Gross income calculation -The first step you can take to file an income tax return as a freelancer is to calculate your gross income for the year.
Deduct the expenses -
Tax is applicable only on the profits. Therefore, all the expenses that you incur to earn revenue can get deducted from the total income. So, for example, if you are a software developer, you can reduce the expenses incurred for buying software as a business expense and deduct that from your total income as well as tax liability.
Moreover, for those expenses that are not exclusively for business purpose or relate to your personal work as well, you can create a note of the monthly consumption or payment trends and allocate a reasonable percentage of those as your business expense.
You are also allowed to deduct depreciation expenses from your gross-total income. That includes the wear and tear of the equipment you use for your business or profession purpose such as laptop, computer, camera or any other gadget. Since the monetary value of your asset decreases over time, you can use depreciation to spread its cost over a period instead of showing it upfront.
That is how all expenses, including depreciation that you use for your freelancing work, can be deducted from your income to reduce your tax
liability. However, it is necessary to remember that these expenses should not be illegal or used for personal purposes.
Add income from other sources -
To calculate your gross-total income, you also have to add income from other sources, including those received from non-freelancing work. Some examples of such income can be - The gains made from the sale of a property
, interest income accrued on your savings or fixed deposit account, income from trading in shares, equity or debentures or any other additional income over and above your freelancing revenue.