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Freelancing — the word rings in the thought of working at your convenience, setting up shop anywhere, and direct exposure to clients. Freelancers get paid based on their contract and may also incur expenses in carrying out the assignment. Keeping track of payments from multiple assignments and hence paying taxes can sound cumbersome, so we got tips ClearTax Founder and CEO Archit Gupta to simplify the process, and tell us how freelancers can easily file taxes.
Keeping track of income
If you are a freelancer, you may receive payments on an assignment basis or every quarter or month, based on your contract. The receipts constitute income from professional services. You will need to aggregate their invoices to find the gross income from freelancing. As a freelancer you can claim deductions for expenses from the gross receipts, thereafter.
Professional receipts above Rs 30,000 per financial year may face TDS deduction. This is deducted at 10% tax at source (from your client) whenever the payment is made to you. The deducted TDS is deposited on behalf of the freelancer by the payer. You can claim this back when you file tax returns. The TDS rate is 7.5% for professional fee transactions from 14 May 2020 until 31 March 2021.
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