Filing of income tax returns for an individual requires a few steps to be followed with some information on how to do the same. Income tax is the amount of money paid to the income tax department by an individual or a company based on certain calculations. These calculations relate to income and expenditure account from business or service including a statement of assets and liability. If you are a salaried individual, it will be a less hassle for you than a freelancer filing an income tax return. When it comes to freelancers or consultants who have income from multiple sources and there is more than one client, it becomes a bit complex.

Freelancer and Taxation

It’s quite different when you’re a professional not under the payroll of an employer; rather you have several clients for whom you provide your intellectual, technical and professional service. You work as a business person and are supposed to pay your taxes on the gains you make in return to the service provided by you to your various clients. There is a list of professionals who can be termed as freelancers.

There are freelancers in law or law-related professions such as an attorney, an advocate or a lawyer. A lawyer earns his or her living by providing legal advice or consultation to clients. A legal profession has many branches of expertise. There are law graduates who are legal advisors to various organizations and they get paid by these organizations for the legal advice they provide to these companies. A lawyer works as an arbitrator or mediator, by dint of his knowledge, in the matters of law. Barristers are legal experts of higher rank and they work for high-profile cases in the higher courts.

Likewise, there are architectural professions, professional accountants, medical professionals that include physicians and other health professionals, and there are technical professionals also.

Deduction of TDS

TDS is deducted on the following:

  • Salary
  • Interest payments from the bank to the customer
  • Payment of rent
  • Fees for professional consultation
  • Professional fees

TDS is a kind of tax in advance which has to be submitted with the tax department. This tax is deposited periodically. In TDS system, there is a deductor and a deductee. The deductor is the one who happens to be the company in which an employee works or the client for whom the consultant or freelancer works. The deductor’s responsibility lies in deducting the tax from the payments that he makes to the employee or the service provider for their job. The deductee can claim the TDS back as an income tax refund when he files the IT return.

The professional service provided is subject to a 10% TDS by the deductee, that is Tax Deducted at Source under Income tax act. If you are a freelancer or consultant, you need to fill in and submit either ITR-3 or ITR-4. If the income is from business or profession, ITR-3 is needed to be filled in and submitted. From the financial year 2016-17, a professional can choose presumptive taxation. He can also declare 50% of the gross receipts as his income. For this, he has to file ITR-4.

There are ways to reduce the quantum of tax. You have to show certain expenses against which you can claim deductions. These expenses are house rent, depreciation, office expense, travelling expense, repairs, meals, hospitality expenses, etc. the tax consultant will help you explain about them further and will help you file a proper tax return.

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