Salaried individuals have it relatively easy when it comes to filing their income tax returns. They are usually reminded about their tax filing and tax saving obligations by the company HR. Even when they have to carry out the procedures, they just need to look at few documents. Upload their Form 16, enter in a few details and they are done with their taxes.
But for freelancers and consultants, filing taxes is a more complicated process. They don’t have income coming in from only one source; freelancers typically work for a number of clients. This is why their taxes might be more complicated. But, they do have to be filed. So here are 4 things that freelancers and consultants should keep in mind while filing their income tax:
Freelancer from a tax purview
When you earn from an intellectual or manual skill, your income is qualified as 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.
TDS is deducted from your payment
Every professional services that are rendered by you are subject to 10% tax deducted from source. You can claim TDS refund as well, just the way your salaried friends do.
Claiming expenses reduces tax liability
The expenses that you incur towards your work can be claimed to reduce your income and tax on it. The expenses that you can claim come under the heads of rent, repairs, depreciation, office expenses, traveling expenses and even meal, entertainment and hospitality expenses.
The ITR-4 form applies to you
The income tax form that freelancers and consultants are required to fill out and submit is ITR-4 and Section 194J is the part of the Income Tax Act that mandates deduction of TDS from payments made for professional services.