Being your own boss comes with its own sets of pros and cons. You will be solely responsible for overseeing all the minute details, especially when it concerns paying taxes on time or furnishing every data related to your business. Here's how self-employed should efile their taxes.
By Vikas Dahiya
Stepping into the world of entrepreneurship is an exciting as well as a nerve-racking decision. As an owner whose business is still in its infancy, there are several things you must do to avoid tax-related complications. Running your business as a freelancer doesn’t involve as many formalities since any monetary transaction can be directly processed via any of your existing bank account. Freelance business owners and self-employed professionals fall under the tax slab of income from business or profession, which is why there will be no requirement to file separate income tax returns (ITRs) like corporations do. The best way to file for claims with zero error is to seek the help of professional solution providers.
Determining Taxes as per the I-T Act
If you have been collecting service tax or VAT against your business and have a turnover of Rs 20 lakh or more in FY 2016-17, then you must immediately register for GST (effective from July 1, 2017). If your current turnover is less than the limit but the expectant turnover for FY 2016-17 is over Rs 20 lakh, then you must register for GST as well.
If you have Domestic Clients
The Income Tax Act mandates that the clients should make TDS (10% of the total income) on every payment received for the goods or services your business provides.
Benefits of this TDS:
# The TDS will be applicable against your total tax liability.
# Any excess payment on TDS can be claimed as a tax refund or be utilized for clearing additional dues (if any).
# The TDS which has been made will be linked to your PAN.
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If your Clients are Based Overseas
Payments from your foreign clients usually get credited through PayPal or as a direct transfer to bank account. TDS under such conditions will be processed as per the respective local law of your client. Register under Double Tax Avoidance Agreement (DTAA) so that taxation on your income is not deducted more than once.
Maintaining Every Audit Report
Being your own boss comes with its own sets of pros and cons. You will be solely responsible for overseeing all the minute details, especially when it concerns paying taxes on time or furnishing every data related to your business.
# Keep an updated record of all your bank statements, receipts, invoices etc. in your Google Drive.
# Get registered on the official website of the Income Tax Department. This will help in keeping tabs on all the TDS plus your tax liabilities.
# Download an updated document of your Form 26AS.
# Investments and deductions are available for every taxpayer. Take full advantage of these benefits and file for such. (example; Investing under Section 80).
Things to know if you want to employ assistance
# Salary payments for contract services are tax-deductible which can be claimed by you under business expense while filing for tax return.
# First thing to do before crediting salary to your employees is to make TDS from their salary under Section 194C. The Income Tax Act states that as an employer you will be responsible for issuing Form 16A to your employees.
If you are still doubtful on the procedure and need assistance then you can seek the help of professional Chartered Accountants from reliable sources.
Few Pointers Provided by All India ITR for Self-Employed Individuals on E-Filing
# Audit your overall income within the relevant financial year.
# Choose the correct e-filing form.
# Submit the details of TDS.
# Claim for refund on TDS before the due date.
# Claim for business expenses to decrease tax burden.
# Don’t wait for the last minute to file your returns.
# If there are any advance tax due then clear the due.
How to Save More on Taxes
As a self-employed person, e-filing for returns on expenses related to your business is the best tax saving means. Here are some ways through which you can e-file for returns or deductions and save on taxes;
# E-filing for deductions under Section 80 which can be claimed even by self-employed individuals.
# E-filing for claim deductions under Section 80C (applicable for PPF account holder, investments in ELSS, LIC policy purchases).
# E-filing for deductions under section 80G (applicable on donation contributed towards a charity).
Don’t forget to furnish a precise record of every bill related to the business. A few of the above-mentioned procedures are easy and can be done on your own. In case of complicated procedures you can always rely on the solutions offered by us.
(The author is Founder and CEO of All India ITR)