Income Tax for the Self-Employed: All You Need to Know

Income tax return (ITR) can be difficult to understand for a salaried individual or a business owner. However, it’s even more challenging when you are self-employed because of the non-traditional ways of income generation.

The following are some of the things to keep in mind when filing your ITR as a self-employed professional:

ITR Form and TDS

The correct ITR form for the self-employed individuals is ITR-4. In addition to that, you should be aware of Section 194J of the Income Tax Act of 1961 which pertains to TDS deduction of 10% of the payments made to you. To be specific, your clients will deduct 10% TDS on the payments made for your services when the total amount exceeds Rs. 30,000 in a financial year.

Note: The TDS is deducted in advance. However, when you file your ITR, then you can claim a refund on the same in accordance with your actual taxable income. For example, if your annual taxable income falls within the Rs. 2.5 to Rs. 5 lakh bracket, then the income tax rate is 5%. Since the TDS deducted in 10%, you can claim 5% of the TDS.

The table below explains the various tax slabs for FY19:

Tax Benefits

Apart from the conventional tax-saving methods including interest paid on a home loan, contribution to PF, insurance premiums, etc. you can also deduct your business expenses from your taxable income. These include traveling costs, equipment purchased for the business, etc.

Filing an ITR isn’t too complicated if you know the fundamentals. Plus, you can file your ITR online easily through the e-filing portal which is https://www.incometaxindiaefiling.gov.in/

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