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TAX IMPLICATION ON FREELANCER WORK IN INDIA

Being inspired by many article published in CAclubindia, I wish to write my first article. I request the readers to comment upon the same and any feedback and suggestion to improve in any way will be taken in an appreciable manner. Thank you.

In this emerging India where e-commerce is growing at large place, use of this market place is not only restricted with respect to transaction in goods but also this facility is used for transacting in services. Even it is forecasted that the market will grow by more than 100 times by 2025.

So it’s good to find a business opportunity in this field. Moreover Services in online service providing have special sites and the users of such sites are commonly known as freelancers. (More discussion on who are freelancer and their work are discussed below in this article) but remember that when you flourish the government is keeping eyes on you for collecting their revenue from your earnings. So it’s better to clearly find out what tax implication one would have to keep in mind while providing such freelance service.

Before moving directly into tax implication let us first clear out what actually is happening in such market:

In such market people provides their services either skilled or unskilled in various fields like designing software, administrative, contractual work perform something specific, data entry, business services like accounting, book keeping, HR/Payroll , copywriting, web development, sales and marketing and much much much more. Thus there is wide scope of expanding business online.

These services are provided over the internet at some specific websites like odesk.com, freelancer.com, elance.com and many others are emerging. The person providing services are known as freelancer and the work is known as freelance work. The work may be for short term or long term on hourly rate basis or on fixed rate basis.

Thus the Freelance in India will have to born direct and indirect taxes.

IMPLICATION OF DIRECT TAX:

DIRCET TAX COMPONENTS can be observed under following heads:

A) Tax Deduced on Source

TDS needs to be deducted if service receiver who is paying to freelancer is liable for audit under Sec 44AB.Further either of the following condition should be satisfied:

a. The person providing the professional service or contractual service is resident and the person receiving the service is also a resident.

b. The person providing is a non resident but such person is providing to a person who is resident in India as there is income is deemed to accrue in India.

B)  ADVANCE TAX:

Advance tax is the income tax payable if your tax liability is more than Rs. 10,000 in a financial year. It should be paid in the year in which the income is received. Advance tax is applicable when an individual has sources of income other than his salary. For instance, if an assessee earns income via capital gains on shares, interest on fixed deposits, winnings from lottery or races, capital gains on house property besides his regular business/salaried income then after adjusting for expenses or losses he needs to pay advance tax. 

Therefore a freelancer (will be considered as self-employed) needs to pay advance tax if his total tax liability exceeds Rs 10000/- as income from freelance work will be considered under the head income from business and profession. Advance tax needs to be paid under different dates after estimating the income for the year.

C) INCOME TAX LIABILITY

This is normal tax liability payable by an assessee after taking all his income under all the heads and deduction under chapter VIA and considering the amount paid uner advance tax and TDS deducted.

Indirect tax (Service tax) implication being important and little longer will be uploaded in next part.


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Category Income Tax, Other Articles by - JAINENDRA JAIN 



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