nemo_online
Forerunner
If I get salary in some other currency such as pounds or dollars from freelancing, how much do I need to pay in taxes in India?
Thanks
Thanks
If I get salary in some other currency such as pounds or dollars from freelancing, how much do I need to pay in taxes in India?
- Thread starter nemo_online
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enthusiast29
Juggernaut
Same as per Indian tax slabs as you'll eventually be getting money in INR in your bank.
rsaeon
Innovator
On the INR amount received in your account. If you're filing under 44ADA, you're allowed a 50% write-off so if you earn 10 lakhs, income tax will be assessed on 5 lakhs. Out of which the first 2.5 lakhs is not taxed and you'll get a rebate of Rs 12500 for the next 2.5 lakhs, so your actual income tax for a 10 lakh yearly income through freelancing is 0 rupees.
Kind of sounds too good to be true so I could be wrong.
Afaik, withdrawing cash and showing that as part of the tax-free 50% is preferable
nemo_online
Forerunner
scott1391990
Galvanizer
I withdraw <50% monthly as cash and that's just it. I don't know the details behind how this works but that's the advice I got from my CA. If you have any specific questions then I can try asking him.
nemo_online
Forerunner
Read this about 44ADA - https://cleartax.in/s/section-44ada . I am not part of the professions listed in the article. Anyway, will have to speak to a CA, I guess, to get more clarity on the subject.
rsaeon
Innovator
Thanks, I recently had to file ITR and spent a few days reading about it on the income tax website and reddit.
Page 5 of this explains the 50% write-off: https://incometaxindia.gov.in/tutorials/13. tax on presumptive basis in case of certain eligible businesses.pdf
The rebate of 5% upto Rs 12500 is automatically applied when you file your ITR online. It's only applied if your taxable income is under 5 lakhs (so after the write-off).
All cash withdrawals are monitored/recorded for non-current accounts that are linked with pan card and tallied up within a financial year so you don't really need to do anything except withdraw the cash. Having the record of cash being withdrawn for expenses makes it easier to validate your ITR filing under 44ADA (I assume).
If you're earning with the work you do on a computer, it should be eligible.
kiranrss
Explorer
you can use the section 44 option but will not get the benefit of certain deductions. i was a free lancer a couple of years ago and used this section. ultimately you need a good CA (always do your own research no matter whom you hire) and they can walk you through this. interestingly my CA used to deduct his fees also as an business expense.
all said do file your returns since all remittances are tracked no matter how low the value and you don't want to get into a situation where you have to start meeting with assessing officers.
all said do file your returns since all remittances are tracked no matter how low the value and you don't want to get into a situation where you have to start meeting with assessing officers.
About section 44, it eases taxation for select entities by completely eliminating the need of accounting. Following is my understanding and I'm not a tax consultant.
- Select types of self employed professionals can self declare 50% of revenue as expense. Thereby income coming to 50%. So if a dude received 7 lac in his bank account in a financial year as his freelancing income, he can self declare income to be 3.5 lac and pay income tax on that only.
- Select types of business can self declare 92% of revenue as expense (94% if it's digital). Thereby income coming to 8% (for cash transactions) or 6% (for digital transactions). So if a business had a turnover of 1 crore in digital transactions, then that business can self declare income to be 6 lacs and pay income tax on that only. No need to keep the books.
- It is still possible to show expenses beyond the allowed limits as stated in first 2 points but then you have to keep books and get it audited by a CA. That kinda nullifies the scheme.
- Regular business deductions like electricity bill or office rent aren't allowed. Because these are already considered. Are you even reading this right? You didn't keep the books remember? Read first 2 points again.
- You can still take deduction under section 80 like insurance premium or mutual fund investment etc, in case you are using old regime of income tax.
- It's not all cool though. There are limits to this. You can't have a 100 crore business taking advantage of this scheme. Moreover, you are supposed to pay GST once you cross its threshold. That applies to freelancers too.
- Third parties who assess you creditworthiness will only see declared income and not the actual monies you received in the bank.
- Return filing using this scheme is simple for anyone. You don't need a CA. It's as easy as filing salaried person's ITR-1 form. To avail this scheme, you have to file through ITR-3 form.
- With the help of this scheme, it has become very easy to be a tax compliant for a budding professional or a startup. But as your revenue grows and once GST become applicable, it kinda levels off.
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