NOTE: The content of this article is relevant to self-employed Indians.

Freelancing is affectionately called “additional income” for many reasons. Some want their hobby to pay for itself, while for others, it’s all about “testing the waters” before making the big decision. But that’s beside the point. The point is that self-employment income is actually INCOME, however small. AND, “Any income derived from self-employment is taxable according to the provisions of the Income Tax Law. 1961 as “Business / Profession Profits and Gains”.

Most freelancers are not aware of this particular law. (Income Tax Act of 1961), which is also because they do not pay income tax. But ignorance of the law is not acceptable and said self-employed person could face legal punishment for not paying income tax.

As a freelancer, not all of us have the affordability of hiring a registered accountant, not to mention the fact that freelancers are wary of disclosing our sources of income to someone else, unless the person is a family or an individual. very very trusted friend. Eventually, that leaves us to do our taxes and do the paperwork.

But, all finance related websites (government or otherwise) are so loaded with jargon that it becomes increasingly difficult for a person who has no financial background to understand and do their tax calculations on their own. As a self-employed person, I fully understand and sympathize with the self-employed partner.

Here is a short e-book synopsis on how self employed Indians can handle their income tax calculations, until such time as they are ready to hire the services of a registered accountant:

1. For the 2013-2014 appraisal year, if you earn more than 2.50,000 per year, you are obligated to pay taxes.
2. Typical freelancers manage multiple clients and use multiple payment gateways to earn revenue (in other words, clients’ payment for services / products provided). It is essential to separate income transactions from bank statements from personal transactions to avoid calculation mishaps.
3. Business-related expenses such as paying for a printer cartridge, a new PC, domain hosting charges, etc., are deductible from your total income. Income tax is calculated on the resulting amount.
4. Depreciation of assets when claimed reduces the final tax payable to a considerable extent.
5. In addition to business-related expenses and asset depreciation, certain specific sets of investments are entitled to tax deductions under 80C. (eg PPF, home loan, etc.)

Taxable Income = NET Income – Total Deductions

Use this table to know the% of taxes to pay on your taxable income

Govt.Of.India allows its citizens to pay taxes online through its website.

This makes all income tax calculation and payment easy and convenient, without having to queue at banks or the income tax office.

Every citizen with income is obliged to pay taxes to the government to contribute to the growth of his country. However, some of us do not have the correct information on this matter. This e-book is intended to be an educational manual for self-employed Indians, so that they can do their own taxes, until such time as they can afford a CA.