With more and more growth of internet in India, the number of freelancers or independent contractors is on a steep rise. People prefer to work for themselves on their own terms than an employer and are capable of earning far more than what they would in their day to day job. So the question comes “Do I need to pay taxes for my earnings as a freelancer”? The answer is YES and you need to pay taxes and file your income tax returns even if you are an individual consultant or a freelancer.
Within Indian Law any individual running a business where he/she is the sole owner is termed as a Sole Proprietor, the same applies with a Freelancer. A person earning on his own is considered a Sole Proprietor and needs to file income tax returns using the ITR-4 return form . If you have any other income source (maybe your full time job) you need to include that as well while filing your income tax return.
For the financial year 2012-13 (Assessment year 2013-14) , the income tax slabs have been defined by the government of India as follows. The numbers are revised every year at the time when the finance minister announces the budget so do keep an eye for next year.
The tax slabs are self explanatory, if you are a general tax payer or female tax payer for the first 2 lakh of your income for the year you don’t need to pay any tax after which 10% slab is applicable till 5 lakhs and beyond that 20% and 30%.
Do I really need to pay taxes?
Yes, absolutely. Not paying tax is a crime as per government rule and you might have to face severe penalty if the IT department raises a scrutiny against your Income Tax Filing. So file your Income Tax on time. Moreover nowadays with all payments being tracked against the PAN number issued, there is no escaping.
What is TDS and is it applicable in case of Freelance Work?
TDS is Tax Deducted at Source, Government of India has made regulations by which a company paying an individual or another company for services offered needs to deduct tax at source. But in case someone deducts tax at source they have to provide a Form 16 to the person whose tax has been deducted. You can then use this TDS amount while filing your Income Tax Return and seek refund in case your earning for the year doesn’t exceed 2 lakhs.
Find more information shared by a lawyer for the benefits of the Freelancers.
Have you filed your income tax returns?
Share your problems while filing IT returns and also if some tax implication has been missed here.