If you are a freelancer, consultant or professional, you are luckier than your salaried friends in more ways than one. Not only are you your own boss, you can also get away with paying income tax on only half of your income. And that too, legally!
The Income Tax Department had introduced a Presumptive Taxation Scheme under Section 44ADA that allows you to consider only half of your gross annual income as profits. Hence, you can pay income tax on only that much.
Freelancers, consultants and professionals can benefit from the Presumptive Taxation Scheme only if their gross annual income is less than ₹50 lakh.
For a jargon-free, easy-to-understand example on how you can lessen your tax outgo under this scheme, check out our Guide on Section 44ADA. A freelancer or consultant who earns around ₹40 lakh in a year can save as much as ₹3 lakh in taxes by using this scheme.
The Presumptive Taxation Scheme can be availed by designers, interior decorators, writers, medical professionals, media artists, legal professionals, technical consultants, engineers, accountants, architects, sports-related persons and more.
The other benefits of presumptive taxation scheme are is that it is easier to file returns using a shorter tax form and you don’t need to maintain a book of accounts to compute profit and loss statements.