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    How freelancers can save tax

    Last Updated On 20-07-2016

    Filing income tax returns for a freelancer is a complex process. Their salaried counterparts have it easy because of the Form 16 they receive and the TDS that is automatically deduced on their behalf. But freelancers have a lot more due diligence to do and aspects to take care of.

    Hence, it is normal for freelancers to get nervous about filing their taxes. Because of lack of knowledge, they also miss out on a number of ways that they can use to save taxes. There are expenses related to work that freelancers can claim to pay less tax. Let’s take a look at these expenses:

    1. Workplace costs
      The money that you pay for a place to work is a deductible expense. This could be the rent paid for a proper office. Even if you work from your own home or parent’s home, you can claim a reasonable portion of the expenses. Typically, this can be done by claiming the portion of rent paid to your parents as supported by an agreement. This rent can be claimed as your freelance business expense. In case you work from your own home, you can attribute a portion of the maintenance charges as freelance work expenses. 
    2. Asset costs
      Every freelancer uses equipment like a laptop, a computer, a printer, a mobile phone, etc for their work. Freelancers can claim depreciation on these assets. Depreciation means a part of the cost of owning and using the asset can be considered as an expense and deducted from the freelancer’s taxable income. This depreciation cost can be claimed every year till the cost of asset is exhausted.
    3. Daily costs
      Freelancers should maintain a proper record of all expenses made for the day-to-day running of their work. These expenses can include electricity costs, telephone costs, interest costs, courier charges, commute charges, stationery costs and even meal and entertainment costs incurred on clients. If a proper record of these expenses is maintained in the form of receipts and invoices, the freelancer can claim them as deductible expenses. 
    4. Travelling expenses
      Business travel expenses can also be claimed as deductible expenses by freelancers.
    5. Subcontracting costs
      Quite often, a freelancer has to employ another person to help with some aspect of their work. The payments that you make to such a person are deductible as subcontracting costs. Remember to deduct TDS on these payments when they go beyond the defined limits and this TDS has to be properly deposited by you. 

    Apart from these expenses that freelancers can claim, they can save and invest in Section 80C deductions of the India Income tax laws (“ITL”). These include investments  like, PPF, ELSS funds, tax-saving fixed deposits, etc upto the overall limit prescribed under Section 80C of the ITL. Freelancers can also claim deductions on life insurance, medical insurance,  children’s tuition fees, etc upto the overall limit prescribed under various sections of the ITL.

    To know more about term plan, term insurance, long term savings visit PNB MetLife website.


    • *Tax benefits are subject to conditions and other provisions of the Indian tax laws and are subject to amendments made thereto from time to time.


    The aforesaid article presents the view or an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ before making any decision.

    PNB MetLife India Insurance Company Limited, Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka.
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    The marks “PNB” and “MetLife” are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
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