Being self-employed is an alluring career possibility. You are employed for yourself and create your own selections, earning your profits. From a monetary point of view, a worker has the flexibility to manage his/her taxation entirely by taking full management over designing financial gain and expenses to scale back their taxes.

Someone who is known as “assessee” under income tax Act, 1961 and income tax Rules, 1962 by the government of India is levied Tax. The assessee has been outlined below income tax Act, 1961 as:

An individual who is a salaried person or owner of ownership firm, a Hindu Undivided Family additionally referred to as HUF, a partnership firm, a liability partnership firm, a registered company with Registrar of corporations, etc. The income tax Department identifies the assessee by their PAN i.e. Permanent Account Number.

Income tax for salaried or business person

All financial gain of the person is assessed below the subsequent 5 heads for charging income tax and computation of total financial gain, namely:

  1. Income from pay
  2. Income from House Property
  3. Profit and gain from Business or Profession
  4. Capital Gain
  5. Income from different sources

Who is taken into account as Self-Employed?

Self-employment means someone who sells his or her services to totally different employers while not having a long contract with any of them. Income tax Act, 1961, levies tax on financial gain of self-employed persons below the pinnacle “Profit and gain from Business or Profession”. In the act, self-employment is named a profession. Business has been outlined within the Act as, “any trade, commerce or manufacture or any journey or concern within the nature of trade, commerce or manufacture”. However profession has not been outlined within the Act. Profession additionally includes Vocation as given within the Act. Thus, a painter, a sculptor, an author, an auditor, a lawyer, a doctor, a creator, a forecaster comes below profession or vocation.

Profit ought to be computed when deducting all losses and expenses incurred for earning the financial gain within the regular course of business, profession or vocation. Skilled financial gain earners need to get their accounts audited by an accountant and submit a tax audit report if their gross receipt is Rs. 50,00,000 or more in a fiscal year.

How to Calculate Financial Gain for the Self-Employed?

To calculate financial gain to file ITR for self-employed or business person, the Income Tax Act offers 2 choices

  • Calculate the nonexempt financial gain on a presumptive basis while not claiming any deduction for expenditures
  • Claim all the prices and calculate the real profit

In case you decide on the second possibility, check that you have got correct books maintained on account to submit as proof. Also, if your financial gain exceeds Rs.50 lakh, you would like to urge your account books to be audited from a licensed official, says a Tax Consultant in Chennai.

Self-Employed Tax Filing

In the traditional tax filing method by a self-employed jobholder, they need to file an income tax Return– 4 (ITR-4). They are allowed to assert all the expenses that are incurred to earn revenue from the profession. If you have valid proof in record these expenses are deductible. Below the presumptive theme, it is deemed to have allowed the deduction of all the expenses and depreciation to benefit from the profession.

Self-Employment Tax in India

  • ITR filing in Chennai for self-employed permits them to assert many tax deductions from the gross nonexempt financial gain.
  • They embrace prices incurred towards the profession, interest on loans to hold out the business, insurance for and depreciation of salaries to staff, assets and regular workplace expenses.
  • Expenditures like net bill, electricity bill, phone bill and traveling prices are allowed to be subtracted from the gross financial gain.
  • While filing ITR for self-employed, for each such deduction there should be legal proof of the expenses.
  • Recently, the Indian Government has offered a selection of tax-filing to the self-employed professionals (those having an financial gain of but Rs. 50,00,000 in a year) by manner of a presumptive legal system. It means that the assessee has the selection of filing his taxes either in an exceedingly typical manner or through the presumptive tax methodology.
  • According to the presumptive tax methodology, self-employed professionals are allowed to assert expenses at the rate of 50% of the gross financial gain, and therefore the Income Tax is calculated on the outstanding 50% whereas adding any interest financial gain to that
  • In this methodology, you do not have to show any proof of expense severally, and you’re not needed to take care of accounting records. Income tax for the self-employed in India conjointly applies an equivalent taxation theme.

Presumptive Taxation

Government has introduced a presumptive taxation theme for skilled earners whose total gross receipts are less than Rs.50, 00,000 in fiscal year and businesses whose turnover is less than Rs. 2, 00, 00,000. Below this theme, they do not need to keep all such records, books of accounts, etc. The profit is assumed at 8% of gross receipts for businesses and 50% of the gross receipts of professionals in a fiscal year and consequently they need to pay income tax as per income tax rates applicable on them. This theme is non mandatory for them. If they do not go under the theme, they need to have their books of account audited by an accountant and consequently file the income tax return and pay tax. Below the presumptive theme, assesses will claim tax saving investments below section 80C, and medical payment below section 80D. All deductions below Section 80 of chapter VI A are allowed. This theme is applicable to solely an Indian resident assessee who is a private, Hindu Undivided Family (HUF) or Partnership Firm.

If any resident assessee has opted to file income tax come below the Presumptive theme in any fiscal year, within the next fiscal year, they will opt for presumptive theme and file income tax come as a traditional assessee. But in this case, they then cannot avail the advantages of the presumptive theme for succeeding 5 monetary years.

For example: If the resident assessee opts to file income tax come below the presumptive theme for the fiscal year 2016-2017 and 2017-2018, and in next fiscal year 2018-2019, the assessee opts out of the presumptive theme and files income tax come below traditional course then he/she cannot value more highly to file his/her return below presumptive theme for succeeding 5 monetary years that’s 2019-2020 to 2023-2024.

Tax Rates for Self-Employed/Businessmen

Profit and gain from profession is rateable at constant rates as different financial gain when you file ITR in Chennai. It is levied at the subsequent rates, depending on the class of person:

In case of Individual whose age is below sixty years, HUF, Association of persons, Body of Individual, artificial juridical person

For financial gain up to Rs.2, 50,000 – Nil

For financial gain between Rs.2,50,000 and Rs.5,00,000 – 5% of the amount in excess of Rs.2,50,000

For financial gain between Rs.5,00,000 and Rs.10,00,000 – 20% of the amount in excess of  Rs5,00,000

For financial gain above Rs.10,00,000 – 30% of the amount in excess of Rs.10,00,000

In Case of old person whose age is between sixty years and eighty years

For financial gain up to Rs. 3,00,000 – Nil

For financial gain between Rs. 3,00,000 and Rs. 5,00,000 – 5% of the amount in excess of Rs. 2,50,000

For financial gain between Rs. 5,00,000 and Rs. 10,00,000 – 20% of the amount in excess of Rs 5,00,000

For financial gain more than Rs. 10,00,000 – 30% of the amount in excess of Rs. 10,00,000

In Case of senior citizens whose age is eighty years or above

For financial gain up to Rs. 5,00,000 – Nil

For financial gain between Rs. 5,00,000 and Rs. 10,00,000 – 20% of the amount in excess of  Rs. 5,00,000

For financial gain above Rs. 10,00,000 – 30% of the amount in excess of Rs. 10,00,000

In case of Firm and liability Partnership

  • 30% (Including Cess) for rateable financial gain Up to Rs. 1,00,00,000.
  • The amount of income-tax and also the applicable surcharge, shall be more increased by health and education cess calculated at the rate of 4% of such income-tax and surcharge
  • 12% surcharge for rateable financial gain > Rs. 1 crore.

In case of corporations

  • A domestic company is rateable at 30 percent. However, the rate would be 25% if turnover or gross receipt of the corporation doesn’t exceed Rs. 2,50,00,000 in the previous year.
  • The amount of income-tax and also the applicable surcharge, shall be more increased by health and education cess calculated at the rate of 4% of such income-tax and surcharge
  • 7% surcharge for rateable financial gain > Rs. 1,00,00,000.
  • 12% surcharge for rateable financial gain > Rs. 10,00,00,000.

How to File ITR for the Self-Employed?

Just in case you’re speculating what ITR form for self-employed should be used for, ITR for self-employed people is filed through ITR-4.

In ITR 4, a share of the receipts are counted as earnings, and taxes are paid on it, rather than claiming business prices against those receipts and paying tax on the balance.

The financial gain earned by self-employed people is logged underneath ‘income from business or profession’. It conjointly includes Income Tax for business and ITR for exporters

Here are a few-filing ways which will create ITR for self-employed people less complicated to understand:

1. Understanding the Tax Treatment

A self-employed individual refers to somebody who does not earn a set earnings or financial gain from a corporation. They are employed on a written agreement or an assignment primarily based on employment for a selected amount. Hence, from a tax perspective, the financial gain is ‘Profit & Gains of Business & Profession’.

ITR for the self-employed implies that they need to pay taxes on the combined financial gain earned in a fiscal year. All earnings, regardless of the quantity, ought to be supplemental to the gross financial gain for the year.

2. Selecting the correct ITR

ITR-3 or ITR-4 is the correct ITR for self-employed people. Choosing the correct ITR may be a crucial step for e-filing your Income Tax returns.

3. Tax subtracted at supply

Whenever self-employed individuals receive a payment from a consumer, they will receive it once deduction of tax (TDS) thereon. You want to even be attentive to Section 194J of the Income Tax Act that mandates TDS from payments created to professionals. TDS is subtracted at a 10% rate on the payments created. However, the nice news is that, a bit like salaried people, self-employed people will claim a refund on the TDS that’s subtracted on your behalf through the method of e-filing.

4. Claiming expenses to scale back tax outgo

Since your financial gain is treated as profits and gains of a business, you will even claim bound expenses that you simply have incurred towards obtaining this business. You will use these prices to scale back your financial gain and tax thereon. These expenses will embrace rent for space, food and amusement expenses because of conferences, depreciation of workplace instrumentality, and travel prices.

These are a number of ways in which ITR for self-employed people is simplified. Bear in mind to e-file before the date to avoid an Income Tax notice from the tax department.

Steps to File ITR for self-employed on-line

The process to e-file ITR for self-employed people is by using the web at your convenience and time. The method to e-file ITR for self-employed may be a fast and simple manner. E-filing ITR for self-employed also can facilitate saving cash as you’d not ought to rent a person to file ITR.

Below are the steps to file ITR for self-employed online:

Step 1: Log into the official e-filing web site (

Step 2: Choose the user form to register yourself with the Income Tax Department. Next, you need to enter your current address and your permanent address before coming into the Captcha code and touch ‘Submit’.

Step 3: You then need to fill in your personal info like your name, your PAN and your date of birth. PAN can be used as your user ID whenever you log in to file ITR. In addition, enter your contact details like your mobile number and mail ID.

Step 4: Your PAN can then be verified by the system and your group action ID still as contact details are displayed on the screen.

Step 5: Last, activate your Income Tax Department account through the link sent to your email ID to complete filing.


In conclusion, filing Income Tax Return in Tambaram, Chennai for freelance persons, senior voters, and firms has been mentioned above. The method for filing your ITR form initially depends on that form you decide. You can disclose your returns with the supported documents you will need. If you find filing Income Tax return to be hectic, you can seek the expertise of our PhoenixTax- Tax Consultant in Chennai.