Exploring Freelancing - Seeking advice on insights and considerations

[amit]

Hello All,
I am new to freelancing realm and might soon be navigating it.
I am finding as much knowledge as possible for ease of understanding all aspects, how minutiae they are, to help self and other beginners in the process.

Some aspects eventually will be discussed with a CA as it will require professional help, but I think seld understanding of all aspects always help and who better to ask than the community who has been doing it for long i assume.
Thank you for you time in advance as it is a lengthy post.

Below is what I lack understanding of:

1. What different ways are there to become a freelancer?
   Become a contractor and sign an agreement? What to care in those contracts?
   Open a firm? What are the ways and things to take care of?
   Anything else?
2. What private health insurance and other stuff one needs to take care after transition to freelancer.
3. 44ADA will work for <75LPA, but what when its >75LPA and 44ADA is not applicable as per my understanding?
   How will taxation work in this case?
4. What sections can taxes be filed under?
5. What expenses does experienced freelancers show while filing taxes?
6. Would GST implications be negligible due to the export of services?
7. There is another area of FIRC and LUT which I am not aware of, as the EOR also provides the service of contractual agreement and might save from FIRC and LUT.I am not sure how this works.
8. What banking benefits can a freelancer get. Any negotiations, points to take care of.
9. How much cost does a CA would incur in average for these things in general? People who are already doing this might help as GST, auditing and other things are involved.
10. Are there any other aspects that I might be overlooking?

[daryldy]

Hey @amit 

Let me see if I can help you out here!

1. What different ways are there to become a freelancer?
   Become a contractor and sign an agreement? What to care in those contracts? Open a firm? What are the ways and things to take care of? Anything else?
   
   Each person's journey to become a remote worker is very unique and is dependent on their location. Some things to think about are the ff:
   1. In India, it's not generally required to register as a free =lancer when you're earning below 20L. It is still a good idea to register as a basic proprietorship for other business needs. Once you reach 20L in revenue, you may start having tax obligations. It's best to consult a local tax and business consultant to have the best and most accurate information.
   
   2. What is the nature of the job? Most freelance work may not have a contract per se. These are risky as you would not have protections for payment obligations. It's usually best practice to ask for a contract or have a contract on hand that you can use and edit per client. Keep in mind to place the deliverables for both parties, the timelines, communication obligations, the specs of the output, the payment plan, any down payments, protections for yourself and your client, and the jurisdiction of the contract. It's best never to start any work until the contract is signed so keep that in mind. 
   
   3. Always read the fine print.
    
2. What private health insurance and other stuff one needs to take care after transition to freelancer.
   
   Most freelancers will need to signup to national social security and health services on their own. If you have a registration for national social security and health care from a previous employment, you will be able to continue these. You may check out this website for more details on how to become a voluntary contributor. It's also important to look internally on whether you need to sign up for personal insurances as well.  Balance this against your age, revenue, and lifestyle. 
   
   
3. 44ADA will work for <75LPA, but what when its >75LPA and 44ADA is not applicable as per my understanding? How will taxation work in this case?
   
   The first step is to ensure that you are covered as a professional or a small business under the 44ADA. You can confirm this here. You will then need to check if you if :
   
   Your gross receipts are less than or equivalent to INR 50 lakh.
   You record 50% or more of the gross receipts as income in your ITR.
   95% of your income is derived from online sources.
   
   Taxes are calculated as normal, what 44ADA does is it is a way of calculating your net revenue which you now input for tax calculation. Again, it's best to consult a local tax consultant to get the bets and accurate information.
   
   
4. What sections can taxes be filed under?
   
   I'm not sure what you mean by this. If you can clarify, I think I can help as well.
   
   
5. What expenses does experienced freelancers show while filing taxes?
   
   I file everything I use to make my job happen under expenses. Some electricity costs, internet, supplies, part of my rent, travel expenses, meals, wifi, phone, and electronics.
   
   
6. Would GST implications be negligible due to the export of services?
   
   This may be something you'll need to check internally with a tax advisor as it really depends on your personal situation and how those affect your total earnings.
   
   
7. There is another area of FIRC and LUT which I am not aware of, as the EOR also provides the service of contractual agreement and might save from FIRC and LUT. I am not sure how this works.
   
   I'm unsure about how FIRC would help but given certain criteria, you may be able to avail of LUT benefits. Simply put, you are required to provide a LUT using a GST RFD-11 form should you be a taxpayer engaged in exporting goods and services. The LUT would allow you to avail of a tax-free export simplifying the need to claim a tax refund for zero-rated export items and services. More information can be found here.
   
   
8. What banking benefits can a freelancer get. Any negotiations, points to take care of.
   
   Most banks are the same when it comes to individual freelancers varying only in bank charges and possible interest rates. It would be better to take a look at immediate availability to your vicinity and if they integrate well into services you use. Deel supports transfers to all banks in India and should work as long as you input your account number correctly.
   
   
9. How much cost does a CA would incur in average for these things in general? People who are already doing this might help as GST, auditing and other things are involved.
   
   This would be best answered by a local tax advisor but maybe someone on the board can share their personal experience on this as well as a baseline. 🙂 
   
   
10. Are there any other aspects that I might be overlooking?
    
    The best thing about being a freelancer is the freedom. Explore your town, go around the country. If you can manage, travel abroad. Learn a new hobby. Join events and meet people. Its not the job that makes freelancing great, its the freedom so try and maximize it! 
    
    Excited to see your journey @amit !
    
    Best,
    Daryl

[CassyL]

Hi @amit, 

In additon to all of the great resources and answers @daryldy already provided, I wanted to also chime in with a few resources on the questions you shared (in case it's helpful for others in the future, too!). I'm sure there are other Community members with experience as a contractor in India that might be able to provide more insight on the taxes and claims piece. 

"What different ways are there to become a freelancer?"
I think this answer will really vary from person to person. Being an independent contractor has a lot of rewards, including more flexibility in your working hours, ability to claim certain tax deductions where applicable, the ability to work from anywhere, and so much more! However, as with most things, there are both pros and cons. Job security can be a potential risk, because as an IC, you'd have to rely on securing new contracts and maintaining a positive reputation to ensure a steady flow of work. If you're the type of person who can balance and structure their days efficiently, leverage a strong network to build a portfolio of clients, and have honed in on your craft and services, you'll minimize the cons list substantially.

• Check out these blogs to help you navigate through some of the top differences:
  Contract vs. Full-Time Employee: All You Need to Know
  8 Benefits Of Being An Independent Contractor in 2024
  19 Tax Deductions for Independent Contractors in 2024

"What private health insurance and other stuff one needs to take care after transition to freelancer?"

It's best to consult a professional or local expert that can help you navigate choosing the health insurance packages that work best for you, especially if there are additional coverage needs. However, if you're an Independent Contractor through Deel, there are lots of perks and deals you're able to access. You can read through this article on how to Request a Health Insurance Quote as an Independent contractor, or look at this blog for details on Insurance options for Remote Workers.
Hoping that this is a helpful start to kicking off this dialogue. Also, re: FIRC, I believe this thread might be helpful in learning from others too. 

Best Regards,