Finance

Tax Planning For Self Employed Professionals

1 Mins read

Every Citizen is liable to pay taxes if he/she starts earning income. Hence, an income-generating person is termed as assessing wherein under Income Tax act, 1961, some amount of money is payable. Under which, Assessee- Self-employed Individual is the one who doesn’t receive fixed income from the organization. 

The income earned by self-employed professionals comes under the cadre” income from Business/profession”. Let’s look into the tax planning for self-employed professionals.

FILING OF TAXES FOR SELF EMPLOYED:

As mentioned above, the income from Business or profession earned by Self-employed can be filed in the below-mentioned ways.

  • Presumptive taxation is a method of calculation under which income is calculated without claiming any expenses or deductions done by the Business or the profession.
  • The other method of filing is based on the real profit post claiming the actual expenses during the Business/profession course based on the revenue generated.

TAX FILING-PRESUMPTIVE SCHEME:

The concept of presumptive taxation is quite new for self-employed professionals and now let’s look in detail about this.

  • The scheme applies to all self-employed professionals.
  • If a particular self-employed assessee overall gross receipts are below Rs.50 lakhs for the financial year, this scheme is applicable.
  • In case if a person is running a business and the income is below and around Rs.2 crore for the financial year, the scheme is applicable under Section 44AD of the Income Tax Act.
  • There are certain percentages calculated based on the income generated and the taxable income generated from Business/profession.

The ITR form used by self-employed professionals depends on the type of tax they file. If tax is getting filed under presumptive taxation, ITR-4 needs to be submitted. In case presumptive taxation is not adopted, ITR-3 needs to be used. There are different tax slabs for all the self-employed professionals, it gets different based on the income and revenue generated.

Therefore, the above-mentioned factors help in knowing about the ways of tax planning/exemption for self-employed professionals. 

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