How to Deal with Taxes as a Freelancer in India

How to Deal with Taxes as a Freelancer in India

As a freelancer, you are responsible for paying your own taxes. If you are new to freelancing, this task may seem overwhelming. There are several things you can do to simplify the process, though.

Understand the basics of freelance taxation in India

Learning the fundamentals of Indian taxation on independent contractors is the first step. The guidelines for taxing independent contractors are outlined in the Income Tax Act of 1961. The most crucial fact to understand is that freelancers are subject to self-employment taxes. This implies that you are in charge of calculating, paying, and submitting your own taxes as well as your own income tax return.

Choose the right tax regime

The presumptive taxation scheme and the regular taxation scheme are the two tax regimes that freelancers can select from. A simplified tax system that only requires freelancers to pay tax on half of their annual gross income is known as the presumptive taxation plan. For freelancers with low salaries or few business expenses, this may be a good solution.

Although the regular taxes system is more complicated, it may give you access to more perks and deductions. You must record all of your business income and costs if you opt for the standard taxes system. Additionally, you will be required to pay tax on all of your income, not just half of it.

Track your income and expenses

Keeping track of your earnings and expenses is one of the most crucial things you can do as a freelancer. This will assist you in calculating your tax liability and choosing the best tax regime for you. Your income and expenses can be tracked in a variety of ways. You can make use of a simple notebook, accounting software, or even a spreadsheet.

Make estimated tax payments

You must pay anticipated taxes if you anticipate owing more than Rs. 10,000 in taxes for the entire year. The due dates for estimated tax payments are the 15th of April, July, October, and December. Payments for estimated taxes can be sent in by mail or made online through the Income Tax Department website.

File your income tax return 

Typically, the tax return filing deadline is July 31 of the following year. The presumptive taxation scheme is only available to independent contractors; thus, you must file your income tax return by December 31 of the same year if you have chosen this option. The Income Tax Department website allows you to file your income tax return online or by mail.

Get help from a tax professional

Consider seeking assistance from a tax expert if you feel overburdened by the process of managing your taxes as a freelancer. You can complete your income tax return in India and better comprehend the tax regulations with the assistance of a tax professional.

Here are some additional resources that you may find helpful:

• Income Tax Department website: https://www.incometaxindia.gov.in/

• ClearTax: https://cleartax.in/

• Taxspanner: https://taxspanner.com/

• Khatabook: https://khatabook.com/

If you have any further questions, please do not hesitate to contact a tax professional.