RTI filing for fiscal year 2020-21 | Self-employed for a salary? Know the key elements before switching to the new tax system
Self-employed for a salary? Know the key elements before switching to the new tax system
New Delhi: Freelance generally means being hired temporarily to take on and complete specific assignments. You get paid immediately upon completion and submission of the assignment.
In the aforementioned cases of self-employment, an individual is not an employee of the company and therefore is not on their payroll. He is not entitled to the benefits (such as the contingency fund) as mandated by the Companies Act. A person does not have to come to the office. He may carry out the assignment at his leisure (in accordance with previously agreed guidelines) from any location convenient to him.
The 2020 Union budget introduced a new tax regime with lower tax rates but also fewer tax deductions available to a taxpayer. This is the first tax year in which taxpayers can choose to opt for the new tax system. The budget bill also allows taxpayers to switch between the old and new tax regimes in subsequent tax years.
Any income you earn by displaying your intellectual or manual skills is the income from a profession according to the income tax laws in India. This income will be taxable as “Profits and gains from a business or a profession”. Your gross income will be the sum of all the receipts which you will obtain within the framework of the exercise of your profession.
All the receipts received by a person in the exercise of his liberal profession would constitute his gross turnover. The expenses incurred by a self-employed person within the framework of his profession are deductible for the calculation of taxable income.
Say, Raj is a freelance photographer and earns around Rs 70,000 per month. Expenses incurred by Raj in relation to his profession, such as repairs and maintenance of his equipment, salaries paid to assistants, transportation, expenses incurred for client appointments, etc. would be deductible of Rs 70,000 to calculate his taxable income. In addition, he has the right to claim depreciation on the equipment / fixed assets he uses for his work, like cameras, drones, etc.
If a self-employed taxpayer switches to the new tax regime in the current tax year, he will only be able to revert to the old regime once in his life. Once he exercises this option to revert to the old tax regime, he can no longer opt for the tax rates of the new regime.
The self-employed, professionals and people with business income must choose between the two regimes just before filing their income tax return (RTI). Those who have not yet filed their ITRs this year are advised to carefully calculate their tax liability under both options before choosing the new tax regime, as they can only opt out once per day. ‘to come up.