As individuals, they can claim the tax-saving deductions that are available to their salaried counterparts, and as freelancers, they can also claim the deductions available to business owners.
Freelancers have the best of both worlds. They can claim the different Section 80 tax-saving deductions as well as on the expenses incurred for doing their work.
Most freelancers are aware of the Section 80 benefits they are eligible for as individual taxpayers. To boot, they can also claim tax-saving deductions on their business expenses. Here's how a freelancer can go about claiming these benefits:
DEPRECIATION OF ASSETS
As a freelancer, the electronic equipment you use for your work are your assets. These could include computer systems, laptops and cameras. The more these assets are used, their value depreciates. A small part of the value of the asset can be claimed as a deduction from your taxable income every year. Even the vehicle you use to commute for work is an asset that you can claim depreciation on. Any repairing cost can also be claimed.
The expenses that you incur to run the day-to-day activities are the overheads you bear. You can claim these expenditures as deductions while filing your tax returns. If you have purchased a website domain to showcase or discuss your work, you can claim deductions on that too.
CLIENT MEETING EXPENSES
Freelance work often involves meeting clients at coffee shops or restaurants. If you pay for the food or beverages consumed during such meetings, you can claim deductions.
You can also claim tax-saving deductions on travel expenses incurred to meet clients. This includes deductions on fuel expenses for own vehicle and fare for hired cabs. Expenses on outstation work trips can be claimed.
Most freelancers work out of home or coworking spaces. If you rent a desk at a coworking space, you can claim deduction on the amount you pay . If you work from a house you rented yourself, you can claim part of the rent. If you work from family home, you can enter into a rental agreement with a parent or relative who owns the property, and pay them rent, which can be deducted from taxable income.
For certain projects, you might have to enlist the services of another person or firm. If you have quoted this entity's charges in your fees for the project, you will need to make the payment to whoever you employ. Such payments, which are made on a contractual basis, are also deductible.
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