer chooses, tax deductions can be claimed. Freelancers can use the estimated taxation scheme under section 44ADA of the Income-tax Act, 1961 and pay tax on freelance income at half of their total annual income if the total income for the year is less than Rs. 50 lakhs Will be less than.

If the total annual income is Rs 1 crore will be more, a business income tax audit is required

Each time the freelancer pays professionals who pay more than  Rs. 30,000 (FY total), TDS is applicable at the rate of 10%. Freelancers can file income tax returns under the estimated tax assessment scheme using the ITR-4 form. Freelancers who do not avail of the benefits of the Presumptive Taxation Scheme can file their returns using the ITR-3 form, which is applicable for business or professional income. The last date for filing ITR for FY 2021-22 and AY 2022-23 is 31st July  2022.

Procedure for filing income tax for a freelancer

Here are some simple steps you can take to begin the process of preparation for ITR.

·       Visit Income-tax

·       Download ITR-4 under the 'Downloads' tab

·       Fill in all the details in the ITR-4 form.

·       These include general information filing, total gross income, deductible and taxable gross income, details of business and business income, details of TDS (tax-deductible source) and advance tax and self-assessment tax.

·       Calculate your taxes using Form 26AS. Tax deductions and rebates can be claimed under various sections to save tax. Taxes such as property rent, repair costs, travel expenses, local taxes on commercial property, main registration costs, etc., can be claimed for any expenses incurred solely and exclusively for the freelancing work done during the year.

Some applicable deductions

You can file a tax return in two ways:

1. Download the ITR-4 form, fill it out offline, save the generated XML file and then upload.

2. Fill out the ITR-4 form online on Income Tax e-Filing Portal and submit it after e-Verification.

The total tax liability of a freelancer in a tax year is If more than Rs. 10,000, he/she will have to pay advance tax every quarter. Here's a simple process of paying taxes in advance

Click on the link below to pay the tax

https://www.alltaxfin.com/blog/how-to-pay-taxes-online

Knowing the benefits of tax rules and estimated tax plans can help freelancers save tax costs and file income tax returns more easily.

Frequently Asked Questions (FAQ)

Q: Can salaried persons, who are engaged in freelancing work in their spare time, get benefits under the estimated tax scheme?

A: Yes. Income tax is levied on both salary income and freelance income. Salary income will be calculated regularly and the benefit of the estimated taxation scheme will be available only for independent income.

Q: How can I calculate the total turnover to register for GST?

Ans: -According to the GST Act, the total turnover can be calculated by the taxable sale price, free sale price, export of goods and services and inter-state supply through business.

Q: Does a freelancer need Form 16 when filing an income tax return?

A: - Form 16 issued by the employer helps the salaried person to file his income tax return. However, freelancers have multiple sources of income and are taxed under 'Business and Profit from Business'. They can refer to Form 26AS for income tax calculation and Form 16 is not required for ITR filing.

Q: - As a standard deduction applicable for freelancer salaried person Rs. Can claim 50,000?

 A: No, there is no provision for claiming a standard deduction of Rs. 50,000

Alliance Tax Experts helping freelancers with Accounting, GST Compliances and Income Tax Filing, and TDS refunds for the last 8 years. if you have any questions contact us at 9769201316 or santoshpatil@alltaxfin.com

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