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Advance Tax Payment (non-salaried/freelancers)?

Manjari (Programmer) (28 Points)

28 August 2008

I am working as a freelancer since april this year. Prior to this I was employed with a company and had no worries regarding the income tax payments as it was deducted as TDS from my salary.

I want to know about the advance tax and whether I also have to deposit the advance tax? My total income for the year 2008-09 is expected to be 7.5 lac. Since I m NOT working for any company, am I eligible to take the benefit of HRA, conveyance allowance, medical benefits etc while calculating my income tax?

How do I deposit advance tax? Please help

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7 Replies

S.Srinivasaraghavan (Chief Financial Officer and Co) (11318 Points)
Replied 28 August 2008

I suppose from what little information you have given, you are carrying on with your pofession. If so, who is giving you HRA, Conveyance allowance etc., for you to take benefit? How do these come into picture with a freelancer? BUt you can claim the expenditure relating to your profession which includes conveyance, rent etc actually incurred.

You have not given the following information. What do you mean by freelancer? Is the income of Rs 7.5 lakhs gross or net? If net, what is gross?

Upon your clarification of the above, reply can be given.

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CA Thomas Raju Paravada (Chartered Accountant) (570 Points)
Replied 28 August 2008

Manjari What is free lancer?

Regarding adv tax if ur working in a company ur company deducts tax and deposits with the government.

Shubhankar Limaye (B.Com.) (174 Points)
Replied 28 August 2008

You will be entitled to deduct from your gross receipts all the expenses wholly and exclusively incurred for your profession. Such expenses may include Conveyance Expenses, Depreciation on vehicle, Stationary, Telephone etc.

The company which pays you the professional fees will be deducting a ceertain amount (usually 10.3% or 11.33% of Gross Receipts) towards tax on income comprised in such fees. You will get the credit of such tax deducted at source while paying the final tax liability.

You should pay advance tax if tax liability on your professional income (Gross Receipts less Expenditure) is likely to exceed the tax that would be deducted on professional fees.

Advance tax has to be paid if your net tax liability (Tax Liability - TDS) is greater than Rs. 5000. Advance Tax has to be paid by individuals in three installments as follows:
1. 1st Installment by 15th September - 30% of net tax liability
2. 2nd Installment by 15th December - 60% of net tax liability less already paid through first installment
3. 3rd Installment by 15th March - 100% of net tax liability less already paid through first installment and second installment

You have an option of depositing tax online using challan ITNS 280. For using this facility kindly visit https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp

Manjari (Programmer) (28 Points)
Replied 28 August 2008

I am basically a software programmer working on project basis for different clients mostly in US/UK and a few in India. I am NOT a full time employee of any of the company neither I have any registered company or firm of my own.

The total earning mentioned is Gross earning. I do incurr expenses like conveyance, work space rent, phone, internet charges etc.

You may treat me as a self employed person carrarying out my own profession but Individually and not an as registered business entity.

A freelancer is an individual/professional who sells services to clients without a long-term commitment to any of them generally on project/contract basis for a very short period of time that may last a few days or months.

Shubhankar Limaye (B.Com.) (174 Points)
Replied 28 August 2008

How is it possible that being a freelance programmer you do not incur any expenses towards Internet Charges, Phone, Electricity? Is it the case that the such expenses incurred get separately reimbursed?

If you do not incur any expenses in connection with your profession, then entire receipts shall be your income from profession and will be taxed. Calculation of Advance Tax Liability shall depend upon certain factors like The amount of Tax Deducted at source, Income from any other source, Eligible investments made etc.

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Manjari (Programmer) (28 Points)
Replied 29 August 2008

Originally posted by :Shubhankar Limaye
"	How is it possible that being a freelance programmer you do not incur any expenses towards Internet Charges, Phone, Electricity? Is it the case that the such expenses incurred get separately reimbursed?	"

Hi, I guess you have misinterpreted my last message. I have mentioned that I DO incurr the expenses including Rent, Phone, Interent etc. They are NOT reimbrused separately and are included inthe Gross Income only.

Shubhankar Limaye (B.Com.) (174 Points)
Replied 29 August 2008

Sorry I overlooked that sentence

What do you mean by 'the expenses are included in the gross income'.
What is the amount that you receive from the companies? Is that amount Rs. 7.5 lacs?
If the answer is in affirmative then your income from profession would be Rs. 7.5 Lacs minus the expenses you incur for earning this income.

Else, If the amount of Rs. 7.5 Lacs is arrived at by deducting your expenses from fees received from your clients, your income from profession would be Rs 7.5 Lacs.

The expression 'Income From Profession' used above refers to taxable income and not 'gross receipts'