Freelancers, salaried individuals,businesses,NRIs assessment year 2025

The Assessment Year (AY) 2025-26 is the year following the Financial Year (FY) 2024-25. For income tax purposes in India, the Financial Year is the period from April 1 to March 31, and the Assessment Year is the year in which income for the previous year (the financial year) is assessed and taxed.

In the context of freelancers, salaried individuals, businesses, and Non-Resident Indians (NRIs), here's a breakdown of how they might be assessed for AY 2025-26, including any key changes or updates to tax rules.

1. Freelancers (Self-Employed)
Freelancers are considered self-employed individuals and must report income earned from various freelance projects.

Taxation:
Income Tax Slabs: Freelancers are taxed according to the same income tax slabs as salaried individuals (based on income).

Presumptive Taxation Scheme: Freelancers with a turnover of up to ₹50 lakh can opt for the Presumptive Income Scheme under Section 44ADA. Under this scheme, 50% of the total gross receipts are deemed as income, and no further expenses need to be deducted.

Example: If a freelancer earns ₹30 lakh, then ₹15 lakh (50% of ₹30 lakh) is considered income, and taxes are levied on that amount.

Deductions: Freelancers can claim various deductions like:

Section 80C: Investments in PPF, NSC, ELSS, etc.

Section 80D: Health insurance premiums.

Section 80E: Education loan interest.

GST: Freelancers with an aggregate turnover exceeding ₹20 lakh (₹10 lakh for some special category states) must register for GST and comply with its provisions.

Key Considerations for AY 2025-26:
The government has been increasing focus on GST compliance for freelancers and professionals.

Ensure proper record-keeping of all freelance income and expenses.

2. Salaried Individuals
Salaried individuals are employees of organizations and are taxed based on their income from salary.

Taxation:
Income Tax Slabs (for individual taxpayers below 60) (These may change with each Budget; this is the typical structure for reference):

₹0 – ₹2.5 lakh: No tax

₹2.5 lakh – ₹5 lakh: 5%

₹5 lakh – ₹10 lakh: 20%

₹10 lakh and above: 30%

Standard Deduction: A standard deduction of ₹50,000 is available for salaried individuals and pensioners.

Allowances: Some allowances such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA) are exempt to some extent, subject to conditions.

Deductions:

Section 80C: Up to ₹1.5 lakh in eligible investments.

Section 80D: Premiums for health insurance.

Section 10(14): HRA exemption.

Section 80E: Education loan deduction.

Tax Calculation: For salaried individuals, the tax is usually deducted at source (TDS) by the employer. However, the individual must file a tax return to claim refunds if excess TDS is deducted.

Key Considerations for AY 2025-26:
Salaried individuals should carefully examine the TDS calculations, especially if they have multiple sources of income.

Any new tax proposals introduced in the Budget 2025 could impact tax slabs or exemptions.

3. Businesses (Corporate Taxpayers)
Corporations and businesses are taxed based on the type of structure (e.g., private limited company, LLP, partnership firm).

Taxation:
Corporate Tax Rate:

Domestic Companies: The tax rate is generally 25% for companies with an annual turnover of less than ₹400 crore, and 30% for others.

Small Companies: The rate for companies with a turnover of up to ₹50 crore may be 25%.

Minimum Alternate Tax (MAT): If a company’s tax liability is lower than 15% of its book profits, then MAT applies.

GST: Businesses must comply with GST laws if their turnover exceeds ₹20 lakh (₹10 lakh for special states). Businesses also need to file monthly or quarterly GST returns.

Deductions:

Section 80-IB/80-IC: Deductions for companies in special economic zones (SEZ) or certain industries.

Depreciation: Businesses can claim depreciation on capital assets.

Key Considerations for AY 2025-26:
Compliance with the Transfer Pricing provisions is crucial for multinational corporations.

The government has been focusing on reducing tax litigation, and businesses should stay updated on amendments.

4. Non-Resident Indians (NRIs)
NRIs are taxed on income earned in India. The key difference is that they are not taxed on their global income, except for income earned in India.

Taxation:
Income in India: NRIs are taxed on income derived from sources within India, such as rental income, interest income, and capital gains.

Short-Term Capital Gains (STCG): 15% on listed securities.

Long-Term Capital Gains (LTCG): 10% for gains exceeding ₹1 lakh on listed securities.

Interest Income: Taxed at a rate of 30%, unless a lower rate is specified under a Double Taxation Avoidance Agreement (DTAA).

TDS (Tax Deducted at Source): Many NRI income types are subject to TDS, like bank interest or rental income.

Deductions: NRIs are eligible for deductions under Section 80C, Section 80D, and other relevant sections, but only for income that is taxable in India.

Filing Requirements: NRIs must file tax returns if they have taxable income in India. They can also claim a refund if excess TDS is deducted.

Key Considerations for AY 2025-26:
NRIs should review their tax status under any applicable DTAA between India and their country of residence.

For NRI property owners, understanding the TDS implications on rental income and capital gains is critical.

Changes to Look Out for in Budget 2025:
The Indian Budget, typically announced in February, could bring in the following changes for AY 2025-26:

Tax slab revisions: Adjustments to the income tax slabs for salaried individuals.

Capital Gains Tax: Any changes to the treatment of long-term vs. short-term capital gains.

Corporate Taxation: Possible incentives or changes in corporate tax rates, especially for MSMEs and startups.

NRI Taxation: Any changes in tax exemptions for NRIs or changes in the DTAA agreements.

Conclusion
Each category (freelancers, salaried individuals, businesses, and NRIs) has distinct tax obligations for AY 2025-26. Staying updated on the Union Budget and Finance Act will be crucial, as these will contain any changes affecting your tax filing process. If you fall into any of these categories, it’s a good idea to consult with a tax professional to ensure proper compliance.