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In Own your Life – Financial Goals, we went over setting financial goals and motivational practices to help increase your chances of success. If you do not know how much you make you are not going to know how much you can afford to spend, and since most people do not make the same amount month in month out, it is important to figure out a dependable average. Hourly – If you’re paid by the hour and if your hours fluctuate, you need to do a three month average to obtain your net income. Seasonal – Maybe your work outdoors or you are a teacher who get paid nine months of the year. No matter how you get paid, it is very important to determine a figure you can count on for your budget. The best way to find out these specific expense answers is to play the Estimate vs Actual Game.
The game will open your eyes to all your monthly expenses and make it much easier to set up a workable budget. Grocery – This figure includes all food, cleaning supplies and personal items purchase at the grocery store. Entertainment – Movies, Plays, Netflix, Sports, Dinning out and any other form of entertainment you pay for monthly. Utilities – First, I recommend converting most of your utilities into a fixed expense, by setting up even billing plans. Savings is the Key – If you are not saving money on a regular monthly basis than you are literally one emergency away from being back in debt.
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With the advent of the so-called “sharing economy,” a world of fun and profit has opened up to consumers. Consumers experimenting with these opportunities may sometimes overlook the fact that they are actually running a business.
All of the licensing costs, related insurance, advertising, and hard costs invested to generate income are deductible.
That means you must keep detailed records, logs of personal and business mileage, and receipts of all expenses. When it comes to renting your home or property to vacationers, there are different ways of reporting the income, depending on whether you treat the rentals as a business or a hobby. However, there’s good news for people who only rent out their property for a total of 14 days or less per year: all of that rental income is generally tax-free.
Taking on a side job to make some extra cash can be a financial boon, but it’s not without tax implications. The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. While I do not participate in the Sharing Economy, I appreciate the opportunity to learn more the current tax implications and about the business licenses involved.
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All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management. By the end of this chapter you should know the basic provisions of the Income Tax Act that relate to employment income and expenses. You should understand and be able to explain how employment income and expenses are calculated and why the provisions are designed the way they are. You should be able to apply your knowledge and understanding of employment income and expenses to real life situations. The first source of income mentioned in the income aggregation rules in Division B is employment income. Examine carefully the contents of these sections, especially sections 6 and 8, which contain many specific inclusions and deductions from employment sources. For labour law purposes, individuals usually prefer to be employees to gain protection for their severance, pension and injury compensation rights. There is no single test or factor that is decisive in determining whether an individual is an employee or an independent contractor. To analyze a fact situation effectively and efficiently, it often helps to apply a set of tests or factors, accepted by the courts, to the fact situation.
The economic reality or entrepreneur test examines several economic factors and draws from them an inference as to the nature of the relationship. The control subtest, listed as part of the economic reality or entrepreneur test above, determines whether the individual is directed by someone who is in a position to order or require not only what is to be done but how it is to be done.
The control test was considered by the Federal Court of Appeal in the case of The Royal Winnipeg Ballet v.
In cases where the taxpayer doing the work supplies neither funds nor equipment needed to do the work, takes no financial risks and has no liability, the courts have applied the economic reality test and held that the taxpayer is an employee. Where the taxpayer doing the work has a chance of making a profit, risks incurring a loss from bad debts, damages to assets or delivery delays, and must cover operating costs, there is evidence of an independent contractor or self-employed status. The integration or organization test examines whether the individual doing the work is economically dependent on the organization.
The specific result test has been used to distinguish an employee from an independent contractor. In the Royal Winnipeg Ballet case, the Federal Court of Appeal considered the relevance of the intention of the parties.
The CRA does not have a specific Interpretation Bulletin dealing with the differences between employees and self-employed individuals. The taxpayer, a professional pathologist, was appointed Director of the Clinical Chemistry Laboratory of a hospital for a period of five years. The taxpayer's main responsibility was to ensure that the output and quality of the work done in the laboratory by 15 technologists who were employees of the hospital was acceptable.
The normal deductions from employees' salaries were made by the hospital in respect of the taxpayer's remuneration. The following has been excerpted from the decision of the Chairman of the Tax Review Board in the case of Hauser v. The other aspects of the economic reality or entrepreneur test, however, are particularly revealing if we compare the economics of the taxpayer's professional activities in the hospital's chemistry laboratory with that of a private practitioner operating his own private laboratory. On applying the Economic Reality Test to the facts, there is no valid evidence which might support the proposition that the taxpayer was under a contract for services of a self-employed individual. As a result of applying all three tests to the facts of this case, there is nothing that supports the contention that the taxpayer was under a contract for services or was an independent contractor. The consequence of this finding is that the taxpayer's income would be taxed as employment income with the resultant restricted deductions.
Before 1995, some employees were able to defer tax by becoming self-employed (proprietorship) and choosing a fiscal year end other than December 31. Numerous court cases have considered remuneration from employment as opposed to some other type of payment.Bell v. Only the taxable portion (over $1,000) paid to an emergency volunteer is included in income. Most benefits that must be included in income from employment are specified in section 6, with section 7 limited to the benefit from employer stock options.
Beyond establishing that the value of board and lodging is a taxable benefit, as was the situation in the case of Cockerill v. As an exception to the benefit rule that requires the inclusion of the value of board and lodging, the Act excludes from the income of an employee, in carefully defined circumstances of employment at a special work site or remote location, the benefits he or she might otherwise be said to derive from board and lodging and transportation. Paragraph 6(1)(a) itself begins with a preamble which states the general rule for including benefits that arise in the course of or by virtue of an office or employment. Part (c), above, excludes the benefit in respect of the use of an automobile since there is a specific inclusion (discussed later in the chapter) of a standby charge for automobiles and for all operating costs paid by the employer for personal use of the automobile, such as gas, oil, maintenance, insurance, etc. Any benefit related to parking for personal purposes is not considered to be a benefit in respect of the use of an automobile.
An innovation in providing employee fringe benefits is a cafeteria program or flexible benefit program. Since the condominium is the personal-use property of the CEO, and the employer does not pay or contribute to the costs, the benefit provided to top executives would not be taxable. The Act addresses the income tax consequences of employer-provided compensation in respect of losses on a disposition of the employee's residence and other housing-related payments such as financing subsidies.
Employment income includes a deemed interest benefit on an interest-free or low-interest loan made by an employer and received by an employee in his or her capacity as an employee. A deeming rule states that this deemed interest benefit is in turn deemed to be interest paid.
The quarter-by-quarter method described above is used by the CRA and may result in a smaller income inclusion than an annual calculation in (a), above, involving the prescribed rates for all four quarters that the loan was outstanding.
Part (b) of this calculation is modified every fifth year, to use the prescribed rate on every fifth anniversary date, for home purchase loans. Discuss the tax consequences of the above transactions, supporting them with all necessary computations.
Although deductions are really presented in subsequent chapters and the latter part of this chapter, a conceptual discussion of the deduction alternatives may be helpful in understanding the whole issue. There is no deduction available in connection with a home purchase loan except in Division C where the employee has moved, under certain defined conditions as described in Chapter 10. The Act determines the value of an employment benefit arising on the forgiveness of an employee loan. As previously mentioned, Interpretation Bulletins reflect the CRA's position in interpreting a particular section of the Act. The Interpretation Bulletin on employee fringe benefits was last revised on October 12, 1999.
Again, paragraph 6(1)(b) contains a preamble which establishes the general rule for the inclusion of allowances.
Certain allowances, reimbursements, and other payments in respect of disabled persons for transportation to and from the workplace and for the services of an attendant to assist the employee to perform his or her employment duties are excluded from employment income.
A common exception to the taxation of allowances deals with employees who sell property or negotiate contracts. An employee earning an annual wage of $40,000 with an investment income of several hundred thousand dollars a year may choose to own and drive a $100,000 car. With more and more growth of internet in India, the number of freelancers or independent contractors is on a steep rise. For the financial year 2012-13 (Assessment year 2013-14)  , the income tax slabs have been defined by the government of India as follows. The tax slabs are self explanatory, if you are a general tax payer or female tax payer for the first 2 lakh of your income for the year you don’t need to pay any tax after which 10% slab is applicable till 5 lakhs and beyond that 20% and 30%. TDS is Tax Deducted at Source, Government of India has made regulations by which a company paying an individual or another company for services offered needs to deduct tax at source. Share your problems while filing IT returns and also if some tax implication has been missed here. Note: This is not a legal advise and should only be considered as information provided from personal experience, for more information please consult a practising Lawyer or a Chartered Accountant. If you need any sort of help in filing your ITR and maintaining you account i can provide this service to you. For this financial year, you won’t need to pay tax to the government because you will fall under the no tax slab (which is till 2 lakh) ,but the company still has to deduct Tax Deducted at source (TDS) of 10% and submit it to the Income Tax department. While calculating your income tax you need to use the amount credited (in Rs) to your bank account on a monthly basis as your income.
You should take care of advanced tax though, Advanced Tax are applicable to individuals having tax liability greater than 10k per year and should be deposited per quarter to the IT department.
Since this financial year, I’ve been a freelance consultant working in the Software Engineering industry. TDS is an amount deducted by the client (applicable only for Indian clients) before paying your invoice. Service Tax is something that you should charge your client (again Indian Client only) and should be charged over and above the Invoice amount and this needs to be deposited to the Govt of India.
Most of your queries regarding income tax and service tax can be answered by our reply to Mr Loknath in the discussions on this page. Ok yes I read its really very informative thanks for that, but I have one more question since we get payment directly to our bank account from the freelancing sites where does IEC number play its role. No, all Indian freelancers don’t have an IEC code because not all of them are exporters (of services) and although you are receiving the payments directly to your bank account the amount is actually being transferred by Freelance Websites which are outside of the country and hence an IEC code is required as per government laws. All earnings even from export of services is taxable as per Income Tax Law (If you are Indian Resident and not an NRI) . I am a part time employee drawing about 2 lakhs per year (including providend fund etc) and a freelance designer (working as independent contractor) .
My query is also similar, the only difference is that instead of part time I am in full time job plus i am doing freelance work. Karan & Anamika,, if you are working as an employee in an organization (part time or full time) and working along side as a freelancer you will be filing your ITR as an employee but will have to show this income as Income from Other Sources (equal to your total earning that year from freelancing) in your ITR.
As in the ITR there are five heads of income, Being a salaried employee the terms of contract might not permit u people to work for any other person but the income tax act don’t put any restriction on the same.
Hi, I am an employee with a private firm and I draw a consolidated pay with no TDS, and hence no Form 16 from the employer. Rudraksh, I couldn’t get if you are working as a part time or your question is only related to filing return as a full time employee.
Ranjeet, for how to save taxes you will need to consult a tax specialist or a financial planner. 2.If I’ve to pay 30% tax on my 20L income, what about the 10% consultancy services tax deducted from my salary by my employer? Although you will fall in the 30% bracket, you don’t need to pay 30% on the entire amount. Now coming to the point of the employer deducting TDS (10% amount), that is the correct way to for a consultant.
The rent paid if any can be claimed as deduction, also there are other allowances which are part of salary and are exempt like conveyance allowance. When paying freelancers in bangladesh or any other country, do Indian companies need to deduct TDS?
Rahul, When you are paying a person outside of India you don’t need to deduct taxes since the person is not eligible to pay any tax to the Indian Government. Hello Sir, I’m an freelancer, I earn money from ads publishers, they transfer money to my paypal account and further the money goes to my indian saving bank accounts.
Sambit and kalpana: If you are getting paid in INR and your earnings touch 10 lakh, you might have to pay service tax as well. I read that you have mentioned in of the discussions below that service tax is applicable once your gross income reaches 10 lakhs. Hi Nishant, To answer your queries if your gross income from services from Indian Clients exceeds 10 lakh you need to go for Service Tax Registration(it’s not total gross income).
Service Tax doesn’t apply to advertisement and hence your earning there are not to be considered for service tax. No you cannot deduct the eligible amount as HRA, HRA is only applicable for salaried employee but what you can do is show your house rent as the rent for your office when filing your return. Hi , I am getting payment online from foreign country for my software consulting work, out of which I have to pay local web designer who helped me in project. We can save more tax by preparing an income and expenditure account and claiming the screen designer’s expenses, internet expenses, telephone and other if u have any. There is a provision under chapter vi of deductions where we can claim rent as deduction in case of a professional as well.
Another query regarding service tax – I understand that service tax is exempt for export services.
Regarding service tax if you have registered a service tax number you will have to file service tax returns as NIL. For saving maximum tax u can prepare income and expenditure account of yours and file the ITR 4. I was a salaried employee of an Indian corporate till january(mid), for which TDS on my salary was deducted till my separation from the company.
Do I have to pay advance tax on the income that hasn’t been covered under TDS or do I have to pay self-assessment tax on filing the return and show this income as income from other sources? Rather then showing income under head other sources you can save on taxes legally by filing ITR 4 and showing income as professional receipts as you are no more in jod now and also providing professional services to your client abroad drawing your income and expenditure account and claimimg expenses like internet charges, electricity , rent of office, depreciation on laptop, furniture, mobile expenses, etc.
I am freelancer and I earned 7 lakhs last year from my foreign clients through wired transfer. Hi Sir, I am a full time employee in India and I am going to work as a software developer on part-time basis from home for my client outside India. Well for working part time u need to be sure that the employmeny terms don’t restrict u for working part time. Description of Tax Brackets Calculator 2005 Do your financial planning now! This tax calculator instantly estimates your US federal income tax and finds your tax brackets. This is Not a Full Office Suite, But it is the Collection of Small Useful and Reasonable Application ,That are not Broad like Word, Excel But These are Application Which are useful in Offices and Home Based Users. This is a Great Address Book Keeper ,You just have to fill your Relative or Customer Address, Phones Etc. This is a very simple application that goes deep and calculates the most tax refunds you are entitled to.

One of the most confusing aspects of renting a cottage is determining how the rental deductions are treated for federal income tax purposes. Where a cottage owner uses the cottage for personal purposes for less than the greater of 14 days or 10% of the time that the cottage is rented, then the cottage is treated as rental property for tax purposes. Alternatively, those expenses that are attributable to general cottage maintenance and ownership, like property taxes, depreciation and utilities, will be divided into personal expenses and deductible rental expenses in proportion to the rental use of the cottage. Where a cottage owner rents the cottage for more than 14 days each year, but also uses it for personal purposes for the greater of at least 15 days each year or 10% of the total time the cottage is rented, the rental income from the cottage will be taxable income that needs to be reported on the owner’s tax return. This information is intended only as a basic introduction to some of the tax issues that cottage owners who rent out their properties face. Cottage Law is the practice area of The Penning Group focused on family cottage sharing and cottage succession planning. If your hours are set per week, then just added up your net income per paycheck to obtain the figure you need.
The time of year and the state of the economy can have a big impact on the amount you earn. Due to the impact of weather or other factors, you will need to look at the longest time to get a dependable average. Some people are every 6 weeks.  So only list down your estimate cost for this 30 days period. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. You might be driving for Uber or Lyft, renting out your home on Airbnb, or doing odd jobs on TaskRabbit, all in hopes of making a little cash. People who dabble in the sharing economy may never earn more than a couple hundred dollars, but once income exceeds $600 (before expenses) or $400 (after expenses), federal and state taxes, in addition to local licensing laws, take effect. Check with your city clerk or other local official in charge of such things to verify what you might need. For instance, regularly renting out all or part of your home may require you to register it as a hotel—and to pay the local taxes that hotels or bed and breakfasts do. But as for the use of vehicles and homes, depreciation, and home office space, all the rules apply that relate to any business. When you are renting the property out to several short-term visitors (with an average stay of seven days or less), you might be considered a hotel for income tax purposes. Incidentally, if you rent your property to a tenant for 14 days or fewer, not only is the income tax-free but any repairs and remodeling the tenant does during that time is as well. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. Other Product and Company names mentioned here are the property of their respective owners. You should also be able to distinguish between a self-employed independent contractor and an employee. Completing the Exercises (¶3,850) is a good way to deepen your understanding of the material.
Completing the Assignment Problems (¶3,875) is an excellent way to develop your ability to apply the material in increasingly complex situations.
Note that the T1 income tax return (an individual's tax return) does not actually show net employment income as a single number, since the return separates employment inclusions from employment deductions.
Next, the major inclusions of employment income and the major deductions from employment income are considered. In recent years, there has been a surge in new small businesses, together with more consultants and self-employed businesses. The issue is important because independent contractors are treated as businesses and are allowed to deduct all reasonable expenses incurred for the purpose of gaining or producing income from business, except capital outlays such as the cost of land and other fixed assets. While many individuals would prefer to be an employee for labour law purposes and self-employed for tax purposes, this option is not available. Each of the tests, which determine the nature of the relationship rather than the nature of the services, must be understood. Where such control is exercised over the individual, an employer–employee relationship is implied. However, in our increasingly complex business environment, control is no longer appropriate as a conclusive test, but is just one of the four tests which must be examined together as part of the economic reality or entrepreneur test. It seems to me that while the degree of control exercised by the RWB over the work of the dancers is extensive, it is no more than is needed to stage a series of ballets over a well planned season of performances. On the other hand, the major tool necessary for some work is the knowledge, expertise or skill of the person doing the work, as in the case of a professional consultant. The more dependent the individual is on the organization, the more he or she will appear to be an employee. An employer–employee relationship usually contemplates the employee putting his or her personal services at the disposal of his or her employer during a given period of time without reference to a specified result and, generally, envisages the accomplishment of work on an ongoing basis.
He reported to the hospital's Director of Laboratories who advised the taxpayer what his work involved and decided the amount to be paid to the taxpayer. He did not have the authority to hire or fire any of the technologists who worked under him, but could, if necessary, request additional help from the hospital's administration. The taxpayer also participated in the group insurance plan toward which the hospital made substantial contributions. In presenting your answer, discuss the tests that are applied by the courts in this type of situation and consider how the facts relate to these tests. In this instance, it is clear that the Director of Laboratories could not or would not interfere in the taxpayer's exercise of his professional skills. In the latter case, the private practitioner runs the risk of financing the equipment, supplying the help necessary to operate and administer his laboratory and he then has to ensure that he has sufficient clients to render his laboratory operation economically viable.
All the evidence tends to establish that, from an economic reality point of view, the taxpayer was under a contract of service and, therefore, an employee of the hospital. By this agreement, his knowledge and skills in pathology or in any other related field, in which the taxpayer may have been qualified, was employed in the hospital's general organization in the treatment of patients.
The taxpayer was appointed as Director of the Clinical Chemistry Laboratory of the hospital for a five-year period on a full-time basis.
All the evidence clearly indicates that the taxpayer was under a contract of service and was an employee. In this particular case, the taxpayer was allowed a deduction for professional dues in the amount of $366 in 1975, but denied deductions for property taxes, business fees, liability insurance, books and journals, telephone, accounting fees, and travels and conventions in the amount of $2,190. This tax planning was curtailed by the 1995 federal Budget, which forced the self-employed to have a December 31 year end or to use the Alternative Method of reporting business income.
Remuneration includes such items as bonuses, tips, honoraria, and commissions paid to employees. All amounts, received by an individual in his or her capacity as an employee both from his or her employer and from others by reason of his or her employment, must be included in income. Thus, advancing or deferring a payment such as a bonus will affect the level of income of an individual for a given year. The exemption from income is easier for municipalities to administer as they are not required to issue information slips (T4s) for what is usually a nominal amount.
The major list of benefits in section 6 is contained in subsection 6(1), with its many paragraphs listing different specific taxable benefits. Also, each paragraph of subsection 6(1) is a continuation of the sentence commenced in the preamble. This preamble is very broadly worded, as emphasized by the Supreme Court of Canada in the case of The Queen v. A benefit enjoyed and, thereby, included in employment income by the employee-taxpayer, raises the whole question of valuation of the benefit.
As a result, any benefit related to personal parking will be included in employment income as a benefit. These programs enable employees to select from a menu of available benefits some of which are taxable and some of which are not. Since the employee would be learning about many of the new products and also meeting prospective customers, it is clear that the trip would be for employment purposes. The purpose of providing the condominium to employees is to reward senior employees with an annual trip. If, however, the corporation owned the condominium or reimbursed the CEO for maintenance costs, then a taxable benefit would be imputed to each employee who used the condominium.
It may be worthwhile to review related court cases and precedents when determining whether or not a taxable benefit exists. However, this general rule is modified so that only one-half the amount in excess of $15,000 of an employer-paid amount is included in employment income for an eligible housing loss. This definition imposes a 40-kilometre minimum on the difference in the distance between the old residence and the new work location, and the distance between the new residence and the new work location. The benefit is defined as being the difference between the interest calculated at the prescribed interest rate, which may change for each quarter in the year during which the loan was outstanding, and the actual interest charged by the employer in respect of the calendar year and paid by the employee up to January 30 of the following year. The effect of this deeming rule is to meet a condition in the employment deduction provision which allows for a deduction of interest paid on funds borrowed to purchase a car for use in employment. This type of loan results from any move of at least 40 kilometres by the taxpayer or his or her spouse to a new employment location in Canada. Following normal commercial practice, the CRA calculates interest commencing with the first day that a debt is incurred and excluding the day on which the debt is repaid, unless a provision of the Act specifies another method of calculation. However, both of these amounts must meet further tests in paragraphs 8(1)(j) and 20(1)(c), in order to qualify for a deduction. Often, the CRA uses an administratively practical interpretation of the law and, in certain cases, does not enforce the law strictly because it is simply not practical to do so. It contains a list of items which, if received or enjoyed by an employee, must be included in employment income and a second list of items which need not be included, despite the general wording of the preamble in paragraph 6(1)(a), if the CRA's conditions outlined in the Bulletin are met. To mark special occasions, such as Christmas, Hanukkah, birthdays, or a marriage, employers can give their employees two non-cash gifts per year on a tax-free basis. The total cost to the employer, including taxes, of the two gifts or the two awards cannot be over $500 per year. Employees do not have to declare the cost of the gifts or awards as part of their taxable income. If the cost of a gift or an award is over the $500 limit, the employer must include the full fair-market value of the gift(s) or award(s) in the employee's income. This inclusion is determined by the cost of each gift or award and, also, by the number of gifts or awards given in a single year. The new policy does not apply to cash or near–cash gifts and awards such as gift certificates, gold nuggets, or other items that can easily be converted into cash. According to the guidelines, there is no taxable benefit, where providing the computer is primarily to the benefit of the employer. Although it is still in force, these changes in CRA assessing policy suggest that the Interpretation Bulletin is becoming dated and may have to be revised again. Typically, a reimbursement involves the payment by an employee of an expense of his or her employer and the recovery from the employer of the amount paid as substantiated by vouchers or receipts.
The general rule is that all such allowances received must be included in the employee's income. In order for these exemptions to apply the disabled person must be eligible for a disability tax credit which is discussed in some detail in Chapter 10. For example, a reasonable daily allowance for the travelling expense of the president of a large public corporation (a person who negotiates contracts) would be entirely different than a reasonable daily allowance for a salesperson for the same organization. The Queen, the taxpayer claimed that a car allowance was not reasonable because the allowance did not cover all of his expenses of operating the car. The Queen, the judge suggested the type of evidence necessary to determine whether an allowance, to cover reasonable expenses of owning and maintaining a car, was inadequate.
I must also have the complete history of the vehicle such as the expenses over the years an allowance was received. Obviously a normal reasonable mileage allowance would never cover the depreciation of an automobile this expensive. People prefer to work for themselves on their own terms than an employer and are capable of earning far more than what they would in their day to day job. A person earning on his own is considered a Sole Proprietor and needs to file income tax returns using the ITR-4 return form . The numbers are revised every year at the time when the finance minister announces the budget so do keep an eye for next year. Not paying tax is a crime as per government rule and you might have to face severe penalty if the IT department raises a scrutiny against your Income Tax Filing. But in case someone deducts tax at source they have to provide a Form 16 to the person whose tax has been deducted. Also you don’t need to have any sort of registration to be done through the government, just your PAN card would be sufficient. What you will have to do is while filing your income tax for this financial year (last date of which would be 31st July 2013), claim all the money deposited as TDS as a refund.
It is the responsibility of the payer to deduct tax but as u said the payer is a foreign client of yours having no establishment in India thereby not having any tax deduction account number. Moreover you can claim expenses like internet expenses, Mobile phone expenses, Depreciation on the assets like laptop etc. This is only applicable after you have got your service tax registration which is only required after 10 lakh of income from Indian source. You don’t owe Govt of India any service tax on overseas invoices but you owe the taxes as per slab mentioned in the article even on the earnings from export.
With the total earning amount you have mentioned you will fall under the slab of 30% which means there will still be some amount that you owe as personal income tax to the IT department.
Most of the freelancers are not aware of this and hence don’t normally register for an IEC code. So even if you receive payment in other currencies directly in your bank account it is still an earning for you as per Indian Govt and hence needs to be taxed. Whether I will be assessed as an employee or as an independent contractor or both as an employee as well as independent contractor.
Based on the tax calculations for this extra amount of earnings you will have to pay self assessment tax (I am assuming your employer takes care of your income tax deductions for salary paid as TDS) .This will take care of your income tax obligation to the Govt of India. So u need to file ITR showing the freelancing income as income from other sources and then u can’t claim any expenses in relation to that.
The employer will provide you with a Form 16 which basically says that someone has deposited some part of your tax obligation on your behalf to IT Department. In case I reach the 10 lakh barrier, then would it mean that i have to collect service taxes from all my clients including newspapers, NGOs, advertisers(example google adsense)? After which you will need to charge each of your client an additional service tax amount over and above the invoice.
Apart from this you will have to look more closely on what part of your payments are services. The other expenses you have mentioned can be claimed in the income and expenditure account and for that you need to get help from a professional at a meager cost of about thousand rupee. But if you are living in your own house or if you are not paying rent there is not way out. When I file the ITR-4 return form, how will the govt deduct income tax from my net profits – will they deduct the amount directly from my bank account or do I need to deposit the amount at the IT office? But since I have registered a service tax number, do I still need to file service tax returns showing as NIL tax? Similar to below, I also working over the internet and my income is about 15 lacs per year.
After separation I have been working as an individual consultant for a foriegn company (Software), which doesn’t deduct TDS on the invoices i send them.
The advance tax payment dates for individuals are 15 sept, 15 dec, 15 march of the financial year. If you want oay advance tax then you will pay self assessment tax together with interest at 1% per month. If you have a office then office rent, salary to employees if applicable and other specific professional expenses. Also u need to file ITR 4 as u are a professional and from this income you need to deduct the expenses that u incur in earning this income.
Also while paying tax online using the above link do I need to show evidence of deductions like rent, insurance and other section 80 c elements? What sort of taxes will I need to pay in India or charge to the client for the income that I receive from my client?
Is there any ceiling on the income that can be received from the client (outside India) to be considered while considering taxation and filing the returns? Tax Brackets Calculator 2005 shows tax brackets for federal income tax years 2000-2005, calculates you federal tax given your taxable income and estimates average tax rate based on your filing status: single, married filing jointly, married filing separately or head of the household. Different tax rules apply depending on the breakdown of personal and rental use of the cottage. The cottage will not be treated as a personal residence and, thus, a cottage owner can typically deduct many of the rental expenses associated with the cottage. Apportionment of these expenses is accomplished based on a fraction of the total, the numerator of which is the number of days the home is rented at a fair rental, and the denominator of which is the total number of days the home is used for any purposes.
As far as tax deductions are concerned, not only do the previously discussed apportionment rules apply, but a cottage owner is also only allowed to take rental deductions to the extent that he or she actually earns income from renting the cottage.
If a cottage owner uses the cottage as a personal residence and only rents it out for 14 or fewer days each year, then the owner does not need to report any of the rental income earned during those days as taxable income on a tax return. Before we can budget we need to find out where how much money we make and where is it going now. Make sure you pay all your required obligation and live your life normally during this time frame to obtain an accurate result. You have future bills that you are going to have to pay that you won’t be able to cover with one paycheck; unexpected expenses, vacation, repairs, maintenance, illness, holidays. While a side job can be a great way to earn extra money, there are also tax implications to consider. However, if you rent your home only once or twice a year while you’re on vacation, you might be exempt. This means that the rental must be reported on Schedule C and all profits will be subject to self-employment taxes.
A professional will be able to advise you on your individual situation and help you avoid any costly mistakes with your taxes. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management. This determination, although very basic, is important because it will be used in subsequent provisions to compute the limitations on the deductibility of certain items such as retirement plan contributions and child care expenses.

While the net result is, of necessity, the same as that achieved by the Act, the T1 return approach does not show a net income from employment figure that is very important for subsequent calculations. Since the system of rules that allows for deductions pertaining to the employment use of cars is extensive, these rules are considered in a separate part of this chapter. Many employers find it beneficial to hire short-term consultants, rather than long-term employees.
Employees, on the other hand, are strictly limited to those deductions specifically listed in section 8.
It is important to know how the tests work to distinguish between an individual who is considered to be employed and an individual who can be considered to be self-employed. Hence, control is evidenced by the situation of an individual who is subject to a person who has the right to give orders and instructions to the individual regarding the manner in which to carry out the work.Di Francesco v. The shortcomings of the control test reveal themselves in circumstances where it is difficult, because of the nature of the work, to exercise any control over the manner in which the work is performed. At issue was whether the dancers of the Royal Winnipeg Ballet (RWB) were employees or self-employed independent contractors. If the RWB were to stage a ballet using guest artists in all principal roles, the RWB's control over the guest artists would be the same as if each role were performed by a dancer engaged for the season. On the other hand, where a worker and payer agree that certain specified work will be done, possibly, with the use of assistants provided by the worker, it may be inferred that an independent contractor relationship exists. The taxpayer did not have to arrange for or pay his replacement if he was absent from the laboratory for vacations or other lengthy periods of time. However, even though the usual strict controls of an employer over the employee's work are not found in this instance, it does not automatically rule out the possibility that an employer–employee relationship does in fact exist. The taxpayer, on the other hand, uses the equipment and supplies which are all furnished by the hospital. In addition, the payer would be required to withhold from each payment the appropriate taxes at source. However, as discussed in Chapter 1, where specific words are followed by general words, the general words are confined to the same scope as the specific words. Thus, in addition to any bonus or honorarium received from an employer, an individual must include any tips received from his or her employer's customers. However, the voluntary deferment of an unconditional right to receive remuneration has not been accepted and, as a result, has been held to be taxable in the year it became receivable, as illustrated by the case of Blenkarn v. Subsections 6(1.1) to (23) provide mostly amplification, exceptions, formulae or limits for benefits listed in subsection 6(1).
In essence, the single sentence which is subsection 6(1) covers several pages of the Act! Conversely, a receipt which does not increase net worth is not a benefit and is not taxable. Paragraph 6(1)(a) is broad in its inclusion of benefits and does not specifically state that remuneration be from the employer. However, it is unnecessary for the employee's spouse to be present and the value of the trip (airfare and meals) relating to the spouse will be considered a taxable benefit to the employee. Over the past several years this has created longer-term employer-employee relationships and improved employee morale and effective team leadership.
For example, if the employer owns a condominium in the Bahamas and it allows the employee to use it for two weeks while on vacation, the value of the benefit is not the cost of maintaining the condominium for the employer but the rent that the employee would have paid to an unrelated third party for the use of similar accommodation. Recreational club dues (paid for by the employer) are not deductible to the corporation nor taxable to the employee. Interest paid or payable in respect of the calendar year on behalf of the employee by the employer or related party is also included in the benefit calculation. By deeming the imputed interest benefit, which is included in employment income, to be interest paid, one of the conditions of the interest deduction provision is met.
Where a form is prescribed, the number of the form will usually be listed in the footnotes. However, this exemption is deducted under Division C (deductions to arrive at taxable income) and is generally deductible during the first five years of the loan to the extent of the imputed interest net of qualified interest payments. Since the prescribed rate at the time the loan was made (6%) is less than the subsequent quarterly prescribed rates (8% and 7%), the 6% rate applies to all three quarters. This treatment is logical since the principal amount of the loan is not taxed when received.
Clearly, it may be worthwhile on an after-tax basis for an employee to trade taxable salary or fringe benefits for an equivalent amount of non-taxable benefits that are desired by the employee. In addition, to honour employment achievements, such as years of service or meeting safety standards, employers can give their employees two non-cash awards per year on a tax-free basis. The value of a cash or near–cash gift or award is considered a taxable employment benefit. However, there are many exceptions to this rule listed in the paragraph, some of which are discussed below. This was not sufficient evidence to prove that the allowance was not reasonable because the court was not convinced that the taxpayer was making a reasonable use of his vehicle. Even though the expense and depreciation for that car would be reasonable, it would not be reasonable for the employer or the taxpayers of Canada to subsidize this hypothetical employee. Second, the ordinary employee has a geographical limitation placed on the travelling expenses. So the question comes “Do I need to pay taxes for my earnings as a freelancer”? If you have any other income source (maybe your full time job) you need to include that as well while filing your income tax return. You can then use this TDS amount while filing your Income Tax Return and seek refund in case your earning for the year doesn’t exceed 2 lakhs. The refund will be processed within a few months and returned to your bank account by Income Tax Department.The company has to provide you a Form 16 in May next year in case they have deducted TDS from your income. TDS is Tax deducted at source, so in case you work with one of the Indian clients in the future they will deduct this amount from the payment that they are going to make for your services. If you are working alone you don’t necessarily need to go for setting up an organization.
They have clients in India like reliance etc and I have to install softwares at their premise and also in europe region. If by any chance you come across the source of this article would really appreciate you sharing this with us.
In case they don’t, you need to pay tax as a self assessment tax to the Govt of India and then file your return.
For eg if you are deducting a telephone bill of 2000 rs for internet connection, you need to have a bill on your own name for that expense to be a valid one. So lets say after calculations your total tax obligation comes to X (based on the tax slabs) and lets consider the amount already deducted and deposited by the company as Y.
Some of my clients are from the media (newspapers and magazines), some of my clients are couples (wedding clients), and other set of clients are from Non-profits and corporate.
Also certain personal expenses can also be termed as those incurred while earning the said 15 lacs. Because, I have heared that if I receive payment in forex in my account then I need not pay service tax but if I receive payment in Indian rupees then I need to pay service tax if my income exceeds 9 Lakh rupees. Issues include deciding whether you want to open up your personal space to guests, whether your cottage’s insurance is affected by renting and whether your cottage is truly in rentable condition.
Simply put, the amount of time that you spend at your cottage determines the extent to which your cottage expenses are deductible.
Common rental expenses include mortgage interest, property management fees, repairs, taxes, utilities, advertising, and legal and other professional fees.
On the plus side, because your cottage qualifies as a personal residence, you can still generally deduct the mortgage interest for the cottage if you treat the cottage as your second home. The only downside to this treatment is that expenses incurred in connection with renting the cottage are generally not deductible under these circumstances. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. The deduction by an employee of expenditures which include GST may provide the employee with a GST rebate. Employer contributions to EI, CPP, and benefit packages are reduced, and the employer does not need to commit to the contractor for a long term.
Hence, for income tax purposes, self-employed status may be preferred by both the worker and the payer. Judgment must still be exercised to determine the importance of any test or factor to the particular fact situation being analyzed.
In particular, the courts have found the test to be too inflexible in determining the issue in respect of professionals and highly skilled tradespeople who are hired for their knowledge and expertise; that is, they do not need to be told how to do a job. If it is accepted (as it must be), that a guest artist may accept a role with the RWB without becoming its employee, then the element of control must be consistent with the guest artist being an independent contractor.
The laboratory conducted tests exclusively for the patients of the hospital, although some tests were referred out by the hospital to private laboratories. The taxpayer as a staff member, therefore was under the hospital's control for the general assignment and reporting of his work and for the amount of remuneration that would be allocated to him. He neither hires nor fires any of the technologists who work under him but can, if necessary, request additional help from the hospital's administration and all the technologists and clerks working in the hospital's biochemistry laboratory are hired and paid directly by the hospital. It was the taxpayer's personal professional services which were at the disposition of the hospital and the taxpayer's work was done on a continuous day-to-day basis without there being any limited or specified amount of work that the taxpayer had, by contract, to accomplish. However, if a payment is made to such an individual without reference to his or her employment and primarily as a personal gift, it is not income. Thus, when attempting to determine if a particular benefit is taxable, scanning the list of paragraph headings in subsection 6(1) should be the first step. This is a function of the particular drafting style chosen for the Act in which each subsection consists of only one sentence. The Queen, the court determined that free parking spaces were not a taxable benefit since the parking spaces were provided for the employer's advantage rather than the employee's advantage. There is no specific provision within the Act that governs flexible benefit programs; instead each component of the flexible benefit program is governed by its own unique set of rules.
The company does not fund the trip and none of the expenses are deducted from the CEO's personal income. Also, employer contributions to a private dental plan are deductible by the corporation but not taxable to the employee.
A similar effect is provided where funds are borrowed from an employer, for example, to purchase shares of a corporate employer. The CRA's administrative practice is to apply these rules on a quarter-by-quarter basis, not on an annual basis.
If a repayment with after-tax funds is not required because the loan was forgiven, the employee receives an economic benefit. On the other hand, an allowance is a fixed amount which is paid to an employee in excess of his or her salary without the requirement that the employee substantiate the amounts expended.
Any allowance received, that is not specifically excepted, is regarded as an allowance in respect of a personal or living expense.
Since the taxpayer made very little personal use of the car, averaging about 15% per year over five years, he attributed most of the costs of operating his car to his work. The answer is YES and you need to pay taxes and file your income tax returns even if you are an individual consultant or a freelancer.
Moreover nowadays with all payments being tracked against the PAN number issued, there is no escaping. For receiving payments directly from Foreign Clients you can go for Paypal (total charges including conversion to INR in the range of 7%) or a Wire Transfer (any standard bank account supports this, charges in the range of 2%). I would personally recommend you to consult a CA regarding the service tax registration (to confirm if its required or not at this point). So based on the tax slab whatever amount you calculate will need to be paid as self assessment tax, this will take care of your tax obligation. Also u need to show any interest income this financial year and other savings in form of life insurance premiums. Also, I am earning money from publishing advertisements (google adsense) on my photography blog.
The calculator includes a list where you can see what you have been calculated and you can save it and copy it in a texteditor like notepad or wordpad. Getting the most out of your income could be the difference between your budget working and not. All expenses must to account for to have accurate budget.  Only you know your expenses so be as accurate and honest you can.
This will help out next year determined the amount needed to budget for that specific month. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. The income tax implications of this rebate will be considered after the deductions for income tax purposes have been discussed. In addition, the employee versus independent contractor issue is important in determining whether the employer is required to withhold income tax, Canada Pension Plan contributions or Employment Insurance premiums from amounts paid to the individual. Therefore, the elements of control in this case cannot reasonably be considered to be inconsistent with the parties' understanding that the dancers were independent contractors. Although these factors would not be present if the appellant were in fact a private practitioner, the application of the control test is not, in the circumstances of this appeal, a wholly satisfactory or conclusive one. The taxpayer had to do the work personally and did not employ or pay substitute part-time pathologists to do his work in his absence.
For example, an employee who was legally entitled to receive a bonus in December asks her employer to defer the payment until January.
This case rebuts the assumption that free parking spaces are automatically a taxable benefit. However, in designing the program care must be taken to satisfy certain general conditions to ensure that there is no adverse tax consequences for all the benefits provided under the program. It is important to note that the CEO does not use any of the corporate funds to maintain the condominium.
Both cases established a two-stage test for determining if a payment to an employee is employment income.
Since such an expense is not deductible, an amount received as an allowance for such an expense must be included in income.Henry v. The court indicated that the taxpayer did not establish that it was sensible to make such little personal use of the car that he used for work.
Obviously an Appellant has to demonstrate that his vehicle's expenses are reasonable for an employee in his employment. For payment safety though you should always use escrow while taking payments from foreign clients.
Assets are not treated as an expense and you can only claim yearly depreciation on the same. My other source of income is through short-term capital gains in online trading of equities.
So, make sure that you start thinking about those costs for the next year, breaking them down into a monthly amount. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income. Consideration can be given, for example, to the proportion of the individual's income derived from the organization and the availability to the individual of benefits available to employees of the organization. The evidence is that in his absence from the laboratory the taxpayer is not obligated to arrange for or pay his replacement. According to the Specific Result Test one can reasonably conclude that the taxpayer was an employee of the hospital. The Queen, the payment of the hockey player's agent by the hockey club was included in the player's income. She would be deemed to have received the bonus in December under the principle of constructive receipt, as established in common-law court decisions. The supplier will be able to deduct the cost of the reward since it was incurred as an incentive for salespersons to increase sales. However, it must be emphasized that the interest is deductible only if the amount qualifies under all of the specific provisions of these paragraphs. First, a determination must be made as to whether the payment is an allowance or a reimbursement. The court further indicated that the employer's allowance should only be expected to pay for such reasonable use of his car as his work required. There are other options for receiving payments like Moneybooker or cheque but all of them have a very complicated and lengthy process.
As you can see you are not paying more when TDS is being deducted, its just that someone is depositing tax on your behalf.
Income Tax Calculator shows current and past tax brackets and estimates federal tax for years 2000-2012. In applying this test, it is important to determine whether services are performed as an individual in business on his or her own account. Note how closely related the conditions of this test are to those used in the Integration or Organization Test. That principle would include an amount that is effectively received, or the receipt of which can be controlled by the recipient, if not actually received.
Where a lesser amount is recovered, the difference between that amount and the above total costs will be a taxable benefit.
In terms of taxable benefits, it should not matter who provided the reward, since the reward was received by virtue of employment. To be reasonable, the allowance should cover virtually all the costs of his car, both capital and operating.
In fact, the Specific Result Test might be regarded as a later stage in the evolution of the Integration or Organization Test. The Queen, a tax equalization payment made by an employer to compensate for higher Canadian taxes was considered to be part of the employee's compensation. The court suggested that the taxpayer should have provided evidence of the number of hours per week for which he had to use the car for work. Contact me for any work as to formation of co., other filings with MCA21 portal, Income tax, Service tax and VAT, TDs and other such works. Normally, there is no benefit if the employee is in the same economic position as he or she was in prior to the employer-driven transaction which gave rise to payment.

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