Tax burden on Independent Consultant

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Am providing consulting services to one of the firm in India and am working from home. I would like to know what all components can be included (shown as expenses) to reduce tax burden.

If we say, components like telephone bills, internet bills electricity bills what all I need to show as evidence because: Telephone - am using the number which is on my brother's name. Electricity bills - am paying for my home but it is on name of my father.

Can I include rent being paid to my father as expenses for this?

1 Answers

You can show mobile phone bills, internet expenses, fuel bills and other travel expenses, entertainment expenses (taking clients out for dinner etc), hardware/software purchase etc in business expenses.

Regarding electricity bills and house rent, there is a grey area as most of the time, these expenses are personal in nature and not incurred for business.

You can claim deduction for house rent u/s 80GG.

Want to know can credit card statements be considered for fuel bills? Under what section these expenses be put for tax calculation?

For house rent, what I need to show?

Just in rough figures, my total income as independent consultant is INR 5.25 Lacs and my expenses are as below: 1. Savings - Rs. 1.00 Lacs 2. Internet - 2000 per month 3. Petrol - 3000 per month 4. Electricity Payment - Approx. 5000 per month

out of above, Internet connection is on my name for which i can provide evidence, but what about point 3 and 4. i dont have any evidence for petrol refill and electricity bill comes on the name of my father but being paid by me.

Also, under which head/ section these expenses be put while computing income tax.

As such credit card bills cannot be shown as expenses directly, you would need actual bills/invoice for expense done. For house rent, you can show rent receipt signed by landlord.

Deduction for business expenses are not available under any standard section like 80C/80D etc. As you are doing professional/business activity, you would need to maintain P/L accounts which would have revenue and expenses heads, at the end of year, net income would be computed by deducting expenses from revenue.

If electricity connection is not in your name, you can still show expense for same, but how would you prove that this is only used for business activities?

As computation and return filing is complex and very different from a salaried person, I would advise you to get help from a tax professional or CA to prepare your IT returns.

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