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Moonlighters! The Ultimate ITR Guide for Freelancing Income Tax of Freelancers

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Moonlighting by freelancing? Don't get taxed in the dark! This ultimate guide demystifies ITR filing for freelancers.Save money & avoid penalties. File like a pro - Read Now!

Moonlighting, the act of taking on a second job alongside your primary one, has become increasingly popular, especially in the IT sector. But with this extra income comes the responsibility of filing your Income Tax Return (ITR) correctly. Here's a breakdown to help you navigate the process:

Which ITR Form to Use?

If you're a salaried employee and your only additional income is from freelancing, you typically use ITR-1 (Sahaj) for filing your taxes
However, income from freelancing is considered "income from profession," not just the total amount you receive.

Claiming Expenses and Benefits:

The good news is you can deduct legitimate expenses incurred while freelancing to reduce your taxable income
This can include things like internet data charges, electricity bills used for your work, and subscriptions to professional tools.

Here's the Magic Number: Rs. 50 Lakh

If your total freelancing income for the year falls under Rs. 50 lakh, you can take advantage of a special tax benefit
Under the presumptive taxation scheme, you only need to declare 50% of your gross receipts as taxable income.

Let's see an example:

Imagine Suresh earns Rs. 16 lakh from freelancing and Rs. 20 lakh from his regular salary
His total income becomes Rs. 36 lakh
But since his freelancing income is under Rs. 50 lakh, he can declare only Rs. 8 lakh (50% of Rs. 16 lakh) as taxable income from freelancing.

Don't Forget Regular Deductions!

Even with freelancing income, you can still claim tax deductions
Tax deductions can be claimed under popular sections like 80C (investments) and 80D (medical expenses) to further reduce your tax liability.

Planning and Advance Tax:

Remember, it's wise to estimate your quarterly freelancing income and pay advance tax if needed
This helps avoid penalties for late tax payments.

Stay Compliant and Informed:

Managing your moonlighting income effectively goes beyond just filing your ITR
Staying updated on tax regulations and being compliant with tax authorities is crucial.

Key Takeaways:

Moonlighting income needs to be declared in your ITR.
Use ITR-4 for freelancing income.
Claim legitimate freelancing expenses.
Benefit from the presumptive tax scheme if under Rs. 50 lakh income.
Don't miss deductions under sections 80C and 80D.
Pay advance tax if needed.

By following these simple steps, you can ensure your moonlighting journey is not only financially rewarding but also tax-compliant. Remember, staying tax smart and filing your ITR on time are essential for responsible financial management.