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Mint
15 hours ago
- Business
- Mint
ITR Filing 2025: How tax rules differ for freelancers and salaried individuals
ITR Filing 2025: As the ITR 2025 filing season is approaching, many freelancers and consultants are uncertain about how their income is taxed differently from salaried employees. The key differences lie not only in the type of ITR form to be used but also in how income is calculated, the deductions that can be claimed, and the deadlines for filing. White filing ITR, it's important to note that salaried income is taxed under the head 'Salaries", whereas freelance or consultancy income is taxed under 'Profits and Gains of Business or Profession." This classification determines what deductions you can claim and how you maintain records. While salaried individuals often rely on their employer-provided Form 16, freelancers must follow a more complex set of rules. Under the 'Salaries' category, employers deduct taxes at source before paying salaries to the employees. Whereas, freelancers must manage and pay their own taxes. When clients pay freelancers, they usually deduct 10 per cent TDS and deposit it with the government under the freelancer's PAN. Freelancers should collect Form 16A from clients and match it with Form 26AS to ensure proper credit of the deducted tax. Salaried individuals are eligible for a standard deduction of up to ₹ 50,000 if they are under the old tax regime or ₹ 75,000 under the new regime without needing any proof. On the other hand, freelancers cannot claim a standard deduction but can claim actual business-related expenses, which includes: Internet and mobile bills Stationery and printing costs Conveyance costs. Proportionate rent and electricity (if they are working from a rented space) Depreciation on computers, printers, and other office equipment Freelancers cannot claim deductions for personal expenses. However, they have one more provision which allows freelancers to claim a proportion of rent and utility costs of their households as a business expense only if their home is used for work. This also includes, repair, maintenance, and depreciation costs on work-related assets. One must note that any expense you claim must be genuine, proportionate, and justifiable. A freelancer's net taxable income is calculated by deducting eligible business expenses from their total earnings. Other sources of income like rent, interest, dividends, or capital gains are taxed under their respective heads and added to the freelancer's total income. Freelancers, like salaried taxpayers, also has the benefit of deductions under the old tax regime for sections such as: 80C: Investments in Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), life insurance, etc. 80CCD: National Pension Scheme (NPS) contributions 80D – Health insurance premiums 80TTA – Interest on savings accounts 80GG – Rent deduction (up to ₹ 5,000/month) if not already receiving House Rent Allowance (HRA) Freelancers who do not qualify for presumptive taxation must file ITR-3. For example, as a tutor or educator, presumptive taxation rules might not apply, hence detailed income and expense reporting is compulsory. The presumptive taxation scheme under section 44AD gives relief to small taxpayers having business income up to Rs. 2 Crores. If the cash receipts during the year falls within 5 per cent of the total revenue, businesses having turnover up to Rs. 3 crore can opt for presumptive taxation. Tax rates are the same for freelancers and salaried individuals, the key differences lie in income classification, deduction eligibility, and compliance responsibilities.
News18
17 hours ago
- Business
- News18
ITR 2025 Filing: How Tax Rules Differ For Freelancers and Salaried Individuals
Last Updated: With ITR 2025 filing season underway, many freelancers are uncertain about how their income is taxed differently from salaried employees ITR 2025 Filing For Freelancers: With the ITR 2025 filing season underway, many freelancers and consultants are uncertain about how their income is taxed differently from salaried employees. Knowing the distinctions will help you choose the right ITR form, claim eligible deductions, and avoid tax-related penalties. Salaried income is taxed under the head 'Salaries", whereas freelance or consultancy income is taxed under 'Profits and Gains of Business or Profession." This classification determines what deductions you can claim and how you maintain records. Tax Deduction at Source (TDS) Rules For salaried employees, employers deduct taxes at source before paying salaries. In contrast, freelancers must manage and pay their own taxes. When clients pay freelancers, they often deduct 10% TDS and deposit it with the government under the freelancer's PAN. Freelancers should collect Form 16A from clients and match it with Form 26AS to ensure proper credit of the deducted tax. Deductions for Salaried vs Freelancers Personal expenses cannot be claimed. Additional Expense Claims for Freelancers If part of your home is used for work, you can claim a proportion of rent and utility costs as a business expense. Repair, maintenance, and depreciation costs on work-related assets are also deductible. Any expense you claim must be genuine, proportionate, and justifiable. Calculating Net Taxable Income Your net taxable income as a freelancer is calculated by deducting eligible business expenses from total consultancy earnings. Other income—like rent, interest, dividends, or capital gains—is taxed under their respective heads and added to your total income. Deduction Options Under the Old Tax Regime Freelancers, like salaried taxpayers, can claim deductions under sections such as: Choosing the Right ITR Form Freelancers who do not qualify for presumptive taxation must file ITR-3. For example, as a content writer, presumptive taxation rules don't apply, so detailed income and expense reporting is mandatory. Tax rates are the same for freelancers and salaried individuals—the key differences lie in income classification, deduction eligibility, and compliance responsibilities. Staying organised with invoices, receipts, and expense logs is essential for smooth and accurate ITR filing. view comments First Published: News business » tax ITR 2025 Filing: How Tax Rules Differ For Freelancers and Salaried Individuals Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
Mint
25-07-2025
- Business
- Mint
Income tax filing FY 2024-25: Common delays, penalties, and how to avoid them
Many taxpayers delay and put off filing their income tax returns (ITRs) until the last moment. This leads to delay in refunds, avoidable stress and possibility of financial penalties. Even though over the years the process of income tax filing has become simpler, procrastination continues to complicate the process for taxpayers. Here is why delays take place and how you can avoid them this year i.e., while filing the tax returns for the financial year (FY) 2024-25. Taxpayers generally wait for the official release of updated ITR forms along with filing utilities. This usually comes after the previous financial year has ended. Important documents such as Form 16, Form 16A, annual information statements (AIS) are generally available only after mid June. In such a case, filing of tax returns before receiving the complete set of documents may result in data mismatches and incorrect income tax return calculations. Confusion around the default tax regime along with recent updates on the income tax portal have also made many salaried and first time income tax filers hesitant to start early. The income tax submission deadline has also been extended to September 15, 2025 to help taxpayers in filing taxes in a timely manner. Therefore, delays are not just due to technical difficulties. Many taxpayers feel overwhelmed and confused by the paperwork along with the fear of making submission mistakes. There's also a tendency to assume that there is always more time, until the deadline comes extremely close causing more stress. CA Ruchika Bhagat, MD, Neeraj Bhagat & Co., explains, 'Tax filing often takes a backseat due to fear of errors or the mental block associated with finances. People delay it thinking there's always more time, only to panic near the deadline. The solution lies in setting a specific date, breaking the task into smaller steps, and treating filing as a financial responsibility, not a burden.' Set a tax filing reminder: Once you have accumulated all the relevant documents from the official portals such as Form 16, Form 16A, annual information statement (AIS) post the same you should set a tax filing reminder. Set a target of one week or fifteen days within which you will compile and submit your income tax returns. Gather all tax documents early: This includes salary slips, rent receipts, bank interest proofs, Form 16 and investment details along with other similar relevant documents. This will help you in making your tax filing more smooth and seamless. Check Form 26AS and AIS online: To verify income and tax deposited at source (TDS) details match your records as provided on the income tax portal. If required write your entire tax calculation down on a sheet of paper. Compare old vs new tax regimes: To choose the one that gives you the best tax savings. For this you can also take professional guidance after discussing your individual case with a certified Chartered Accountant. Use trusted e-filing platforms: There are several prominent e-filing platforms that you can reach out to and file your tax in seamless fashion. You can also consult a CA for accurate and stress-free tax filing. The objective behind filing taxes early is to try and ensure that you receive refunds faster. Sometimes within two to three weeks. Filing on time also helps in avoiding late fees, unwanted errors and brings clarity and peace of mind. Most importantly it permits you to focus on planning your finances for the rest of the year in an efficient manner. If you miss the ITR deadline for FY 2024-25 i.e., September 15, 2025, then the income tax department may levy a penalty under Section 234F based on your income level. Income level Filing after due date but on or before 31 Dec 2025 Late filing fee (Section 234F) Up to ₹ 2.5 lakh Yes No penalty Above ₹ 2.5 lakh but up to ₹ 5 lakh Yes ₹ 1,000 Above ₹ 5 lakh Yes ₹ 5,000 Note: The above table is illustrative in nature and is open to change and amendments as per the provisions of the income tax act. For personalised legal or tax advice, please consult a qualified tax advisor or lawyer. Therefore, to ensure that you save yourself from the hassle of paying late fines, fees and filing complicated forms it is important for you to take proactive steps and ensure that your income tax return is filed within the stipulated time. Disclaimer: This article is for general information purposes only and should not be considered as professional tax advice. For personalised guidance, please consult a certified Chartered Accountant or a qualified tax advisor.
NDTV
24-07-2025
- Business
- NDTV
ITR Filing 2025: Freelancers Must Follow These Tax Rules To Avoid Heavy Penalties
As freelancing becomes a popular career choice in India, many newcomers often overlook essential tax regulations. Unlike salaried employees, who have their taxes deducted by employers, freelancers are responsible for managing and paying their own taxes. Ignoring these responsibilities can lead to interest, penalties, or even legal notices from the Income Tax Department. One of the key rules freelancers should understand is TDS (Tax Deducted at Source). When a client pays a freelancer, they often deduct 10% of the payment as TDS and submit it to the government under the freelancer's PAN number. It is important for freelancers to collect Form 16A from clients and verify it with Form 26AS to ensure all deductions are recorded correctly. This allows them to claim the deducted tax when filing their Income Tax Return (ITR). GST Registration for Freelancers Freelancers must also be aware of GST (Goods and Services Tax) rules. If their annual income exceeds ₹20 lakh (₹10 lakh in some states), GST registration is mandatory. After registering, freelancers must charge 18% GST on invoices for clients in India. If they are providing services to clients outside India, it qualifies as an export and is exempt from GST. However, GST registration and return filing may still be required. ITR Filing: Forms and Presumptive Taxation Freelancers usually need to file ITR using Form ITR-3 or ITR-4. Under Section 44ADA, they can opt for presumptive taxation, which allows them to declare 50% of their income as taxable without maintaining detailed accounts. In addition, they should keep records of professional expenses like internet bills, software subscriptions, or office rent, which help in reducing taxable income. Consequences of Ignoring Tax Rules Failing to follow tax or GST rules may result in penalties, interest, or legal action. Missing ITR deadlines or not paying advance tax can attract notices from the tax department. Similarly, not registering under GST, when required, can lead to a hefty fine.
Mint
16-06-2025
- Business
- Mint
Here's how to navigate complex TDS rules for online ads, software subscriptions and e-commerce sales
Every month, Ranjani Purohit, a women's apparel manufacturer and seller in Jaipur, has to set aside an extra ₹50,000 just to fulfill her tax deducted at source (TDS) obligations. Purohit is liable to deposit 2% TDS on the advertisements she runs on Facebook, Google and other online marketplaces, but is forced to pay this tax out of pocket, given the nature of these transactions. Big marketplaces such as Facebook and Google demand full payment upfront for running ads, without any deductions. This is contrary to the very definition of TDS, said Lokendra Singh Tomar, a chartered accountant (CA) in Jaipur. 'TDS provisions require the payer to withhold tax at the source, deposit it with the government on the behalf of the receiver, and remit the remaining payment. But big companies such as Google, Meta, Amazon and Flipkart have structured TDS provisions applicable to payments made to them on reimbursement basis." Terms laid out by these marketplaces clearly sate that the business has to make the full payment for prepaid ads. This businesses with no option but to deposit the TDS out of pocket and get it reimbursed later, Tomar added. Cash crunch for small businesses While the reimbursements are honoured in full, the process often blocks substantial capital for businesses with big advertising spends, often creating a cash-flow crunch for small entities. 'The reimbursements can only be filed once every quarter. On an average, ₹1-1.5 lakh of my business's working capital gets blocked for three months in TDS paid towards online ads," said Purohit. Also read: Why cheaper green power is causing losses to Meta, Amazon and Microsoft Apart from online ads, TDS is structured similarly for certain types of fees sellers pay to e-commerce websites and subscriptions of online services such as Microsoft Office, Adobe, and cloud services, among others. Small businesses should be careful to deduct the applicable TDS on such payments as not doing so can attract penalties, and such payments can't be booked as expenses. Mint breaks down these key TDS provisions that small businesses should be aware of. Advertisements Businesses are liable to deduct 2% TDS on advertisements, including online advertisements, under Section 194C when the turnover is over ₹1 crore in business or over ₹50 lakh in profession. The TDS applies if the ad value exceeds ₹30,000 in a single transaction or ₹1 lakh annually. 'The rate is 1% if an individual or HUF (Hindu Undivided Family) is liable to deduct TDS," said Sambhav Daga, a CA and founder of Zaptax Advisors. For online advertisements, after the invoices of all the ad spends done in a month are issued, the businesses should deposit TDS with the government on the basis of those invoices. After filing the TDS return, they must issue Form 16A to the companies on which ads were run and claim the TDS amount back. All marketplaces including Amazon, Google, Facebook and Instagram have dedicated email IDs or support forums on their websites where Form 16A can be submitted to claim reimbursement. Note that all marketplaces have different timelines to claim reimbursements and that these timelines are sacrosanct. For instance, Google asks for TDS certificates to be issued quarterly—by 30 July, 30 October, 30 January and 15 May—for the quarters ending in June, September, December, and March, respectively. Meta asks for all the certificates to be submitted by 31 October for the previous fiscal year. 'The business must furnish Form 16A by the said dates, otherwise the reimbursement may not be processed and they will lose the money deposited as TDS," said Daga. Also read: Amazon finalizing application for satcom licence in India Businesses that run ads on Facebook and Instagram have a way to escape the reimbursement cycle, Tomar said. 'Once a business has been regularly running ads on Facebook and Instagram, Meta can extend a credit line that can be used for ad spends. With a credit line, Meta offers a monthly invoicing system that allows businesses to pay later for the ad spends incurred during a month instead of paying upfront. In this case, the business can deduct TDS at source and escape the reimbursement cycle," he explained. 'However, businesses don't automatically get this facility and have to contact Meta to check their eligibility and avail of it." Prakash Hegde, a CA in Bengaluru, said Section 194C provisions don't apply if the ads are billed by a non-resident entity. 'For many businesses, ad accounts on Meta are not set to the Indian entity and rather Meta Ireland. In this case, the invoice is issued by Meta Ireland and hence, TDS under Section 194C doesn't apply. The other examples are ad invoices billed by Google US or LinkedIn Singapore. Earlier, an equalisation levy of 2% was applicable on these, but it has been withdrawn from the current financial year," he said. Subscriptions and royalties The other important payment where businesses are liable to deduct TDS are fees for software subscriptions. When the subscription is for a service by an Indian entity, for example Google Cloud India, TDS of 10% under is deducted under Section 194-J. However, the subscription fee paid to a non-resident entity attracts 20% TDS under Section 195. For domestic subscriptions, similar to ads, big tech companies ask for the full subscription amount without deduction of taxes for their services. So, the business itself must pay the TDS and claim a reimbursement for it. However, the process becomes tricky when the subscription is for a service by a non-resident vendor. Adobe, for instance, doesn't have an Indian entity so its subscription is billed to Adobe US or Adobe Ireland. In the case of foreign entities, many companies refuse to reimburse the TDS as they are not liable to be compliant with Indian income tax laws and hence don't want the hassle of processing refunds, said Hegde. In this case, businesses have two options – submit the tax residency status of the company to avoid TDS deduction liability or the grossing up mechanism. In the first option, the business should ask the foreign company whose software they have subscribed to for a permanent-establishment declaration and their tax residency certificate (TRC). By submitting these documents, the businesses will not be required to deduct TDS on software subscriptions as per a Supreme Court judgement, said Hegde. 'In its judgement dated 2 March 2021 in the case of Engineering Analysis Centre of Excellence Private Limited Vs The Commissioner of Income Tax, the Supreme Court held that the amount paid by resident Indians to non-resident manufacturers/suppliers of computer software under a distribution agreement or end user licence agreement does not amount to royalty and that such payment is not taxable in India," he said. Hegde added, 'The 20% tax rate is as per the Indian income tax always. But once a business gives a declaration that it doesn't have a business establishment in India along with the proof of its tax residency in another country, the provisions of the double taxation avoidance agreement (DTAA) between India and that country apply. Under DTAAs, software subscriptions are not treated as royalties. DTAA overrides the IT Act and hence, TDS provision as per IT laws doesn't apply." Also read: Mint Primer | Will Meta's smart glasses kill our smartphones? In this case, avoiding TDS depends on the foreign entity's willingness to submit a TRC and establishment declaration. For a small business, it may not always be possible to get these documents from a foreign entity, so the only option is grossing up. Grossing up in income tax means increasing the payment to be made to the recipient to cover the tax that will be withheld on that payment. For example, say an Indian business, ABC, has to pay a ₹10 lakh subscription fee to a non-resident entity, XYZ, and 20% TDS applies. Company XYZ wants the full ₹10 lakh payment. Under the grossing up mechanism, tax authorities will treat ₹10 lakh as the net payment after deducting the 20% tax, so ₹10 lakh becomes 80% of the taxable amount. Now, ABC has to calculate and deposit 20% TDS on ₹12.5 lakh (Rs10 lakh is 80% of ₹12.5 lakh), which works out to ₹2.5 lakh. Vijaykumar Puri, partner at VPRP & Co, said the benefit under grossing up is that the Indian business can claim the entire TDS amount as an expense. 'They will not get reimbursement on the TDS amount, but it can be deducted from the revenue as an expense," he said. However, grossing up should be the last resort to use only if the foreign entity neither agrees to provide a TRC nor reimburses the TDS, as it is an added expense. In the example above, ABC ends up paying ₹2.5 lakh TDS instead of ₹2 lakh. Selling on e-commerce websites TDS provisions for businesses that sell on e-commerce websites changed considerably after the Central Board of Direct Taxes (CBDT) exempted marketplace fees, which include the platform's own commission, from TDS starting December 2023. Earlier, the seller had to pay TDS on the platform's fee and claim a reimbursement on it. Now, the seller only has to deduct TDS on those fees that are not directly related to an order. These include storage fees, ad services fees and inbound transportation fees, among others. Queries sent to the companies mentioned in the article did not elicit an official response.
