ITR : Self-employed

Kindly contact us for an appointment to file your Income Tax returns.
M/s Anbalagan and Muthukumarasamy,
Chartered Accountants

A self-employed person can be a trader, manufacturer, freelancer, doctor, lawyer, Chartered Accountant, website developer, artist, music composer, cab drivers, plumber, electrician, caterer, so on and so forth.

A taxpayer is deemed to be self-employed if he doesn’t carry on his business or profession in any legal form of entity, i.e., Company, Partnership firm, LLP, etc.

If you are self-employed, you should understand the basics of income tax so that you continue working for your goals without tax defaults as it can be very punitive.

Being self-employed and are planning to file return of income, you should learn the income-tax provisions which will help you to file the return of income.

It is advisable to file your return in time and not to wait until the last date. If you miss the deadline, it would become a costly affair.

Late filing fee up to Rs 10,000 shall be levied on late-filers and they also lose the right to carry forward the losses of the current year.

Pay income tax, file returns and purchase peace:

1. Filing your returns is a sign that you have duly paid the tax payable and that you are a responsible law abiding citizen.

2. Filing your returns makes easier for you to get a loan or a credit card.

3. Filing your returns helps you to claim deductions under various sections of the Income Tax Act.

4. Filing your returns is crucial if you to be eligible for a refund and to claim it.

5. Filing your returns in time helps capital losses to be adjusted against capital gains. Also you can ensure that in case you have loss on capital gains you can carry it forward for the next eight consecutive financial years.

6. Filing your returns would help you to get Visa since the foreign consulate would require proof of your income and Income Tax returns.

7. Filing income tax returns regularly through a qualified professional, helps you to avoid any prosecution that may arise due to non filing.

When E-Filing Income Tax returns, we need accurate information on income, deduction and taxes you have paid.

Here is a checklist for you when e-Filing your Income Tax returns:

1. Your ekyc. Identity u0026amp; address proof with photo.

2. Form 16A.

3. Details of immovable u0026amp; movable properties.

4. Details of all loans including your personal loans, vehicle loans, business loans, housing loans, private loans, credit cards and the loan account statements for the relevant financial year.

5. Details of Fixed deposits and the bank ledger copies for the relevant financial year.

6. Details of Shares u0026amp; Securities and dmat statement for the relevant financial year.

7. Details of all bank accounts and the bank statements or passbooks updated until March 31st of the relevant financial year.

8. Interest certificates and TDS certificates from banks, Post offices and companies.

9. Last year return copies and financial statements.

10. Summary Statement of all your investments, fixed and current assets.

10. Summary statement of all your liabilities including long term, short term, secured and unsecured liabilities.

11. If you have let out house property, name and address of the tenant, annual rent amount, copies of municipal tax or properties tax receipt, rental agreement and the housing loan details.

12. Proof for any investment eligible u/s 80-C, 80-D, 80G, etc.,

Income of self-employed people is taxable under ‘Profits and Gains of any Business or profession’.

For the asassessment of self employed, the Income Tax Act offers two options:

1. First option is to calculate the taxable income on a presumptive basis without claiming any deduction for expenses.

Presumptive Taxation Scheme:

The Income-Tax Act allows Self employed to opt for presumptive taxation scheme, wherein income is computed on presumptive basis and taxpayer is exempted from maintaining regular books of account.

For a resident taxpayer, the Income-Tax Act has introduced three presumptive tax schemes.

Income computed under these schemes shall be chargeable to tax as per the applicable tax rates.

I. A taxpayer engaged in a business (not profession) can opt for Section 44AD presumptive scheme, provided turnover from the business doesn’t exceed Rs 2 crore.

Under this scheme, the income is presumed to be at 8% of gross turnover. If business receipts are in digital mode (cheque, bank transfer, credit cards, etc.) then income is presumed to be at 6% of such digital receipts.

II. For professionals, presumptive taxation scheme is available under section 44ADA, provided the gross receipts from the profession do not exceed Rs 50 lakh.

In this case, the presumptive income shall be 50% of gross professional receipts. Doctors, lawyers, architects, engineers, or similar professionals can opt for this scheme.

III. The last presumptive taxation scheme under Section 44AE is for the transporters, engaged in the business of plying, hiring or leasing out of such goods carriages, who don’t own more than ten goods carriages at any time during the previous year.

Continue with Presumptive Taxation Scheme for 5 years.

If a taxpayer wishes to opt for presumptive taxation scheme under Section 44AD, then he can’t reverse his choice during the next 5 years. If he does so, he will be excluded from re-opting for the scheme during the next 5 years.

Further, during these 5 years, he will also be liable to get his books of account audited if his total income exceeds the maximum amount which isn’t chargeable to tax.

2. The second option is to calculate the real profit after claiming all the expenses.

In case you opt for the second option, make sure you have maintained proper books of accounts and vouchers to furnish as proof, and if your income is above Rs 1 crore, you need to get your account books audited by a Chartered Accountant.

When a taxpayer opts for presumptive taxation scheme during a financial year but he doesn’t opt for it for the next 5 years, he shall be required to get the accounts audited if income from business or profession exceeds the maximum exemption limit.

a. Books of Account

If the second option is opted for, the taxpayer shall be required to maintain proper books of account and get them audited if gross turnover exceeds Rs 1 crore.

b. The books of account shall be maintained in a format along with underlying evidences which would enable the Tax Officer to compute the taxable income.

c. Audit of books of account

An individual taxpayer, who has not or who isn’t entitled to opt for presumptive taxation scheme, shall get his accounts audited, if turnover from business exceeds Rs 1 crore during the Financial Year.

Payment of Advance Tax:

A taxpayer is required to pay advance tax if his estimated income tax liability during the year is Rs 10,000 or more. Advance tax is to be paid in 4 instalments: 15% of total estimated tax by June 15, 45% of estimated tax by September 15, 75% of estimated tax by December 15 and 100% of estimated tax by March 15 of the financial year.

In case of any deficiency in payment of advance tax, in aggregate or in any instalment, he shall be liable to pay interest under section 234B and 234C.

However, if presumptive taxation scheme has been opted for, then the whole estimated tax liability has to be paid on or before March 15 of the financial year without any condition of payment of tax throughout the year in instalments.

Digital Signature mandatory in case of audit of Books of Account

After filing of the income tax return, it has to be verified by the authorized person, which is generally the taxpayer himself.

Verification of income tax return can be done through Digital Signature Certificate (DSC), Aadhaar Based OTP or Net banking facility. Verification of return through DSC is mandatory if books of account are audited under income tax and taxpayer cannot choose EVC or any other mode for verifying ITR.Options shall be available to verify the return through DSC or through EVC if taxpayer opts for presumptive taxation scheme or when books of account aren’t audited.

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