Having the freedom to work at your pace, make your own decisions and set your work hours are probably the reasons why self employment is gaining immense popularity. Now, although there are many advantages to running your own business, the part about managing taxes and filing income tax returns can be quite cumbersome. From a tax perspective, the income that a self employed person earns is regarded as Profit & Gains of Business & Profession. Taxes need to be paid on the combined income the self employed individual has earned in a financial year from the different customers.
Under the Indian Income Tax Act, self-employed individuals are allowed to claim a few deductions. Some of these are:
- Interest amount paid on the loan availed for running your business
- Insurance premium paid for covering the stock, store and machinery
- Life insurance premiums paid and investments in PPF, ELSS, etc. under Section 80C
- Money spent on work-related expenses (you will need to maintain vouchers to support as evidence of such expenditures)
- Salary, bonus or commission handed to employees, besides the money spent on their health cover
- Payments not received for your goods and services and the losses incurred on account of this can be marked as non-recoverable and the amount will get deducted from your taxable revenue
- Tuition fees spent on your children’s education
- Medical premiums paid for self and family under Section 80D
With such provisions, if you are undertaking your own venture or are a self-employed professional, you can claim the above deductions to arrive at the final taxable income. ITR-4 Form is the income tax return form that needs to be submitted by self-employed individuals. This can be filed either online or in person. Before filing your returns, make sure that you have proper accounting records and prepare details of your profit and loss account.
To know about the various tax benefits you can claim, write to firstname.lastname@example.org.
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