How to File ITR for Freelancer

Applicability of Taxes and ITR filing For Freelancers

Freelancers in India come under the purview of Income Tax and GST (Goods & Services Tax). If a freelancer's aggregate turnover in a year is more than Rs. 20 lakhs (Rs. 10 lakhs for North Eastern and Hill states), he needs to register under GST. For most of the services, 18% is the GST rate applicable. Depending on the goods and services offered by the freelancer, the GST rate may vary.

Freelancers also need to pay income tax as per the applicable rate. Following are the income tax rates applicable for freelancers below 60 years of age:

Depending on which tax regime the freelancer opts for, tax deductions can be claimed. Freelancers can make use of the Presumptive Taxation Scheme under Section 44ADA of the Income Tax Act, 1961, and pay tax on freelance income on only half of their gross annual income, provided the total income for the year is less than Rs. 50 lakhs.

If the gross annual income exceeds Rs. 1 crores, a tax audit for business income is required to be done. 

Every time a freelancer makes a payment to professionals that exceeds Rs. 30,000 (aggregate during the financial year), TDS is applicable at the rate of 10%. Freelancers can file income tax returns by using the ITR-4 form under the Presumptive Taxation Scheme.

Freelancers not utilizing the benefits of the Presumptive Taxation Scheme can file their returns using the ITR-3 form, which is applicable for income from business or profession.

Income Tax Filing Process for Freelancers

Following are the simple steps to follow for tax filing for freelancers in India:

• Visit the Income tax e-filing portal.
  
  
• Download ITR-4 under the ‘download’ tab.
  
  
• Fill in all the details in the ITR-4 form. This includes filling in general information, gross total income, deductions and taxable total income, details of income from business and profession, details of TDS (tax deducted at source), and details of advance tax and self-assessment tax. 
  
  
• Compute your tax using Form 26AS. Tax deductions and exemptions can be claimed under various sections to save tax. Any expenses exclusively and fully incurred for the freelancing work carried out during the tax year can also be claimed such as property rent, repair expenses, travel expenses, local taxes on business property and domain registration expenses, etc. 

Some of the Applicable Exemptions/Deductions

You can file the tax returns in two ways:

1. Download the ITR-4 form, fill it offline, save the generated XML file and then upload it.
   
   
2. Fill in the ITR-4 form online at the income tax e-filing portal and submit it after e-verification.

If the total tax liability of the freelancer in the tax year exceeds Rs. 10,000, he/she needs to pay advance tax every quarter.

Here is a simple process to pay advance tax-

• Go to tax information network of IT department
• Proceed under challan 280 option
• Fill in your personal information – select (0021) income tax other than companies, select the tax payment type, select the right assessment year and provide your address, PAN, and other contact details along with the mode of payment you choose.
• Double-check the information before you proceed
• Make payment and get the tax receipt
• Keep the receipt secured for furnishing the same information while filing your income tax return.

Knowing the tax rules, benefits of presumptive tax schemes can help freelancers save the tax outgo and file income tax return with ease.

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.