File ITR 3 Or ITR 4 For Freelance Income

The income which you are earning as a freelancer becomes taxable under the head “Profits and gains of business or profession’ and you are required to maintain books of accounts presuming that you are an engineer. 

If you are an engineer, you can avail the benefit of presumptive taxation under Section 44ADA of the Income-tax Act, 1961, where you need not maintain books of accounts in case your gross receipts do not exceed Rs 75 lakh and cash receipts do not exceed 5 per cent of the gross receipts. In case the cash receipts exceed 5 per cent, the threshold is Rs 50 lakh. Under the presumptive scheme, you can offer 50 per cent or more of receipts as your income without having to maintain books of accounts. In such a case you have to file ITR4.

In case you are not a qualified engineer or you claim that your income is below 50 per cent of the gross receipts, you have to file ITR 3. You can claim depreciation on your laptop and all other expenditure incurred in connection with working as a freelancer in case you do not opt for Section 44ADA presumptive scheme.

Under Section 194IB, any individual or a Hindu Undivided Family (HUF) who are not engaged in any business or profession and are not otherwise required to deduct tax at source (TDS) have to deduct tax at 2 per cent on rent where the amount of rent exceeds Rs 50,000 for a month or part of a month. 

The deduction is to be made at the time of credit of rent for the month of March or from the rent of the last month of tenancy in case the premises are vacated during the year. In such a case, the tenant is not required to obtain the tax deduction account number (TAN).

In case the landlord is a non-resident, there is no basic threshold limit, and the tenant has to deduct tax on the rent at 30 per cent. The tenant has to obtain TAN and file TDS return.

Your wife’s money which you intend to use for opening an FD in your name can be treated as a gift from your wife. The transaction of gift from spouse is not treated as income of the recipient spouse but any income which arises due to the spouse from the gift so made is required to be clubbed in the hands of the spouse making such gift. 

The clubbing provisions will apply till the relationship subsists and will apply even if the asset changes its form in future. Please note that income from the investments made of already clubbed income is not subject to clubbing and it is only the income arising on the original value of the gift that is required to be clubbed.

If you intend to treat it as a loan from your wife, then I would advise you to pay interest on it else the income tax department can still club the income applying Section 60 of the Income-tax Act, 1961.