Freelancing is on the rise in India. More people are choosing to work for themselves rather than engage in traditional employment. However, most new freelancers do not understand taxes; this can lead to penalties, interest, or even prosecution.

Understand Your Tax Obligations
Salaried employees have their payroll taxes withheld from their salary by the employer. As a freelancer, you are responsible for your entire tax obligations. Tracking income, deduction, and when to pay your taxes will all fall on you.

Know Your TDS (Tax Deducted at Source)
Often, clients will deduct 10% Tax Deducted at Source (TDS) before making the payment to the freelancer. Clients must verify and submit TDS to the government from the freelancer’s PAN number. Freelancers should obtain Form 16A from the client and cross/check that TDS with Form 26AS available online, which will assist with ensuring proper credit is applied during the ITR filing.

GST Rules for Freelancers
If the freelancer has income exceeding ₹20 lakh per financial year, they must apply to be registered for GST and in some states including Punjab, applicable with income exceeding ₹10 lakh. After registration, you will be committing to recharging GST at 18% for invoices of Indian clients. However, services to overseas clients are known as exports and exports do not require GST obligations. However, even under exports, you may need to file your returns.

Choose the Right ITR Form
Most freelancers either file as ITR-3 or ITR-4 forms. Under Section 44ADA freelancers, can choose presumptive taxation or declare 50% of the total income as taxable. The presumptive taxation option means one would not need to maintain complete accounting records.

Track Expenses
Freelancers need to keep every expense invoice they obtain. One of the deductions is depending on the office rent, internet bills, and other online software applications used for the business. These expenses help decrease taxable income. Records of your business expenses should always be kept clear.

Avoid Tax Mistakes:
A simple mistake not conforming to tax rules can cost you dearly. Missing deadlines through own fault for filing ITR or not paying required advance taxes have significant penalties. If a freelancer is supposed to register and collect GST on sales of said product or services, the penalties usually are also significant.

Build Your Freelancing Career Strong

Freelancers always look like professionals when they file taxes correctly. It helps build better credit scores if the taxation is being done properly. It can also affect the freelancers ability to apply for loans or government contracts. Additionally, reduce the risk of law suites several years after initiating a business and dealing with taxes.

Use Tools and Professionals:
Freelancers can use on-line tools available to complete tax returns. Many on-line platforms are also very easy to track income and expenses. If you find this too much of hassle, you may hire a chartered accountant. They will ensure you aren’t making errors and following basic tax rules.

Also Read: Expert Reveals Smarter Investment Than Gold: Can You Guess?

Final Note:
Freelancers should understand how the tax system works as early as possible. This can mean not only filing taxes on time, but paying tax honestly and on time. This will allow freelancers to build trust and credibility and position themselves to have a long-term career.

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