Did you know that freelancers too have to pay taxes of up to 30% on their incomes?
But, there’s a way around it!
Here’s a guide on how you can save on taxes as a freelancer 👉
Thread 🧵
But, there’s a way around it!
Here’s a guide on how you can save on taxes as a freelancer 👉
Thread 🧵
India is the second-fastest growing freelancer market. And, if you’re a freelancer following your passion (actively or on the side), your income is considered ‘Income from business or profession’ under the Income Tax Act making it taxable.
But, the silver lining– this makes your freelancing an actual business and you a business owner. Hence, as a freelancer, you can claim business expenses & get tax deductions up to Rs. 1.5 lakhs!
Depending on your annual income, your tax rates would vary from 5-30%. But, this applies only on your TAXABLE income, i.e. total income minus expenses & deductions. Hence, the bigger your expenses, the lesser your taxes.
Here are some ways to save a big chunk on your taxes-
Here are some ways to save a big chunk on your taxes-
1- Keep track of every penny you spend on your freelancing business. This includes heavy charges such as office space rent, repair & maintenance fees, travel fares, etc. and small expenses such as office supplies, stationary, phones, internet and even the apps you purchase.
In fact, a meal or karaoke night with your clients also counts; just save the bill. Who thought “tax-free lunch” could be real as long as it is business-related?
That’s still not it. Your laptop, camera or the bike you use for work are all depreciating assets i.e. they lose their value over time. And, based on your items’ useful life and the depreciation rates set by the government, you can claim tax deduction on them for multiple years!
2- Declare your investments and loans. If you have an ongoing education loan, you can claim tax deduction on the interest part of the EMI (not the principle). In fact, as a business owner, you also get certain special tax benefits on car loans.
You can also save up to Rs. 50000 tax by investing in equity-linked saving schemes (ELSS) or going for a Public Provident Fund (PPF) account.
3- And, the easiest of all– get insurance. You already know how term insurance and health insurance policies financially protect you and your family in emergencies. But, do you know how much taxes these policies can save you?
Under Section 80D, you can claim tax deductions of up to Rs 75000 on your health insurance policies! And, if you have a term insurance, Section 80C heavily slashes down your taxable income leaving much more money at your disposal.
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