News Topics

Is it true that freelancers have more tax benefit…

Is it true that freelancers have more tax benefits than salaried individuals under the income tax a…

Is it true that freelancers have more tax benefits than salaried individuals under the income tax ambit?

0
Chiranjibi Aug. 03, 2018

Yes it is true. Let's see where both of these individuals start paying their taxes.

Employees:

Employees can use the benefit of at least Rs. 2.50 lakhs (the basic exemption limit) and 1.50 lakhs (80C deduction).

This means an employee can get away without paying a rupee of tax if their income is Rs 4 lakhs.

Freelancers:

Among other things, freelancers are entitled to a flat deduction of 50% on their income. They have to pay tax on the remaining 50%. 

For example, if the freelancer has earned 8 lakh rupees in last financial year, 50% i.e., 4 lakh rupees is exempt and only the other 4 lakh is taxable.

And even in the remaining 4 lakh, the calculation is the same as the employee (no tax). More deductions if rebate u/s 87A is applicable (but that applies to the employee too). I think you know where this is going.

Essentially, a freelancer earning a whopping 8 lakh rupees can get away without paying a single penny in taxes.

Conclusion:

Thus, an employee starts paying taxes from 4 lakhs, whereas the freelancer starts paying taxes from 8 lakhs. This is the tax benefit we are talking about.