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Find out all about Freelancer Expenses

Find out all about Freelancer Expenses : Meet Xyz!

Xyz decided to quit his job in April 2014 and started working as a Freelancer. He developed a windows app and he decided to sell it via his website. He hoped people across the world would purchase and download his application.

Xyz launched his app in Feb 2015 and it went viral. People who purchased his app in India, paid using an Indian Payment Gateway called ‘Superfast’. People purchasing his app from outside India used a foreign Payment Gateway. Both payment gateways charge 4% as commission fees. The total charged to Xyz by the gateways is Rs. 24,000 as commission fees.

Xyz’s earnings in 2014-15 from sales of his app were ~Rs. 6,80,000. Out of that, the portion of the revenue from India was ~Rs. 2,80,000 and the portion of the revenue from outside India was ~Rs. 4,00,000.

Xyz is now confused about how he should go about figuring out his Freelancing Expenses.


Find out all about Freelancer Expenses

Freelancer Expenses 

Xyz’s total revenue from his app is Rs 6,80,000. Since he is a freelancer he is allowed to deduct expenses from his revenue. Xyz starts to list down all the expenses which are directly related to this app revenue.

An office table and chair was rented by him in his apartment so he could work on the app. Rent paid Rs 800 per month. Total Annual Rent = Rs 9,600

Xyz took high speed internet services which cost him Rs 1,000 per month. Total Internet Costs = Rs 12,000.

Xyz also had a couple of meetings where he used a cab to reach and spent money with a few consultants who make apps and understood from them about the finer details of launching the app. Total expenses = Rs 8,000

He decided that he needed to hire a person to test his app and that he would need this person to work with him for 2 months. Total expenses = Rs 35,000

He also had domain registration expenses of Rs 10,000 and additionally Rs 2,000 to get the temporary hire started up on the work. Total expenses = Rs 12,000

Depreciation on laptop (Xyz purchased a laptop for Rs 60,000 and 60% depreciation is allowed on laptops as per the income tax act). Rs 36,000

Xyz also purchased insurance for his laptop for Rs 8,000

His telephone expenses of Rs 36,000 for the year, of which Xyz allocated 50% as directly related to his freelancing work. Rs 18,000

Also payment gateway commission of Rs 24,000 shall be included.

So with the information Xyz gave, this is the detail of his Income from Business/Profession or simply the Income of his Freelancing work. Below his ‘Net Profit’ or ‘Freelancing Income’ is also calculated which is Rs 5,17,400 for the financial year 2014-15


Find out all about Freelancer Expenses

In my next blog , we will see how Xyz will compute his taxable income and finally arrive at how much tax he needs to pay to the government.

Find out all about Freelancer Expenses


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Find out all about Freelancer Expenses


Find out all about Freelancer Expenses

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