Taxable income for freelancers in India


Freelancers are self-employed people who handle projects from the comfort of their home, and in other places, there can be expertise in various fields like marketing, website designers, consultancies, software designers, social media content writers. Their salary is also taxable, just like any other business person or a salaried employee according to the Income Tax Act.

Freelancing income

This earning would be taxed under the category “Profits and Gains from Business or Profession” head. The gross earnings would be the sum of all the receipts you have received throughout carrying out your profession.

Accounting process 

On two bases their income can be evaluated on the accrual basis and the cash basis of accounting. Only one technique for calculation purposes has to be followed throughout the years

Computation of taxable income:

Presumptive Tax Calculation: if their Gross Receipts is below Rs. 50 lakhs. In this case, their income is taxable under section 44ADA on a presumption basis.

Taxable Income = 50% of Gross Receipts

 One is not required to maintain Books of Accounts and get them audited by CA If one is covered U/S 44ADA.

Net Taxable Income from Profit & Loss Account: If their gross receipts are more than Rs. 50 lakhs per annum or if he thinks that his Net Profit is less than half of his Gross Receipts, then the Books of Accounts can be maintained.

Taxable Income = Gross Receipts – Expenses incurred for Business

TDS deductions for freelancers

 Many clients deduct TDS from the fee of the freelancers and he can assert the TDS deducted from his salary in ITR filling. The total amount of TDS deducted during the year information can be checked on Income Tax Portal in form 26AS.

 Advance Tax

All the receipts, income, expenses and TDS deducted, and earnings from other sources are combined like income from house property, interest incomes, capital gains, etc. Then, as per the tax slab income is calculated. If the tax amount is greater than Rs 10,000, one has to pay the advance tax by or before the due date.

Filing ITR

It Includes:

  •  All sales and their sources
  •  Spending incurred by the sales
  •  The amount of overall tax paid, along with advance tax
  •  Depreciation on properties
  • Investments asserted as deductions

Points to keep in mind before submitting ITR:

  • All income receipts and expenses receipts earned or spend in a year during their services.
  • The expense incurred for performing the freelancing work.
  • The expense should not be personal or capital.
  • Expenses more than Rs 10,000 per day, if paid in cash, aren’t allowed as a deduction.

 Applicability of GST

 Freelancers are liable for CGST, SGST, and IGST, depending upon the place of service If the total amount of services exceed Rs. 20 lacs per annum, then they are liable to be registered under GST Act, claiming the input tax liability can reduce the liability of GST.

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