Business owners or people with occupations such as writer, lawyers, actors, astrologers, doctors, etc., can be regarded as self-employed. Whether salaried or self-employed, every individual must declare their annual income through different sources and the income tax paid on it by filing their income tax return (ITR). The tax is applicable as per the latest tax slab rates specified by the IT department.
Let’s understand the critical aspect of ITR filing for self-employed persons.
Taxable Income and Deductions
Taxable income signifies the income on which the tax is applicable as per the tax bracket. For a self-employed, this can be calculated in either of the two ways:
- Based on presumptive taxation, i.e., without considering any deduction claim of expenditure incurred to generate the revenue. This option has been added recently and applies to self-employed people whose gross receipts fall below 50 lakhs INR in a financial year. The assessee can either opt for it or continue with the below method.
- Based on the actual profit after deduction of claims regarding expenditure towards the operation of business or profession.
Various investments, payments, or incomes can get you tax benefits by lowering the taxable income. You can check the relevant deductions you are eligible for as a self-employed individual while calculating the taxable income here.
Choice of the ITR Form
Two forms, ITR-3 and ITR-4 are available for individuals/HUF engaged in a business or profession. Choose either of them depending upon their suitability in your case:
- ITR-3:ITR3 applies to individuals/HUFs with income of more than ₹50 lakhs annually and have not opted for a presumptive taxation scheme.
- ITR-4:ITR4 applies to resident individuals/HUFs with income up to ₹50 lakhs in a financial year and have opted for a presumptive taxation scheme.
Steps to File ITR
Step1: Login to the official website of Income Tax Department, Government of India using the link: https://www.incometax.gov.in/iec/foportal
Step2: Register yourself if you are a first-time user else, login with your user id and password to proceed.
Step 3: Click on the “e-file” dropdown and select “Income Tax Return”. Now select the relevant assessment year and the ITR form 3 or 4, as applicable in your case.
Step 4: Carefully fill out the required details under different heads and proceed to the final step, i.e., verification.
Step 5: You can either e-verify the return or choose to send a signed ITR-V through normal or speed post to the given address of the Income Tax Department Bengaluru, within 120 days of filing the ITR.
E-filing in Easy Steps
E-filing the ITR is simplified and a convenient process that can be easily done from the comfort of your home. You must have all the vital details to be filled. It is not compulsory to fill the entire form in one go. You can keep adding details and save the draft in case of any confusion. Finally, the filing process completes with ITR-V verification.