Various consultants and professions such as blog consulting, software developer, copywriter, web designer, blogger, tutor, fashion designer, etc. are considered to be freelancers. Filing income tax for self-employed people can be a bit complicated as income comes from multiple sources.
Tax levied on freelancers
Freelancers in India are subject to Income Tax and GST (Goods and Services Tax). If the freelancer’s total turnover in a year is more than Rs. 20 lakhs (Rs. 10 lakhs for the North East and Hill States), you will need to register under GST. For most services, 18% is the applicable GST rate. The following chart provides the income tax rates for freelancers below the age of 60.
There are two techniques freelancers can use to record their income and expenses and determine their taxable income. The accounting technique, once chosen, must be followed continuously over the years. It is not allowed to replace technology frequently, for example to save taxes or to avoid taxes.
If the total amount of tax payable is Rs 10,000 or more, the freelancer must pay quarterly. This tax, which is paid each quarter, is an input tax. First, all income is totaled, expenses and TDS are subtracted, and income from other businesses is added from home ownership, interest income, capital gains, etc. Then the amount is calculated according to the tax bracket to which they belong. If the tax amount exceeds Rs. 10,000 , you must make the tax prepayment before the due date.
Tax levied on bloggers
Income earned through blogging in India is chargeable to income tax as bloggers are considered to be freelancers. It is computed in the same manner as businesses in India are computed under the the “Profits and Gains of Business and Profession”.
Applicability of GST
In the past, VAT and service tax were the taxes that the self-employed had to pay. However, the tax process has now been switched to GST. GST means the tax levied on the products or services you offer. Therefore, freelance work also falls within the scope of services. Therefore, 18% GST applies to most services.
Freelancers who become independent proprietors are also responsible for CGST, SGST and IGST depending on their place of work. There is no GST exemption even if the store is online.
Even when bloggers sell blog space in their state or nationwide, they are still subject to GST rules. If the total amount of services goes beyond 20 lakhs per year, therefore subject to registration under the GST Act.
This limit is upto Rs. 10 lakhs for Uttarakhand, J&K and Himachal Pradesh At the same time, they can also claim the tax credit sponsored on goods and services. Services they use for their business. This reduces your GST liability, as freelancers work on different jobs and their income comes from domestic and international services, therefore, tax calculation of their income can be confusing and brainstorming.
To avoid tax penalties and take advantage of maximum tax credits, an expert’s advice is always recommended.
Every time a freelancer or a small enterprise proprietor makes a price to experts which exceeds Rs. 30,000 according to transaction or in combination at some point of a economic year, TDS applies on the charge of 10%. The deducted tax at supply should be deposited with the government.
Further, a freelancer should deduct tax or TDS simplest if he has been audited at some point of the preceding economic year. A freelancer can be audited simplest if the yearly gross receipts exceed Rs 50 lakh. Otherwise, there’s no want to deduct tax at supply. Hence, wherein the yearly gross receipts exceed Rs 50 lakh, and the freelancer has had his bills audited in the sooner year, TDS could follow to diverse bills inclusive of salary, and contractual bills made with the aid of using the freelancers.
The freelancer could have to test for the applicability of TDS on all bills included below the provisions of TDS. Also, as soon as the taxes are deducted, the freelancers are required to deposit the tax and document TDS returns.