“Income Tax and GST on Freelancers” topic seems to be so much current and relevant thing to discuss as people of India are rapidly shifting to providing freelancing services or doing freelancing business instead of a full time job. This article is to the rescue of all the freelancers who are unaware of the taxation impacts on their freelancing income in India. Article will provide brief guide on Income Tax applicability on Freelancers, TDS, Advance Tax and GST requirements for freelancers.
Income Tax and GST on Freelancers in India
The article will be further divided into Income Tax on Freelancers in India and GST on Freelancers in India.
Income Tax on Freelancers in India
Freelancing Income will be taxable under head “Profit & Gain from Business or Profession”. From Gross receipts of freelancing business setting off of expenditure related to such freelancing business will be allowed. Expenditures allowable such as :
- Depreciation on Assets used for freelancing business such as Laptops/Computers/software/Furniture & fittings
- Office expenses such as rent, insurance, advertisement, electricity, telephone, travelling, meeting expense or other similar expenses.
- Third party websites such as Upwork, Fiver, Jobs from Home charge subscription charges, service fee or connect charges to apply for jobs.
- Payment for professional services, accounting services or outsourcing will also be allowed.
Due Date for Freelancers Tax filing
- Due Date for Business Tax filing is 31st July, 2022 for F.Y. 2021-22 & A.Y. 2022-23.
- In case Audit ( Tax Audit/Statutory Audit or any other audit as per applicable law) is applicable on business, due date for business tax filing is 30th Sept, 2022 F.Y. 2021-22 & A.Y. 2022-23.
Benefits of Freelancers Tax filing
Key benefits for Freelancers tax filing are:
- Freelancers can claim refunds of TDS/TCS
- Freelancers can carry-forward losses from shares, house property, business (if any)
- Freelancers can submit the same as supporting loan documents
- Freelancers can avoid penalties, interest charges, if any.
ITR Forms which can be used for Freelancers tax filing
Freelancers tax filing of return would require freelancers to select the form which would be applicable to them based on sources of income and type of business. ITR Forms applicable which can be used by business are as follows:
- ITR – 3: ITR-3 can be filled by person if ITR-1,2 & 4 are not applicable to him. ITR -3 can be filed by individuals and HUF having gains from business & profession. He can have Income from Salary. No limit on number of house properties and agriculture income.
- ITR – 4: Individuals or HUF with a total Income of up to INR 50,00,000 having income from salaries, one house property, other sources, and agricultural income up to Rs.5,000 and have income from business & profession computed on presumptive taxation basis under section 44AD/ 44ADA/ 44E.
Pre-requisites of Freelancers tax filing
Pre-requisite data which a business would require before Freelancers tax filing are as follows:
- User must be registered on e-filing portal.
- Link Aadhaar Number and PAN on e-filing portal in case of proprietorship, add authorized signatory details and validate Digital Signature Certificate for that signatory
- It is mandatory to have at least one pre-validated bank account
- Nominate pre-validated bank account for refund
- Books of Accounts (Balance Sheet & Profit & Loss Account including Schedule of Fixed Assets and other relevant Schedules)
- Interest Certificates from the Post offices and Banks
- Download Form 26AS and Annual Information Statement
- Loan statements from any NBFC or the Bank
- Bank Account Statements for relevant period
- Creditor/Debtor/Stock Confirmation.
- Yearly reports/Information from Third party websites such as Upwork, Fiver, Jobs from Home.
Slab Rate for Freelancers Individuals FOR F.Y. 2021-22 & A.Y. 2022-23 are
“Individuals” being a type of Person as per Income, have to do Freelancers tax filling.
For details article on slab rates of individuals refer link>> https://www.taxledgeradvisor.com/salaried-tax-filing/
Applicability of Advance Tax on freelancers
Freelancers if their, Estimated Income Tax liability exceeds INR 10,000, then they are required to make advance tax payments in following manner :
| Status | By 15th June | By 15th September | By 15th December | By 15th March |
|---|---|---|---|---|
| All assessee (other than the eligible assessee as referred to in Section 44AD or section 44ADA) | Minimum 15% of Advance Tax | Minimum 45% of Advance Tax | Minimum 75% of Advance Tax | Minimum 100% of Advance Tax |
| Taxpayers who opted for presumptive taxation scheme of section 44AD or section 44ADA | Nil | Nil | Nil | Minimum 100% of Advance Tax |
Applicability of TDS on freelancers
Liability to deduct TDS for freelancer arises only when turnover or gross receipts exceeds certain limits. Once Tax Audit is applicable, them liability to deduct TDS and file TDS returns arises.
For Tax audit applicability refer link >> https://www.taxledgeradvisor.com/auditing/income-tax-audit/#When_is_Tax_Audit_applicable
Tax Saving tips for year 2022-23 for freelancers
GST on Freelancers in India
GST registration can be obtained voluntarily by any person or entity irrespective of turnover. GST registration becomes mandatory if a person or entity sells goods or services beyond a certain turnover.
For Service Providers if aggregate turnover exceeds INR 20 lakhs in a year is compulsorily required to obtain GST registration. However, for special category states, aggregate turnover limit for service providers is INR 10 lakhs.
Freelancers providing Interstate Services are compulsorily required to obtain GST registration. One has to determine the place of supply to identify whether a supply is inter state or intra state supply. For determination of place of supply refer Chapter IV and V from table of contents of IGST Act>> https://cbic-gst.gov.in/pdf/IGST-Act-Updated.pdf>>
For GST Return filing requirement refer >> https://www.taxledgeradvisor.com/gst-return-filing/
Need Expert Assistance for Income Tax and GST on Freelancers in India
For expert assistance on Income Tax and GST on Freelancers in India, or in Udaipur and Rajasthan, reach our professionals at Tax Ledger Advisor.
