According to Income Tax Rules, Freelancers can claim Standard Deduction if they have worked for a month during any financial year.
New Delhi. Income Tax rules are quite different for salaried employees and freelancers. However, if the freelancer has done a full time job even for a month in a financial year, then he can claim a standard deduction of Rs 50,000 like salaried taxpayers. For this, the freelancer will have to give information about doing the job (ITR Filing) while filing the income tax return. For this, they have to file income tax return through a separate form. Let the salaried taxpayers fill ITR Form-1 or 2.
Which form has to be filled?
Income from freelancing cannot be disclosed in Income Tax Return Form-1 (ITR-1). If there is an income of even Re 1 through freelancing, then the taxpayer will have to fill ITR Form-3 or 4. Freelancers cannot claim the standard deduction of Rs 50,000 normally available to salaried taxpayers. However, if he has worked full time for some time also, then he can claim standard deduction on income from salary. In ITR-3 and 4, there are two separate columns to give information about salary and income from freelancing. Freelancers can also claim for expenses incurred during freelancing to reduce tax.
What is Standard Deduction?
Standard deduction is the exemption that is available on the investments and expenses of the taxpayers individually. This is the amount that is directly deducted from your income. After this, tax calculation is done on the remaining income according to the tax slab. Earlier its benefits were available to the employees, but it was abolished in the 2005 budget. It was started again by the Modi government at the Center in 2018.
Changing deduction?
In the year 2005, the then government abolished the standard deduction and made a provision for exemption in some special items. Then it was provisioned in the budget of 2018. At that time, the deduction of Rs 19,200 as transport allowance and Rs 15,000 as medical allowance was abolished and a standard deduction of Rs 40,000 was given. This was later increased to Rs 50,000.
Who gets the benefit?
The benefit of standard deduction is given to the employees who get salary in return for working. According to the Income Tax Act, the income of pensioners is also treated like salary. Therefore, pensioners also get the benefit of standard deduction.
