New Delhi: Many youngsters resorted to freelancing to tackle the job crisis during the Covid-19 pandemic. Freelancers often inquire if their sporadic income is subject to the same Income Tax regulations as the regularly employed. There are questions surrounding tax complications that are often ignored.
Income tax filing may appear to be a difficult chore, but with the correct information and advice, you can make it a breeze. Filing income tax returns is not just a legal necessity; it is also an opportunity to decrease your total tax liability and maximize your revenues.
The Indian gig economy has been rising in recent years, with the number of freelancers and self-employed individuals increasing at an exponential rate. The epidemic has further fuelled this rise, as many people have discovered ways to make their hobbies a legitimate source of money.
How to file an Income Tax return?
In India, freelancers and self-employed individuals must submit income tax returns (ITR) if their total income during the relevant fiscal year exceeds the basic exemption level of Rs 2.5 lakhs for the fiscal year 2022-23.
Check your income first
Individuals must file a tax return if their total income during the relevant fiscal year exceeds the basic exemption limit, which is Rs. 2.5 lakhs for FY 2022-23. Individuals with incomes less than this limit, however, can still file a tax return voluntarily.
File returns before the due date
The deadline for filing a tax return for freelancers and self-employed individuals who do not need their books audited is July 31, 2023. The deadline for those who must have their books audited is October 31, 2023. If you miss these deadlines, you can file your tax return until December 31, 2023, but you will have to pay a late filing charge.
Assess your tax liability
Freelancers and self-employed individuals pay the same tax rates as salaried employees. However, if certain conditions are met, you can choose a simplified tax regime. Your taxes will be enhanced by appropriate surcharges (varying from 10 percent to 37 percent) as well as a four percent health and education cess. If your total income is less than Rs. 5 lakhs, you may be eligible for Rs 12,500 tax relief.
Seek auditing of your taxes
If your gross yearly revenue surpasses Rs 1 crore, you must have your books audited. The limit is set at Rs 10 crore if your cash receipts are limited to five percent or less of total turnover and your payments are limited to five percent of total payments.
You may also be subject to a tax audit if you operate a business subject to presumptive taxation but offer to tax income that is less than the limits stipulated therein, and your income exceeds the taxable limit during the relevant tax year. The professional receipts threshold for such an audit is Rs 50 lakhs.
Know which tax form you must fill
If you are earning from “business or profession”, you should file your tax return using either ITR-3 or ITR-4 tax form. The tax authorities have made available all of the income tax return forms for the fiscal year 2022-23.
Individuals or businesses houses earning from “Business or profession” and posting their taxable income of less than Rs 50 lakhs must file their tax returns on the ITR-4 form. This form also applies to people who have chosen presumptive taxes.
Individuals or enterprises with capital gains, more than one house property, or income or assets outside India, on the other hand, are ineligible to submit ITR-4. Individuals must ensure that they meet all of the prerequisites before filing their tax returns with this form to ensure that their taxes are filed correctly.
Freelance gig workers must benefit from myriad tax breaks to decrease their overall tax burden. Tax deductions are a terrific method to make your money go farther, whether it’s for saving for retirement or claiming deductions for paying health insurance premiums.
Tax deductions of up to Rs 1.5 lakhs are available for investments in tax-saving programs. You can also claim deductions for investments in government-specified infrastructure bonds, treatment expenses for an assessee’s disabled dependent, charity contributions, and interest paid on an education loan.
Take advantage of these tax breaks to minimize your tax liability and maximize your earnings.