Why ULIP mis-selling has become rampant ?

The number of self-employed people is growing gradually. In this piece we would discuss about the tax compliance of self-employed persons — how they are taxed and what are the avenues to pay taxes to the government for their respective income just like any business person or salaried individuals according to the Income Tax Act. But first we should know how the income of a self-employed individual has been defined.

Income amount

Income of a self-employed can be calculated on presumptive basis under section 44ADA of IT Act, provided their gross receipts are below Rs 50 lakh.

If the amount is more than that limit, taxable income is generally defined as the 50% of gross receipts. If one is covered under this section, he/she is required to get himself audited by a CA.

TDS

Tax deduction at source or TDS is one of the main things for the self-employed to pay tax. They can assert the deducted TDS while submitting Income Tax Return (ITR). One can obtain the information regarding TDS deducted from Form 26AS from IT portal itself.

Every time the person is paid by any person or entity, the person should file a TDS if not done by that entity itself.

Advance tax

If the overall amount of tax payable is Rs 10,000 or more, the self-employed is supposed to pay advance tax in every quarter.

Firstly, all the receipts are combined; expenses and TDS deducted, and earnings from other sources are added. Then, as per the tax slab the person belongs to, the amount is calculated. If the tax amount is greater than Rs 10,000, you must pay the advance tax by the due date.

GST

After the introduction of goods and services tax or GST everybody has to pay GST. The self-employed falls under the purview of service section, therefore, 18% GST applies to most of the services. The person has to file the GST regularly in every quarter.

Points to keep in mind

— A self-employed individual should keep a record about the receipts in a fiscal year.

— The person should keep a close tab on what his/her expenses are to deliver the service.

— Expenses amounting to more than Rs 10,000 per day, if paid in cash, aren’t allowed as a deduction.

— No capital expense can be claimed as expense. For example: purchase of laptop, phone or furniture etc.

— He/she should keep all TDS-related documents at one place to calculate at the end of the year.

— If he/she pays advance tax the documents related to advance tax should keep handy while filing ITR.