Pooja Tiwari, 29, who lived in Ghaziabad after the birth of her first child two years ago, enrolled in the online distance learning diploma course in export-import management. As his mother came to take care of the child, Pooja got a job in a Noida company. The business was progressing well, but due to the Kovid-19 stalled, the company consolidated its business. In such a situation, Pooja started teaching children of ninth and 10th in the house. She wants to know whether she will have to pay income tax on the tuition she is earning. When you do any of your work, you work as a freelancer and the income tax law applies accordingly.
If you are a freelancer, you will have to pay tax, because your income comes under the purview of 'profits and gains of business or profession'. The money that a freelancer gets through his work is income. Whether it is from a domestic source or from an international source, it does not matter. If you are getting cash in exchange for your work, then your advice is to keep a bank record of it. The income of Rs 2.5 lakh annually from freelancing comes under income tax.
Understanding Income Tax
As a freelancer, your taxable income is calculated after deducting expenses from total taxable income. Ie total income-expenditure = total taxable income. Once you fall within this scope, then it becomes very easy for you to assess which tax slab you are in and how much is your income tax liability. As a freelancer, you can deduct many expenses from your total income. But in this process keep in mind that the amount to be deducted is proportionally directly related to the particular work spent. For example, if you take internet support by taking tuition classes, then the amount spent on the internet connection can be reduced from the total income. But you cannot reduce internet expenses on the amount received from every student. Likewise, you cannot deduct the expenses of buying a laptop or the clothes you wear and teach tuition from the total income from tuition.
Expenses that can be reduced
You can include those expenses which are necessary to complete the work you got as a freelancer. However, you must have a receipt or proof of these expenses.
* Travel expenses for work-related meetings.
* Expenses for office use, stationery, phone, internet, etc.
* Cost of the devaluation of the laptop, camera, and other equipment.
* Rental of equipment used for freelance work.
* Office Rent.
* Equipment repair costs.
* Payment made to Freelance Consultant.
* Lunch and living expenses to complete the work.
Suggestions for worship
To avoid tax liability, you may decide not to keep a record of the amount received from tuition. But it can prove harmful to you in the future. Since you will not get Form 16, filing income tax returns is very important for you. By filing income tax returns, you can take a loan from the bank in the future, apply for a visa, and buy life insurance policies with high-security cover. By the way, as a tuition teacher, you can also claim tax deduction under the Income Tax Act 80C and 80D in your freelance work.