Explained: How are freelancers, social media influencers taxed in India

Being a freelancer does not mean that one does not have to pay taxes. The Income Tax laws in India state that like the salaried and professional taxpayers, freelancers are also liable to pay taxes on their income.

According to the Income Tax Act, an income earned by exhibiting a person’s intellectual or manual capabilities is considered as earning from a profession. Such income is considered as ‘profits and gains from business or profession’ as the income is treated as earnings from self-employment. The gross earning is an accumulation of all the receipts received by the individual throughout carrying out the profession.

Apart from freelancers, social media influencers are also subject to the income tax under the heading "profits and gains from business and profession."

A freelancer needs to opt for ITR-3 or ITR-4 to file Income Tax Return (ITR).

Salaried individuals who earn extra income in a financial year from freelancing work outside their job will also have to opt for an ITR form similar to that filled by businessmen or professionals.

Freelancers can deduct expenses incurred to carry out the freelance work from their business income. Such expenses will include rent of the property taken by the freelancer to carry out the work, costs incurred for repairing such property, costs incurred for repairing electronic equipment like laptop or personal computer used for work, money used for buying office supplies, utility bills like internet and phone, work-related travel expenses, conveyance bills and depreciation value of equipment like laptop.

Standard deduction of Rs 50,000 is not applicable to freelancers while filing ITR. However, those who have a salaried job along with freelancing work can claim standard deduction on the salary income if they opt for the old regime of taxation.

However, for claiming expenses as a deduction, freelancers will have to ensure that the expenses are directly related to the work and spent during the tax year.

To arrive at the payable tax, the taxpayer has to determine the income from various sources and deduct the expense.

Sometimes, employers deduct TDS before paying the freelancers. Hence, the TDS should be included while computing the tax liability.

Freelancers with net taxable amount of Rs 10,000 and above will have to pay advance tax every quarter within the due date.

Social media influencers who generate income from sponsorships and ad money are taxed in the same manner as a freelancer. Influencers, who do not fall under the category of companies and partnerships, are considered self-employed individuals engaged in trade or business for tax purposes. Their income is taxed under current slab rates.

Influencers and bloggers, who earn income above Rs 20 lakh in a financial year or Rs 10 lakh by living in a special category state, have to register their service under the Goods and Services Tax (GST) law. This is because, YouTubers, influencers, and bloggers earn their income through services classified under Online Information and Database Access or Retrieval Services (OIDAR) category. Services are charged at the rate of 18 percent under GST.