Income Tax Return: Tax Saving Deduction for Freelance Professionals; How can they file ITR?

Many professionals in India have chosen to work as freelancers. Freelance professionals must also pay tax, which is classified as Profits & Gains of Business & Profession. Freelancing is more profitable currently since income tax in India for freelancers is quite lucrative, with several favourable tax rules and savings chances.

As a freelance professional in India, you must file an Income Tax Return (ITR) differently than salaried individuals, although the tax rates remain the same. Depending on your business or profession, you must file either an ITR-3 or an ITR-4. Since the Assessment Year (AY) 2017-18, freelancers can choose presumptive taxes by submitting ITR-4, claiming 50% of their gross receipts as income. It’s critical to remember that if your total income for FY 2022-23 exceeds INR 2.5 lakhs, you must file tax filings.

It is critical to have all of your personal information, revenue data, and financial particulars on hand when submitting your tax return, including eligible tax-saving investments made throughout the year and tax audit reports.

As a freelance professional, you are eligible for multiple tax breaks under the Income Tax Act, including Sections 80C, 80CCC, 80CCD(1), 80CCD(1B), 80CCD(2), 80D, 80DD, 80DDB, and 80E. Keep in mind that only the Section 80CCD(2) deduction is accessible to taxpayers who choose the New Tax Regime.

Taxpayers should maintain the following information on hand when preparing their tax returns:

• Personal information such as an address, contact information, bank accounts, Aadhaar numbers, and so on.
• Revenue details, including gross receipts, costs, other income, and eligible tax-saving investments made during the year, as well as any tax audit report.
• Financial information such as assets (both domestic and foreign), bank balances, cash balance, debtors, creditors, loans and advances, and any other liabilities, as well as capital balance.

Tax deductions to avail as a freelance professional:

Freelance professionals are eligible for the following tax breaks. It is important to remember that taxpayers who choose the New Tax Regime are only eligible for the deduction under Section 80CCD(2).

Section 80C

Life Insurance Premium Provident Fund Subscription to certain equity shares Tuition Fees National Savings Certificate, Housing Loan Principal, and Other Miscellaneous Items Section 80CCC Annuity plan of LIC or other insurer towards Pension Scheme.

Section 80CCD(1)

The Central Government Pension Scheme on the deductions indicated above, there is a combined limit of 1,50,000/-.

Section 80CCD(1B)

Deduction for payments made to the Central Government Pension Scheme, excluding deductions claimed under 80CCD (1), a maximum deduction of 50,000/- is available in this regard.

Section 80CCD(2) (Available in New Tax Regime also)

Employer contribution to the Central Government Pension Scheme. If the employer is a PSU, state government, or other: A salary deduction of 10% is allowed. If the employer is the central government, the deduction ceiling is 14% of the pay.

Section 80D

Deduction for payments paid towards health insurance premiums and preventive health screenings for self/spouse, dependent children, and parents. 25,000 (50,000 if any individual is a Senior Citizen). If no premium is paid for health insurance coverage, it can also be used to pay medical expenses incurred by a senior citizen. 5,000 for a preventive health checkup, which is included in the above limit.

Section 80DD

Deduction for contributions made towards the maintenance or medical care of a disabled dependent, or for any amount paid/deposited under relevant approved schemes. A flat deduction of 75,000/- is available for a disabled person, regardless of expense incurred. If the person has Severe Disability (80% or more), the deduction is Rs.1,25,000/-.

Section 80DDB

Deduction for costs paid for self- or dependent-care medical treatment for specific diseases. Deduction limit of 40,000/- (Senior Citizen 1,00,000/-).

Section 80E

Deduction for interest payments paid on a loan for higher education for oneself or a family member. The total amount paid in interest on the loan can be repaid.

Freelance professionals can lower their tax bills and boost their savings by investing intelligently and planning their taxes correctly. As a result, tax planning is an important component of personal finance that all freelancers should evaluate and implement with the help of a knowledgeable finance professional.