Income Tax Saving Deductions and ITR Filing: Checklist for Freelance Professionals

As a freelance professional in India, filing your Income Tax Return (ITR) is slightly different from salaried individuals, but the tax rates remain the same. You will need to submit either ITR-3 or ITR-4, depending on your income from business or profession. Since the Assessment Year (AY) 2017-18, freelancers can opt for presumptive taxation by filing ITR-4, where they can declare 50% of their gross receipts as their income. It's crucial to remember that if your total income exceeds INR 2.5 lakhs for FY 2022-23, you are obligated to file tax returns.

When filing your tax return, it's essential to have all your personal information, revenue details, and financial particulars in hand, including eligible tax-saving investments made during the year and tax audit reports.

As a freelance professional, you can avail of several tax deductions under various sections of the Income Tax Act, such as Section 80C, 80CCC, 80CCD(1), 80CCD(1B), 80CCD(2), 80D, 80DD, 80DDB, and 80E. Keep in mind that only the deduction under Section 80CCD(2) is available for taxpayers opting for the New Tax Regime.

Taxpayers should keep the following details handy while filing the tax return.

Personal information such as an address, contact details, bank accounts, Aadhaar, etc.

Revenue Details of gross receipts, expenses, other incomes and eligible tax- saving investments made during the year and tax audit report, if any.

Financial particulars such as assets (Indian and overseas), bank balances, cash balance, debtors, creditors, loans and advances, and any other liabilities along with capital balance.

Tax deductions to avail as a freelance professional

The following deductions are available to freelance professionals. It is pertinent to note that only the deduction under Section 80CCD(2) is available to taxpayers opting for the New Tax Regime.

Section 80C

Life Insurance Premium Provident Fund Subscription to certain equity shares Tuition Fees National Savings Certificate, Housing Loan Principal Other various items Section 80CCC Annuity plan of LIC or other insurer towards Pension Scheme

Section 80CCD(1)

Pension Scheme of Central Government A combined limit of ₹1,50,000/- is applicable on the deductions listed above.

Section 80CCD(1B)

Deduction towards payments made to Pension Scheme of Central Government, excluding deduction claimed under 80CCD (1) A maximum deduction of ₹50,000/- can be availed in this regard.

Section 80CCD(2) – Available in the New Tax Regime also

Deduction towards contribution made by an employer to the Pension Scheme of Central Government. If Employer is a PSU, State Government or Others: Deduction limit of 10% of salary If Employer is Central Government: Deduction limit of 14% of salary

Section 80D

Deduction towards payments made to Health Insurance Premium & Preventive Health check up for Self/spouse or dependent children and parents. ₹ 25,000 (₹ 50,000 if any person is a Senior Citizen). It can also be availed for Medical Expenditure incurred on a Senior Citizen, if no premium is paid on health insurance coverage. ₹ 5,000 for preventive health check up, included in above limit.

Section 80DD

Deduction towards payments made towards Maintenance or Medical treatment of a Disabled Dependent or Paid/Deposited any amount under relevant approved schemes. Flat deduction of ₹ 75,000/- available for a person with Disability, irrespective of expense incurred. The deduction is ₹1,25,000/- if the person has Severe Disability (80% or more).

Section 80DDB

Deduction towards payments made towards Medical treatment of Self or Dependent for specified diseases Deduction limit of ₹ 40,000/- (₹ 1,00,000/- for Senior Citizen).

Section 80E

Deduction towards interest payments made on loan for higher education of Self or relative Group. Total amount paid towards interest on loan taken can be availed.

By investing wisely and planning their taxes effectively, freelance professionals can reduce their tax liabilities and increase their savings. As a result, tax planning is a crucial aspect of personal finance that all freelancers should consider and implement with the advice of an experienced finance professional.

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