“The hardest thing to understand in the world is the income tax,” said Einstein. As the tax season arrives every year when the salaried and businessperson hurry to meet the deadlines to present the proof of investments or other documents to save on tax, the scenario for freelancers is quite different. Likewise, while setting up a business, a businessperson always looks for the ways to save on tax, the freelancers too can save for few thousands.
No doubt, tax time is one of the most stressful phases of life and you don’t want to go away your hard-earned money. But face it, like it or not, you’re legitimately responsible o pay tax irrespective of the nature of your business. However, being tax complaint has its own perks. If you are looking for housing, vehicle, education loans, etc. it is mandatory that you file your tax return on time for the loan to be processed. The banker may reject your request on the ground that you don’t pay taxes on time.
As a freelancer, on the best part, one can claim dual tax-saving benefits, since they claim for exemption applicable to both individual and businesspersons. Tax filing could be a hassle for the freelancers; however, they have certain benefits to enjoy. As an individual, they claim for tax saving under Section 80C that are available to their salaried counterparts and, as freelancers, they can enjoy the deductions available to the business owners as well.
Why Filing income Tax is Important:
- Income tax filing is necessary for VISA processing
- By filing your income tax on time, you can register immediately for immovable properties.
- At the time of issuing a credit card, if you’re irregular on paying tax, the banker will reject your request. So, pay tax on time.
- It is the only legitimate way to justify your money as white money and maintain a good rapport with the Income Tax Department.
Under Section 80C, freelancers are eligible to avail tax benefits like individual taxpayers by optimising tax saving investments like NPS and PPF under Section 80C, deduction on house rent under 80GG, etc. Above all, they can claim tax benefit on their business expenses too. However, the first-time taxpayers may find the process confusing or may face hassle. So, consider these pointers whenever you prepare for D-day and save more:
Depreciation of Assets You Use:
The equipment you use while freelancing are your asset including, computers, laptops, cameras etc. You must be aware of the fact that the value of these assets depreciates as you use them. But the best part is that you can use a small portion of the depreciated value of the asset as a deduction from your taxable income. Even, the vehicle you use to meet the client or visit the offices is an asset and can be used for claiming a deduction on it. However, depreciation rate may vary asset to asset.
Cost Dedicated for Client Meetings:
Freelance work often involves meeting people. Client meetings occupy most of your time at coffee houses, restaurants. You can claim a deduction against the bill paid by you, travel expenses incurred to meet the client, including the fuel expenses for your own or hired cabs. Travelling expenses incurred on outstation official trips can be used for claiming a deduction on taxable amount.
Rent Paid for Office
The rent paid for using a desk for co-working space can be used for claiming purpose. Also, if you work from a rented home, you can make a claim for part of the claim amount.
E Filing Income Tax: Things to Know About
An independent portal is designed for e filing tax return by the Income Tax Department- incometaxindiaefiling(dot)gov(dot)in . The efiling income tax is possible either with or without a digital signature. Those who file the e-file income tax without a digital signature require taking a copy of form ITR-V, signing it and sending it within a stipulated date.
Income tax efiling is the most convenient, fastest and easy way of paying tax. You can file the tax from any place and at any time. Moreover, what makes it user-friendly is the detailed instructions available on the site, which make it easy, even for those who are not very much internet savvy.
For whom is e-filing Compulsory- With or Without Digital Signature?
- The corporate taxpayers are bound to efiling income tax with a digital signature
- Taxpayers other than (1) and (2), whose total annual income is more than 5 lakh, is liable for efiling income tax with or without digital signature
- Taxpayers who claim relief under section 90, 90A or 91 shall furnish the return of income electronically, with or without digital signature.
- Those who require to file ITR-5 are too required to file the same electrically with or without a digital signature. In case of a firm which book of account is audited under Section 44AB shall file the return electronically with a digital signature.
It’s true that single penny counts when it comes to your own business or if you’re doing freelance work where the amount of earning is minimal. It is always a concern for all about how to save on tax. And whenever the big day is about to arrive, it turns to sleepless nights for many. Whether you’re a business person or a freelancer, these are just a few ways of most sought-after ways of saving tax. You can try these tips when the actual time arrives and remain cool-minded throughout the year.
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