Tax-saving Deductions Freelancers Can Claim in ITR

Freelancers have an advantage in terms of availing more tax-saving deductions

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The tax-filing deadline for freelancers is the same as it is for their salaried friends — 31 July 2017. This deadline applies for your income earned in FY2016-17. Filing tax returns and paying tax is tricky, especially for freelancers.


For salaried individuals, the Form-16 pretty much takes care of everything. But while the tax return filing process is a little more complicated for freelancers, they have an advantage in terms of availing more tax-saving deductions. This is because freelancers can claim the dual tax benefit as both an individual and a business owner.

Here are the details of various deductions that freelancers can claim in their income tax return.

  1. As An Individual Taxpayer

Section 80C Deductions - The maximum limit for the deduction under Section 80C is INR1.5 lakh. There are various investment options and expenses that can be claimed within this limit. These include ELSS funds, life insurance premium, PPF, tax-saving fixed deposits, tuition fees of children, repayment of home loan principal, NPS etc.

Health Insurance - Deduction is available up to INR25,000 for medical insurance of self, spouse and dependent children.An additional deduction for insurance of parents (father or mother or both) is also available to the extent of INR25,000 and INR30,000 if the parents are senior citizens.

House Rent - This deduction is available for rent paid when HRA is not received, as is the case for freelancers.The amount of deduction depends on your total income, but the maximum amount that can be claimed as deduction is INR60,000 per annum.

Education Loan - A deduction is allowed for interest on loan taken for pursuing higher education for self, spouse or children or for a student for whom the taxpayer is a legal guardian. There is no restriction on the amount that can be claimed.

Charity -Contributions made towards certain charities for religious or social causes is also allowed as a deduction from income.

2. As a Business Owner

As a freelancer, what you’re doing essentially is running a business. Hence, you can also claim deductions on certain expenses incurred for running this business. Here are the business-related expenses that you can claim.

Office Rent -If you are working from a rented premises,you can claim the monthly rentals paid by you as an expense. If you work from home, you can claim deductions by paying rent to your parents after entering into an agreement with them. But your parents will have to show this rent as a part of their income.

Depreciation - As a freelancer, the equipment you use for your work, like computer, printer, camera etc, are your assets.You can claim depreciation on such assets as your business expense. The depreciation rate varies according to the asset. You can also claim depreciation on your vehicle if you use it for work purposes.

Office Overheads - While doing your work,you may have to incur various day-to-day expenses to run your business. This could be electricity, telephone or internet expenses,travelling & conveyance costs, or payments made for office supplies.You can claim all such office overheads as your business expense.

Payments - You may often hire some persons or firms to assist you in your work.The payments you make to them can be claimed as a business expense.

Legal and Accounting - If you have employed the services of a lawyer or an accountant for your work,you can claim such expenses as well.

This is how freelancers can reduce your income tax outgo to a great extent by claiming expenses as individual taxpayers as well as business owners.