As a freelancer, you may already know how to handle your finances. After all, you are the one running your entire business. One aspect of finance many freelancers often fret over is the process of taxes, especially tax-saving. As a solo traveller in your professional journey, you may feel that you need a companion in this regard – a companion that can not only help you understand taxes better but also advice you in ways to save them. With Its Just Tax, you can find just the right companion. We begin by providing you with 4 amazing tax-saving tips that every freelancer must know. Let’s go.
1. Saving tax through your expenses
The Income Tax Act allows you to claim tax deductions on several of your professional expenses. Before we get to know these expenses, let’s have a look at the conditions that are laid down for them –
I. The expenses shall be made for professional purposes only. In case of an expense for an item that is used for personal as well as professional purposes, only the amount equivalent to the professional usage may be eligible for deduction.
II. The expenses incurred shall have a valid proof (invoices, receipts, etc)
III. The expenses must be of the current financial year only
IV. The expense shall not be incurred for any activity that is illegal or criminal.
Accordingly, you can claim tax deductions on the following expenses – your office rent, internet bills, depreciation of capital assets, stationery and other supplies, furniture, electronic equipment such as laptop, printers, scanners, and so on. The expenses that you incur to bring in and maintain business can be claimed under deductions as well. For example, you may have dinner with a potential client or go for a game of golf to talk about a particular project. These come under entertainment or meal expenses and can be used by freelancers to save tax.
2. Take advantage of the presumptive scheme
As per Section 44 of the Income Tax Act, under presumptive taxation, if your annual income is under Rs 50 lakhs, then your taxable income shall be the 50% of your total gross income. So, if your gross annual income is, say, Rs 34 lakhs; then, under the presumptive scheme, your taxable income shall be considered at Rs 17 lakhs only, after you have made the tax deductions bases on expenses and other exemptions.
3. Plan effectively, execute rigorously
Planning your expenses at the beginning and tracking them through the financial year is one superb tax-saving tip for freelancers. So, if your laptop has acquired a few repairs this year, make sure to get the receipts for all of them and collect them in an organized manner. When travelling through cabs or other modes of transport for business, ensure to get the due bills and receipts. Try to invest only in those items whose expenses can be claimed for deductions.
Another tip would be to track the usage of several items that you may utilize for professional as well as personal reasons. This would help to scale down on the personal use and maximise it for professional use – which would mean higher savings on your taxes.
4. Take professional help online
Saving tax means saving money. And, isn’t that the goal of every freelancer? Therefore, we advise you to spare no stone unturned when it comes to gaining knowledge about tax-saving for freelancers. Taking professional help can be very beneficial here. However, you may be hesitant about it as experts often charge a great deal. An excellent alternative would be to take advice and consultations online as the charges would be much lesser. Its Just Tax offers advice on several professional and legal matters for FREE! You can avail of consultations and several other services from the convenience of your home. Let our experts do the work while you focus on what is important for you – your work!
Do remember that the information provided here may differ or change depending on several factors. It is advisable to consult a professional before going ahead with anything.