Top Tips on Tax & Legal For Freelancers

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The freelance industry is booming all over the world, including India, and is only expected to grow, with technology changing how we live, communicate and now where we work.

With more and more regular employees opting for a freelance work, the trend is growing leaps and bounds. Since the credibility and sustainability of freelance work are realized by the employers, the market is taking all in its stride, and supporting the trend.

However, one issue remains – new-age freelancers are with little awareness about their legal rights and the tax rules that govern them.  

Below are some essential tips on handling the tax and legalities concerned with the freelance work.


Your work is your own: 

The freelance workers should know the legalities involved in accepting work and before hiring their skills out for someone else. Creative workers, for instance, should understand the fact that your work is your own, and none of the others can copy/use it in their name unless specified.

Many of your clients will attempt to pass off your creativity as their own once they have paid for the work done. This is not how it is supposed to work unless you have signed a specific agreement to this effect.

An agreement, signed at the time of recruiting a freelancer, wherein it is specified that the work will be used for a particular purpose and the name of the employee will not appear, need to be signed and ‘approved’ by the freelancer. Only in such cases can the work be reused or reformed according to the requirements.

In all other cases, if no such agreement is signed, you continue to hold the copyright to your work and can choose to do what you wish with it in future.

Income Tax Refunds: 

As a freelancer, your employers will be deducting tax at a flat rate without knowing what your earnings are for the year.  While an employee can give in advance the tax projections for the year, a freelancer may not be able to do so, due to sevral hindrances, most of all, not understanding how much their earnings will be at the end of the year.

Hence, although the tax will be deducted every month with your payments, you can always claim it back as a tax refund. At the end of the year, you will be able to recover much of the extra tax paid, particularly by claiming expenses on acquiring clients, travelling for work and so on.

After filing tax for the financial year, you can ask for a tax refund and get the excess of tax deducted at source.

Insist on a Contract: Many freelancers tend to work without much paperwork. A client will call and ask for a graphic design, a travel piece or a photograph, and you will get working. While this may work initially, as you expand, you may face issues such as non-payment and unnecessary reiterations.

Think about situations when, after confirming on providing the payments every month on 15th, you are not paying the right amount, or there are delays in payments.

Such issues are often faced by freelancers around the world. The only possible solution is a perfect and non-breakable contract before taking work from the clients.

Till now, only word of mouth contracts (or email contracts) have been issued for freelancers in India. Although this may work fine sometimes and the employers might keep up their work about issuing the amount of work or the fees for the service rendered, it might not be the case always.

Having a foolproof contract can legalize the matter and settle any differences once and for all. You should insist on a fixed set of rules while working for your client, including how many iterations are included in the stated price and when you expect payment.

Check Your Clients

Well, it is easier said than done, to check on the clients. There are several clients, offering freelance work from remote locations. Although it is tough to touch base with all of them and inquire as to their credibility, one can ascertain of them are genuine through various ways.

Check the directories for their address, directories for the numbers, and if you can, visit the office (in case it is not a remote location) before taking up work.

While it may not be possible to do so at every opportunity, hire yourself to those companies/agencies which have a credible record maintained and can offer a foolproof contract.

Hence, although working as a freelancer in India is a great opportunity to keep your work-life balance and also allows you to set your own pace, it has several sets of problems. Only by making sure we have abilities to tackle them can ensure we have an unhindered and uninterrupted work and money flowing our way.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.

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