Freelancers and Taxes
What are the expenses that can be claimed as a deduction against income?
- Rent of the property
If you take a property on rent for carrying on your work, rent paid by you is allowed to be deducted.
- Repairs undertaken
If you have agreed to pay for repairs to the rented property then these repair costs can be deducted. If you own the business property and carry out repairs those are also allowed to be deducted. Any repairs to your laptop, printer, equipment are also allowed to be deducted.
When you purchase a capital asset, the benefit of such an asset is usually expected to last more than a year, such assets are capitalized and not charged to expenses when they are bought. Every year a small portion of its cost is expensed and is allowed to be reduced from your income. This expense which is charged every year is called depreciation.
For example, when you buy a laptop for Rs 60,000 to carry on your freelancing work – the Rs 60,000 will be considered your asset and assuming a straight line depreciation of 33.33% each year (depreciation % and methods are laid out in the Act for different type of assets, hypothetical rate here for ease of understanding), every year Rs 20,000 shall be charged as expenses. And in 3 years we would consider the asset to be fully depreciated. Note that, the type of assets, methods of depreciation and rates of depreciation to be charged as per the Income Tax Act are laid down by the Act itself and those shall be applied.
- Office expenses
Expenses incurred to carry on your work such as printer, office supplies, your monthly telephone bills, internet bills or conveyance expenses.
- Travel Expenses
The cost of travel to meet your clients within or outside of India is allowed as a deduction.
- Meal, entertainment or hospitality expenses
When you do client meetings, when you take your clients out for dinner or some other outing and money has been solely spent with the intention of getting new business or retaining existing business.
- Local taxes and insurance for your own business property
- Domain registration, apps purchased to test your product are also allowed as expenses.
Freelancers and Taxes
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