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Income Tax for Freelancers – 5.TAXABLE INCOME & Calculate INCOME TAX

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5.1 Calculate TAXABLE INCOME

Taxable Income = NET Income – Total Deductions
This is the actual non-savings part of the NET income upon which one is expected to pay tax to the government.

TABLE 4 –Taxable Income
NET Income from Table 2
Total Deductions from Table 3

(Difference)
Taxable Income  

Next step is to ascertain where your Taxable Income fits in the Income Tax slab table.

5.2 Compute INCOME TAX

Income Tax is calculated on the NET Income.
Use this table ( & a calculator )to compute your Income Tax that need to be paid

General tax payers
Income tax slab (in Rs.) Tax

Approx Tax Amount in Rs
0 to ₹ 2,00,000 No tax   0.00
₹ 2,00,001 to ₹ 5,00,000 10%  ₹ 20,000  – ₹ 50,000
₹ 5,00,001 to ₹ 10,00,000 20%  ₹ 1,00,000 – ₹ 2,00,000
Above ₹ 10,00,000 30%  >₹ 3,00,000

Female Tax Payers
Income tax slab (in Rs.) Tax  
₹ 0 to ₹ 2,00,000 No tax   0.00
₹ 2,00,001 to ₹ 5,00,000 10%  ₹ 20,000 – ₹ 50,000
₹ 5,00,001 to ₹ 10,00,000 20%  ₹ 1,00,000 – ₹ 2,00,000
Above ₹ 10,00,000 30%  >₹ 3,00,000

Senior citizens (Aged 60 years but less than 80 years)
Income tax slab (in Rs.) Tax  
0 to₹  2,50,000 No tax  0.00
₹ 2,50,001 to ₹ 5,00,000 10%  ₹ 25,000 – ₹ 50,000
₹ 5,00,001 to ₹ 10,00,000 20%  ₹ 1,00,000 – ₹ 2,00,000
Above ₹ 10,00,000 30%  >₹ 3,00,000

Very senior citizens (Aged 80 and above)
Income tax slab (in Rs.) Tax  
0 to ₹ 5,00,000 No tax  0.00
₹ 5,00,001 to ₹ 10,00,000 20%  ₹ 1,00,000 – ₹ 2,00,000
Above ₹ 10,00,000 30%  >₹ 3,00,000

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Income Tax for Freelancers – 6. PAY INCOME TAX (Online)

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6. Pay Income Tax Online

If the tax-liability (in other words, the amount of tax that need to be paid) is more than ₹ 10,000/-, then the individual is expected to pay this amount in advance before 31-March (of the assessment year) If the tax liability is less than ₹ 10,000/- ,  the assessee is  liable to pay this amount as Self-Assessment Tax before Filing Income Tax Return (on or before 31 July)
Laptop-SmileyOur Income Tax Department has put forth clean and simple how-to on payment of Income Tax, E-Payment Procedure by Income Tax Department, Govt of India.
IncomeTaxSite
From the overview of things, this looks pretty simple and easy to do. But, as with most govt sites, we never know until we try  it out. But then, we can’t really “try out” on Govt. sites.. isn’t it? So, the next best sensible thing to do, was to ask the experts. Taxmantra came forward with the response, and it is most certainly encouraging. Read on !
DGQuestion
So, did you (your associates) use the information in this link to pay taxes online?How was the experience ? Any glitches ?
Do you recommend this to a first time tax payee?
(if no, what other alternatives do you recommend?)
Taxmantra.com Says –

Taxmantra

This system of online payment of Income Taxes is not new and now has established itself as most preferred way of paying taxes online. Infact, there is no other option to remit taxes, if you wish to make payment online. Either, you can directly log on to this page to pay, or if try out from your bank’s online banking, it would take you to this page itself. 

This system has improved a lot and does not have much hitches.

Anyone can make use of this to make payment, the only thing to be noted here is that, there are some taxation terms, which needs to be kept in mind. Like, AY, Nature of payment. We have noticed at times, users make mistake in choosing right terms.

Just so that you are able to get an idea, here is an example calculation

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Income Tax for Freelancers – 7. DUE DATES for Individuals & Example Calculation

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7.1 Due Dates for Individuals.

For Individuals (Freelancers) Due Date
First Instalment – Advance Tax t [30%] 15 September
Second Instalment – Advance Tax t [60%] 15 December
Third Instalment – Advance Tax t [100%] 15 March
Income Tax Return [Not-Audited] 31 July *
Income Tax Return [Audited] 30 September
t Delay in payment of Advance Tax attracts interest under 234B and 234C of the I T Act.
* Income Tax Return in case of a Tax-Payer, whose accounts are not required to be audited under any law, can be filed till the end of the assessment year that is 31 March. However,  there may be liability to pay Interest u/s 234A for delay in Filing Return.

7.2 EXAMPLE

TOTAL  Income =

₹ 5,00,000
(Salary / income from freelance services, Fees, Honororia, Interest from Fixed Deposits, Post office savings scheme etc)
Income upto Rs.20,00,00 not taxable

– ₹ 2,00,000
 
 

₹ 3,00,000
Contribution made towards PPF, LIC Premium etc (All put together upto a total of 1 Lakh Rupees, 1,00,00/-

-₹ 1,00,000
Taxable Income
 

₹ 2,00,000
Tax payable at 10 %

 =

₹ 20,000
Education cess (3% of tax payable)

 =

+ ₹ 600
TOTAL TAX PAYABLE  including cess
 

₹ 20,600

Thanks to CodeCogs for this wonderful Equation Editor for webpages.

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Income Tax for Freelancers – 8. BOOK OF ACCOUNTS & AUDITING

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8. Book of Accounts & Auditing

when your freelancing business flourishes

Everyone wants to thrive in his/her business, and freelancers are no exception. We continue to be in operation with the vision of “making it big”.  So, it is only fair to equip ourselves with the knowledge of “What to do”…. “When we actually get there”.
I believe that unlike some, most of you (like me) have very limited knowledge of financial jargons. Yet, this is no excuse for not-educating oneself. Let us get started.. now that it involves “money-matters”…

A.      Book of Accounts

Definition: “Books or books of account includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in floppy, disc, tape or any other form of electro-magnetic data storage device”. This is an inclusive definition.” – Source : Taxguru

In other words, you need to maintain records of income, expenses, receipts, bills for all transactions exceeding ₹ 50/- Be informed (forewarned) that you are required to preserve these books for at least 6yrs.
Gross Receipts (Definition):

Gross receipts are the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses.

B.      Auditing (& of course, Auditor)

The book “An Introduction to Indian Government Accounts And Audit” [page 14, para 1.9] issued by the Comptroller and Auditor General of India, defines audit as

  “An Instrument Of Financial Control. It acts as a safeguard on behalf of the proprietor (whether an individual or group of persons) against extravagance, carelessness or fraud on the part of the proprietor’s agents or servants in the realization and utilization of the money or other assets and it ensures on the proprietor’s behalf that the accounts maintained truly represent facts and that the expenditure has been incurred with due regularity and propriety. The agency  employed for this purpose is called an auditor.”

 In simpler terms, auditing means, to check the accuracy of the financial statements (income , expenses, profit&loss) and detect any errors or fraudulent transactions, which should be duly recorded and reported.

Nirmal_CA

Nirmal Says,

Requirement of Maintenance of Accounts

 “ If your Gross Receipts from Freelancing / any Other Business / Professional exceed ₹10 lakhs or income exceeds ₹1,20,000/-  in the Financial Year then you are liable to maintain books of accounts”

Requirement of Audit

“If your Gross Receipts from profession exceed ₹25 lakhs or from Business exceeds ₹1 crore in a financial year, you are liable to get your accounts audited by a Chartered Accountant.”

Ref : Simpletaxindia

“Income from freelancing is then a part of Gross Total Income, just like your Income from Salary, or Income from House Property or Other Sources (Interest incomes, etc). All deduction which are available u/s 80C such as PPF, LIP , etc to name a few, are available from Gross Total Income.
When the income includes ‘Income From Business / Profession’, then applicable Income Tax Return Form is either ITR 4S [Income from Business is assessed a Presumptive Rates] (OR) ITR  4 [For all Business(es) including Audited]”,

See http://canirmalg.wordpress.com/disclaimer/  disclaiming liability on behalf of the author / persons giving inputs and making reviews, etc.

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Income Tax for Freelancers – IT RETURN & Recommended Reads

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9. FILE INCOME TAX RETURN

tiredSmileyPhew !.. that will be for another post… later.
I am exhausted already…
So until then, ciao !!!
 
 
 

Recommended Read

✔ Go to First post, and Read again !!!
✔ http://wirc-icai.org
✔ http://www.simpletaxindia.net
✔ http://taxmantra.com
✔ http://www.accounting-n-taxation.com
✔ http://www.taxfaq.in/
✔ http://charteredclub.com

Disclaimer, Now that you have read it all
DeepaGovind
I am not an expert at accounts/taxation issues. The information shared with you here is compiled after extensive research and multiple reviews from certified CAs.
The purpose of this article is to enable you to make an “informed-start” on Income Tax computations, and does not claim to be a complete guide in itself.
All the information in this e-book has been obtained via google search.i.e to say, this is publicly available data. I have made an attempt collect and compile only those details which I personally feel that is relevant to fellow freelancer. More so like, one-freelancer-to-another.
I believe you too would agree that there is no “one size fits all” when it comes to taxation issues. There are multiple factors involved. So, it is THE BEST to connect with a CA and discuss things on a case-by-case basis.
Yes, they are highly priced. But, that is the price we ought to pay for their expertise. Let us respect that. One way to go about this would be to group yourself with fellow freelancers and negotiate on the price for bulk processing. But then, it is ultimately the CA’s decision to take your group, AND / OR, your decision to approach a CA on your own

 ~Deepa Govind

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Income Tax for Freelancers – Table of Contents

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  1. Income Tax for Freelancers, Make an Informed start
  2. Disclaimer and Acknowledgements
  3. Foreword and Introduction
  4. Tax Payee or not ? Where do you fit in ?
  5. Calculate Total Income
  6. Business Related Expenditure
  7. List of Deductions and Exceptions
  8. Calculate Taxable Income & Compute Income Tax
  9. How to pay Income Tax online (Advance Tax)
  10. Due Dates ( for Individuals) & An Example Calculation
  11. Book of Accounts and Auditing
  12. File Income Tax Return (Not included in this series), Recommended Reading & Discalimer (Again, but a different one !)
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Resume Revolution: Exploring VisualCV

Curriculum vitae (CV): A short account of one’s career and qualifications prepared typically by an applicant for a position. (Merriam-Webster Online)
A Curriculum Vitae , CV, or Resume is most definitely the job-seeker’s gate pass to establish contact within a company
With the internet gaining importance in all facets of life, paper resumes evolved into Word documents. Companies began to accept resume submissions via email, provided they were submitted in Word format.
This allowed the candidates to follow up on their interview status and other verification queries without having to rely on the mail-man ,postal delays, or make multiple trips to the company, especially if the company and the candidates are not located in the same place. Continue reading “Resume Revolution: Exploring VisualCV”

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Document to PDF conversion – Compromise on inaccessible links & annoying watermarks or use open source.

As any virtual assistant will tell you, in the nature of our work ( which is truly online in every sense), document exchange is a big hassle. With public documents such as portfolio items we would definitely not prefer to use documents in their original formats, doc, xls, etc. So, the available alternative is to take up screenshots and convert it into jpegs. Again, its very tedious, cumbersome and unprofessional to present to prospective clients. Then it was a chance discovery at Pdfonline.com.

All I had to do was to prepare my document, check for typos and grammar, fill in the details and upload it at PdfOnline, along with my email address. ( You can use any free email service for this. ) After your document is converted, you will receive it as an attachment in your inbox. Cool!… isn’t it. So far, So good, especially if you have only static text content.

On the other hand, lets assume that you have written MyWebsite ( as a hyperlinked text), instead of actually typing the url http://www.mywebsite.om/. In such case, the URL text within the pdf document will be accessible, while the hyperlinked text will not be.

Now, this is okay for small urls like web url, blog url etc. Let us assume that you want to include few links to express a point, give refrences, provide credits etc The length of the url is fairly long & there are several intercepting links. Providing the Url text will tarnish the presentation completely, and it is impossible to eliminate the url completely. In such case you are forced to use a hyperlinked text. But what use are there links, if these are not accessible in the pdf. PdfOnline’s solution to this problem is their BCL-Easy PDF

The trail version of BCL – Easy pdf is free to download and you can convert as many documents you want to pdf without any expiry data. Plus this also retains the hyperlinked texts & all of them are accessible from the pdf page.Great ! Isnt it.. Too Good To Be True, isnt it… Yes, it is too good to be true. There is a catch, which is..they have their BCL-Easy pdf stamp appearing in the bottom right corner of all the pages in the pdf file. If you are okay with it, then there is nothing else to think about.

On the other hand, if you are somewhat like me, not afraid to try open source, then I would recommend to go in for OpenOffice.org ( personal recommendation – close replacement for MS office ~145MB, worth the effort). In addition to the regular docs, spreadsheet, paint and other stuff in their suite, OpenOffice allows you to export you documents into pdf, where in the hyperlinks are retained , there is no watermark & there is no expiry as well.

Please click on the image to download the pdf file. I tried embedding pdf within this post. But that disallows the follow-hyperlink by default.

Deepa’s
Virtual Assistance
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Happy Holidays – Holidays does not mean you have to be incommunicado.

EzineApprovedIts holiday season and I believe an extended break is a welcome change. But many of my friends are wary of going in for a break for the fear of loosing out on new clients, or not being able to provide timely response during this break. We all have a schedule to follow and deadlines to meet. Holiday season is definitely not an excuse to extend the deadline. But, this also does not mean you have to put in a double shift.

It is at times such as these, I get to hear, “it is good to work at an office, coz you clearly know when the work stops, and when your response is expected. With the work from home scenario, the dividing line tends to get blurred over time.” Some often remark, ” when I am not doing chores , or helping my kids with their study”, I instinctively reach out for the pending tasks at my project desk”.

In all this, we are constantly “at work”, completely forgetting the fact that we need some “ME-Time” too, eventually all this translates into the double shift that I had mentioned earlier. Going on holidays or taking a break does not necessarily mean that you are incommunicado, or you “have to be” incommunicado. However, if you choose to be completely cut-off, then set up an auto responder with a message as to when the sender can expect your response.

So, what can you do ( or not do) to avoid coming across as inaccessible during holidays?

  1. Spend only 1 hr to check & respond to mails. For mails that require more than “this or that”, provide a quick reply that you will get back with a detailed response after [date].
  2. DONOT get tempted to “let me do one little thing” with your project. This is like quick sand, you never know when you will get sucked into your work-mode.
  3. Try not to connect to the internet via your palmtop, mobile etc. Learn to disconnect at least during this holiday season.
  4. If there is nothing else to do, stretch yourself, don’t reach out to your laptop.
  5. Have a wallpaper that says you are on vacation if that helps.

Of late, I have been busy hectic with a Custom Application at Zoho Creator, writing tutorial posts and helping my parents in law to “learn computer”. Christmas holidays have begun and new year is not that far. So, eventually I have decided to take the long awaited vacation along with my family. Though we haven’t decided what to do this holiday season, I guess discussing this over dinner is where the mood of holiday really sets in.

Merry Christmas & Happy Holidays to all of you.

Deepa’s
Virtual Assistance
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Work From Home – Booby Traps That Kill Your Time

“Work From Home” has somehow become associated with women who are unable to attend office for personal reasons (child care tops the list). When this idea is pitched into our actual corporate environment, it gets highlighted as “telecommuting”. Well.. it all means the same eventually, work from home!

Tell me, how many times you have come across classifieds that say “Work from Home” in print & over internet. Very tempting isn’t it? Especially, when fuel prices, traffic woes & road rage, flash across our minds. But is it really all that sugar and honey? Does “work from home” truly translate into bliss and feeling of gratification?

The fact that we work from home, on one hand saves up on office setup & installation costs, drastically cuts down our fuel bills, & for some wardrobe bills too. While on the other hand, we fail to consider the frequent interruptions & distractions that arise purely based on the fact that we are at home. This could be a unannounced guests, neighbour who shows no sign of leaving, unsolicited sales representatives etc. Not to mention the temptation to succumb to “I will do it later” –syndrome.

The greatest strength and also the greatest drawback of working from home is that, “there is no one watching over you”. Sometimes, we do need someone over our shoulders to tell us when we are drifting away. Working at home is not a wonder therapy and one-size-does-not-fit-all. It requires some amount of grit and determination to get it work for you, just right. Watch out for the

  • Booby traps listed below. Discover what works for you best.

    1. Booby Trap 1 : – Time Factor

      • Have strict timings to “attend work” & allocate time to “do other things” in your computer. Need I say more???
      • If it is neither your “working time” nor your “other time”, stay away from your system. At the end of the day, it is still a machine.
    2. Booby Trap 2 : – Space Factor

      • Separate physical space will trigger the “serious mood” required to work.
      • Eventually, this will tune the family “not to interrupt while at work”.
    3. Booby Trap 3:- Phone calls & Visitors.

      • Make a note of phone calls & visitors.
      • Return the calls when you are “not at work” & gently explain your routine.
      • After a couple of similar calls, they too will begin to respect your time.
    4. Booby Trap 4- Emails & Social Networking

      • These are the silent time stealers. Unless you lock them up completely it is impossible to “be at work”.
      • I respond to official mails before I begin work & after I complete work. (any mails that arrive later is responded the next day). Perhaps you can come up with your own routine.
    5. Booby Trap 5- Commit things to writing

      • Our memory is not a dumping yard & there is no overload indicator.
      • I use a 200 page notebook with separators to write down tasks associated with my ongoing projects. May be you can try and get to know what works for you.
      • I also use sticky notes for meetings & project delivery, a new set every week.
    6. Booby Trap 6: – Family time is truly for family

      • Churning codes in your head while helping your kids with homework is something I would not recommend.
      • Isn’t it for the sake for family you decided to work from home? So what is the point if you are mentally glued to work even while with family.
    7. Booby Trap 7: – Take a walk

      • Working from home could lead to isolation in your neighbourhood.
      • You mind & body needs sunshine and human interaction for a healthy well-being.
      • Walk the dog, or take a stroll… what is important is to “stay disconnected”.

    Wile working from home, it is indeed a challenge to draw the line between work & non work hours. It is even a greater challenge to get this message across to friends and family. You work from home does not mean that you are at everybody else’s disposal, and, you time cannot be taken for granted. But before you can explain this to someone else, YOU need to respect YOUR TIME and not stray from your routine.

    The moment you are able to discipline your mind & actions towards this, then its only a matter of time, practice & patience, others get the message.

    Deepa’s
    Virtual Assistance

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