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Tax Obligations for Freelancers and Gig Economy Professionals in India

Unravel the tax responsibilities of freelancers and gig economy professionals in India. Gain valuable insights to streamline your financial planning.

  • 2,716 Views | Updated on: Mar 21, 2024

Updated On: 28th July, 2023

Indian youth is moving towards the journey of entrepreneurship. And this journey got fueled during the time of the pandemic. With the rise of the work-from-home culture, people started earning in the comfort of their place. This further encouraged service startup ideas and opened doors for young entrepreneurs.

    Key Takeaways

  • The gig workforce in the economy is expected to grow up to 23.5 million workers by 2029-30.
  • A Gig economy consists of temporary workers without a contract between the employer and the worker.
  • Freelancers are people providing services on a contract or project basis and, thus, considered self-employed.
  • Every Indian earning more than ₹3,00,000 is liable to pay income tax annually.
  • Except for senior citizens and super senior citizens, the income tax slab is the same for every taxpayer.

The gig workforce in the economy is expected to grow up to 23.5 million workers by 2029-30. Therefore, estimating and evaluating the income from this sector is crucial. Hence, the government levied taxes on freelancers and gig workers, similar to salaried employees and business owners.

Gig Economy

A Gig economy consists of temporary workers without a contract between the employer and the worker. Generally, it consists of services that are flexible, independent and unlike full-time employment.

Freelancing

Instead of being employed by an organisation or company, freelancing is considered as self-employment. Freelancers are people providing services on a contract or project basis and, thus, considered self-employed.

Taxes for Gig Workers and Freelancers

Every Indian earning more than ₹3,00,000 is liable to pay income tax annually. This similar rule is applicable to freelancers and gig workers. You must refer to the following table to understand the tax slabs for freelancers and gig workers under New Tax Regime:

Income Tax Slab

Income Tax Rate

Up to ₹2,50,000

NIL

₹2,50,001 - ₹5,00,000

5% above ₹2,50,000

₹5,00,001 - ₹7,50,000

₹12,500 + 10% above ₹5,00,000

₹7,50,001 - ₹10,00,000

₹37,500 + 15% above ₹7,50,000

₹10,00,001 - ₹12,50,000

₹75,000 + 20% above ₹10,00,000

₹12,50,001 - ₹15,00,000

₹1,25,000 + 25% above ₹12,50,000

Above ₹15,00,000

₹1,87,500 + 30% above ₹15,00,000

  • A freelancer and a gig worker whose primary source of income is either through services or part-time work must consider their tax to be paid as a self-employed taxpayer.
  • Income tax deductions can be availed as mentioned under Section 80C. Other deductions are similar to any other taxpayer in India.
  • A gig worker’s Tax Deducted at Source (TDS) may be deducted by the person/organization that uses their services in case the total income is more than a particular limit. Thus, it is better to check form 26A periodically.
  • One should register GST if the total receipts exceed ₹20 lakhs in a financial year. However, the limit is 10 lakhs for certain northeastern states.
  • Freelancers can deduct expenses incurred on work-related stuff from their income. It could be anything from office furniture to client meetings. However, the expenses must be directly related to the work they do.
  • One needs to file TDS returns and deposit the tax deducted at source with the Income Tax Department on a timely basis.

TDS for Freelancers

TDS is the amount deducted from payments such as salary, commission, rent, interest, or professional fees. The person who gets the payment at the point of sale, must pay the tax. This minimises tax evasion as the tax is collected at the moment of payment. While submitting ITR, freelancers can claim the deducted TDS and obtain information from Form 26AS. In addition, TDS is deducted at the rate of 10%, and freelancers can only deduct TDS if they have been audited for the last financial year. However, freelancers can only be audited if the annual gross receipt exceeds ₹50 lakhs, and TDS won’t be applicable in such a scenario.

To Sum Up

As freelancers and gig workers provide services to various entities and people, it sometimes becomes confusing to understand their tax liability. However, the government has streamlined the approach to compute taxes and deductions under Income Tax Act. Thus, it has become easier to evaluate income, taxes, and claim deductions for the same. Moreover, except for senior citizens and super senior citizens, the income tax slab is the same for every taxpayer.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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