For most of the footloose and fancy- free freelancers, the world darkens a bit when it comes to claiming tax returns. Your Indian clients have most likely been paying you after subtracting the tax deducted at source (TDS). And it is no mean amount.

Do the math

The standard TDS is 10%, provided your client pays you more than Rs 30,000 a year for professional services. Did you forget to furnish your Permanent Account Number (PAN) when your client asked? Oops! You’re in trouble. If a freelancer doesn’t provide his or her PAN, there are 20% TDS. Bet that hurts! Now, how about claiming it back?  

The paper trail

Every cloud has a silver lining. The TDS cloud has several. As a freelancer, you actually can afford to take it easy. Firstly, the company or individual employing you must pay this tax to the government. It is not your responsibility. So, you’re spared the hassle. Secondly, if there is a slip-up, they are the ones that land in hot water. Fines if any will be levied on them and not you. If they fail to file, it is their problem, not yours.

All you need to do is to keep your paperwork in order. Sounds like a tall order? Fret not! The paperwork refers to only one form—a Form 16 A certificate. The employer issues you this certificate. They may do so every second quarter. Or, they may give you certificates for several months together. Follow up with clients about the procedure they follow. Consult your tax advisor if you harbour doubts.

Get your money back

The TDS is adjusted against the total income tax you must pay for a financial year. If your annual income does not fall under the tax bracket, you can claim a refund for your TDS.

Say, your annual income is Rs 200,000 from all clients taken together:

• Each of them deducts a TDS

• Each issue a Form 16A

• Your total TDS will be Rs 20,000/-

If this is your only source of income, then you do not fall under the tax bracket. This implies that you do not owe the government any income tax. The tax that has already been deducted at source will then revert to you. All you need to do is apply for a TDS refund from the Income Tax Department.

Points to ponder

• The TDS is deducted from each payment. So, you (or the client) have no way of knowing your exact annual income till the end of a financial year.

• Your income source must mention Professional Services when you file your tax returns. Returns literally mean the excess money paid in tax that the government will return to you. File your IT return and request a refund.

• You need to file taxes with a specific return form—the ITR-4. This applies to income from business or profession

• Maintain a profit/loss account of all your freelancing work. Show your expenses at the end of a financial year

• Common expenses that you can show include telephone bills, Internet bills, travel expenses, office supplies etc.

• In case there are 80C/80D deductions applicable, you will have a greater leeway. You will need a higher income before you fall in the taxable category.

Seek professional help so that you can file your returns without a glitch.