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Freelancer Tax Computation

Freelancer Tax Computation: How much tax will Xyz pay?

In my last 2 blogs we looked at the expenses that Xyz can claim against his freelancing income and total taxable income for Xyz. Today, let’s help Xyz find out how much tax he needs to pay.

We had a chat with Xyz and here all the details he shared with us.

A PF of Rs 1,200 was deducted by Xyz’s previous employer. A TDS of Rs 2,000 was also deducted.

On his Fixed Deposits a TDS of Rs 1,200 was deducted by the bank.

Xyz purchased a life insurance policy of Rs 50,000 where the sum assured is Rs 4,50,000. Xyz also has a PPF account in which he contributed Rs 60,000 in December 2014.

Xyz also purchased a health insurance policy and paid a premium of Rs 12,000, since he no longer had a health cover from his employer.

Xyz also purchased an ELSS mutual fund on the advice of a friend by investing Rs 25,000 in January 2015.

This is how Xyz’s tax shall be computed.

Investments eligible for deduction under section 80 C- EPF of Rs 1,200 deducted by the previous employer. Life insurance policy premium of Rs 50,000, Investment in PPF of Rs 60,000 and purchase of ELSS fund of Rs 25,000 – all these qualify for deduction under section 80C. Total Rs 1,36,200

For purchase of a health insurance policy a maximum deduction of Rs 15,000 can be claimed under section 80D. Therefore, Xyz can claim the entire premium of Rs 12,000.

Xyz can also claim deduction under section 80TTA for interest on savings bank account of Rs 7,800. Maximum deduction available under this section is Rs 10,000 or interest earned.

TDS deducted Rs 2,000 by previous employer and Rs 1,200 by Bank on Fixed Deposit Interest.

Below is the tax computation for Xyz.


Freelancer Tax Computation

Total tax payable by Xyz is Rs 32,582. Do note that Xyz has not paid any advance tax and since his tax liability exceeds Rs 10,000 in one year – Xyz should have paid advance tax. Since no advance tax has been paid by him interest shall be charged under section 234B and 234C.

In my next blog we will look at whether xyz should be concerned about applicability of other taxes like VAT, TDS, Service Tax etc.

Freelancer Tax Computation


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Freelancer Tax Computation

Freelancer Tax Computation

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