Work, as we know it, no longer follows a 9-to-5 schedule.
More than 16 million freelancers live in urban India, changing the way we work, and don’t be surprised if the number quadruples every five years, according to some experts.
Blame the grains that fuel this never-ending technological conquest, which has provided us with a wealth of benefits, one of which is the ability to work from anywhere.
Freelancers, like all salaried employees, must pay taxes on their earnings. However, since freelancers may have many sources of income, it is a little more complicated.
Knowing what to do and doing it correctly is one of the best ways to save money on taxes. As a freelancer, you may be able to save money on taxes in a variety of ways.
If you’re working as a freelancer in India, these are the most crucial and usual things to keep in mind.
Report business income
Freelancing income can be considered business income, which has its own set of advantages. Often, freelancers earn money and consider it their income, even though they must have spent money to provide the services they are providing. If you have a business as a source of income, you can deduct your expenses.
Depreciation on assets, office overheads, office rent, client meeting fees, contracting charges, and so on are some of the most frequent expenses. It’s important to understand that personal costs cannot be deducted when calculating freelancing revenue.
Use presumptive taxation scheme
A presumptive taxation plan has been made available to professionals specified under Section 44ADA. This scheme will presume your income to be 50% of your gross revenues. Hence you would not have to declare any more business costs while using this scheme. This scheme is open for professionals with gross receipts up to Rs 50 lakh. Apart from assuming your revenue, this strategy eliminates the need for any accounting records.
Investments can go a long way
One of the most important steps towards saving tax is investing right, this will help you save tax, but you will also have some portion of your money saved as investments. Various deductions, the most popular being under Sections 80C, 80D, 80CCD, 80GG, etc.
Check if GST registration is needed
A freelancer must decide whether or not they need to register their business for GST in addition to saving money on income taxes. To avoid late fees and interest, this should be done ahead of time.
Filing taxes correctly and on time is one of the most important ways to save money. You’ll save money on interest and penalties if you do it this way. Consider all sources of income and calculate accurately, use TDS credits appropriately, claim proper deductions, and determine if a tax audit is applicable by using the correct ITR form.
Finding the perfect combination is the most crucial factor. Various additional factors, such as other sources of income, eligibility for deductions, the applicability of tax audit, the necessity of bookkeeping for the freelancer, and so on, will all play a role.