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Income Tax Returns: Here’s How Freelancers and Self-Employed Individuals Can File ITR For FY 2023-24

Self-employed taxpayers and freelancers in India are subject to taxation under the "Profits and gains from business and profession" category, with the option to choose between deducting authorized expenses or opting for presumed taxation.

Eashani Chettri
Freelancers and self-employed people have to file taxes differently
Freelancers and self-employed people have to file taxes differently

Any income earned by a self-employed taxpayer or a freelancer would be subject to taxation under the heading "Profits and gains from business and profession." The taxpayer would have to agree to tax their gains after deducting authorized expenses, or they might choose presumed taxation if they met the requirements.

A resident who engaged in notified professions with total gross receipts under INR 50 lakhs during the applicable tax year may elect presumptive taxation, which stipulates that 50% or more of the assessee's total gross receipts from such professions in the prior year shall be deemed to be such profession's profits.

Filing Obligations: Taxpayers who have total income for the relevant financial year that exceeds the basic exemption limit, which is INR 2.5 lakhs for FY 2022–23, are required to file tax returns.

Last Date for Filing Tax: In the event that the taxpayer is not required to have his books of accounts audited, the deadline to file the tax return for these categories of people for FY 2022–2023 would be July 31, 2023. However, the deadline is October 31, 2023, in the event of an audit. The taxpayer has until December 31, 2023, to file their tax return, but there is a late filing penalty.

Tax Rate: These workers would continue to pay taxes at the same rates as salaried workers. Self-employed people and freelancers are entitled to choose a simplified tax system. The decision, however, is applicable for upcoming years with a once-in-a-lifetime possibility to change it. The relevant surcharge (10% to 37%) and the 4% health and education cess would be added to the taxes as calculated.

Requirement of Auditing: A taxpayer is required to have his books audited if his business's gross annual turnover exceeds INR 1 crore. If the taxpayers' cash receipts are limited to 5% or less of the total turnover and payments are limited to 5% of the total payments, the threshold of INR 1 crore becomes INR 10 crore.

Tax Returns Forms: A taxpayer with income under the heading "Business or profession" must use ITR 3 or 4. The ITR 4 should be used to file a tax return for the taxpayer who meets the criteria below. If not, ITR 3 will be used.

  1. Decided in favour of presentative taxation

  2. Having no revenue classified as "Capital Gains,"

  3. Have no assets or income outside of India.

  4. No, or a single-family home only

  5. Over 50 lakhs of Indian rupees are the maximum taxable income allowed per fiscal year.

For the submissions of FY 2022–2023, tax authorities previously distributed offline income tax return Forms on February 10, 2023. The online Forms/tool, however, must be released at year's end. Those who choose ITR 3 before FY 2021–22 must download the offline utility Form and then generate the XML file after filling out the necessary information to file the tax year. Individuals can fill out the information on the income tax e-filing portal and submit their tax return starting in FY 2021–22 without having to download any software.

Details required for filling the tax return:

  • Personal data such a person's address, phone number, bank account, Aadhar, etc.

  • Information about total revenue, costs, other income, and, if applicable, tax audit report-eligible investments made during the year.

  • Financial information, including assets (both domestically and abroad), bank balances, cash balances, debtors, creditors, loans and advances, any other liabilities, and capital balance.


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