India has a well developed tax structure, wherein the authority is clearly segregated the Central and State Governments and Local bodies. Central government has the authority to levy taxes on income. Self employment tax (SET) is the tax primarily levied upon individuals who work for themselves – self-employed people i.e., the people engaged in business or commercial activity of some kind which is legally approved by the Governmental authorities. Under the tax laws, the income of a self-employed person (freelance writer/journalist, independent consultant, businessman , professional) would fall under the head of income from business or profession. You can be self-employed and work part time or full time as long as you are working for yourself. Basically, if you work for yourself and someone else does not pay your tax, you must pay the self employment tax. It is a kind of social security tax. By payment of this kind of tax, taxpayers’ social security is ensured as they get disability benefits, survivor benefits and medical benefits. Tax slabs for a self employed is same as for a service employee.Flickr ]
Tax Benefits To Self-Employed
- All your work/business related expenses can be claimed as business expenses. (Vouchers/bills would be required to support expenses) A variety of expenses including rent or home office expense, travel costs, communication costs (telephone, internet), business meetings, supplies and utilities can be claimed as expenses.
- Claim vehicle costs or mileage allowances.
- Claim home costs if you work from home.
- Normal deductions are allowed for self-employed individuals .
- Section 80C allows investments in PPF (Public Provident Fund), insurance /unit linked insurance plans, pension plans, ELSS (equity linked savings scheme), NSC (National Savings Certificate), infrastructure bonds, FDs (fixed deposits ) apart from home loan principal repayment.
- Tuition fees for your child’s education can also be claimed. Section 80D provides deduction for medical insurance premiums of oneself and family.
- If you are staying in a rented home you can claim the rent paid as deduction u/s 80GG, based on certain conditions. If you buy a house, you can claim a deduction on interest paid.
- The premiums paid towards life and health policies will provide for tax breaks u/s 80C and 80D.