How to File for Taxes as a Freelancer in India

Paying income tax as a freelancer in India can be tricky, and confusing if you are new to the whole scene. But as this financial year comes to a close, you need to put all your receipts together to pay the income tax on time.

Now, I am not a chartered accountant, and I don’t know a lot about the income tax legalities. In fact, I have a CA of my own. But as someone who has been filing income tax as a full-time freelancer for years, I have a good enough knowledge of what other freelancers need to do to save up on their taxes before they go to a CA.

Here are some tips if you are a freelancer in India looking to file taxes:

1. Keep a single bank account for all the transactions

Its common to have more than one bank account, but to make things easy for you at the end of the financial year, make sure you are doing all your business transactions through one account only.

I have two bank accounts, but one is strictly used for receiving and sending business payments, while the other is more of a saving account.

2. Tally up your finances

Now this is the biggest challenge I have faced as a freelancer –

[bctt tweet=”There is really no way to know in advance the exact slab a freelancer will fall in because..” username=”indianscrewup”]

They get paid a different amount every month.

You can estimate a bit an year before and make investments accordingly to save taxes only to find out you have exceeded the tax slab. Don’t get me wrong, its great for a freelance writer in India to earn more but taxes are a pain in the a**.

Download your monthly statement from your bank account online. You will get an option to download them in an Excel format, which will be easy for you. Now with each month’s statement with you, start separating the total payment received to find your annual income in the current fiscal year (March 2016-17).

3. Identify your deductibles

Technically, freelancing is a business and the investments you make in your business can be claimed as a deduction. The final deduction number when subtracted with your total income, gives you your actual income slab.

The deductibles can include:

1. The cost of your new laptop

2. Internet bill

3. House’s rent (The premises cannot be owned by you. If your parents own the house, then you can create a rent agreement between you two and pay them rent every month to get deductions)

4. Any expenses you are spending to meet your clients – phone calls, taxis, or coffee

5. If you are paying someone else to work for you

Subtract the number you got from Point 2 with the number you got from point 3 and there is your final income which will decide your tax slab.

4. Invest in SIPs

Systematic Investment Planning (SIP) might not be the best investment option available in the market right now, but they can help you save taxes. You can claim up to 1.5 lacs in SIPs every fiscal year, and technically its still your money invested in a different part.

So, if your gross final income is 10 lacs, and you have invested in 1.5 lacs SIPs, then your tax slab will go down to 8.5 lacs.

5. Claim TDS

Many of the Indian PVT LTD companies deduct TDS from the final payment when freelancers in India work for more than 30,000 INR with them in a fiscal year. While you might feel saddened for not receiving all the payment in one go, you can claim it later, and save taxes with it.

Usually, clients will send a TDS certificate, but you don’t really need it to claim TDS because its already updated against your PAN card number.

[bctt tweet=”Last year, I filed taxes in June and got my TDS transferred in my account by September first week.” username=”indianscrewup”]

If you are full time freelance writer in India like me, I highly recommend doing all these calculations on your and contacting a CA to help you file taxes.

Have you filed income tax in India as a freelancer? How was your experience?