Summary of this article
The absence of employer deductions requires independent professionals, including freelancers, consultants and small business proprietors, to establish proactive tax compliance plans while reducing their tax obligations. Strategic tax planning enables you to prevent penalties as well as maximize your eligible deductions and benefits.
Being your own boss allows you to create your own work schedule yet requires complete control over your financial obligations particularly in terms of tax payments. The absence of employer deductions requires independent professionals, including freelancers, consultants, and small business proprietors, to establish proactive tax compliance plans while reducing their tax obligations. Strategic tax planning enables you to prevent penalties as well as maximize your eligible deductions and benefits.
For the self-employed, tax planning isn’t about finding any loopholes—it’s about being disciplined with record keeping and knowing which deductions you’re entitled to.
First, track every business expense—rent for your office, internet bills, staff salaries, depreciation on equipment, even travel for client meetings. These are all legitimate deductions under the Income Tax Act. Many freelancers forget small but valid expenses, and that inflates their taxable income.
Second, “if your turnover is modest—say under Rs 2 crore—you can look at the Presumptive Taxation Scheme (Section 44ADA/44AD). It lets you declare income at a fixed percentage of turnover and avoid detailed bookkeeping,” says Kinjal Bhuta, Treasurer, Bombay Chartered Accountants' Society (BCAS).
For a small consultant or trader, it reduces paperwork dramatically. If you have your major business conducted online, then this limit of Rs 2 crore extends to Rs 3 crore.
Third, don’t ignore retirement savings. Contributions to schemes like PPF, NPS, or even life insurance premiums qualify for deductions under Section 80C/80CCD. Self-employed individuals often miss out here, unlike salaried people who have EPF automatically.
Finally, plan for medical cover. Premiums for health insurance under Section 80D can be claimed for yourself and your family. It’s both a safety net and a tax saver. Though it may also be borne in mind that majority of these investment deductions are not available under the new regime of taxation.
“At times business structuring also helps in tax savings. While the small businesses are structured like partnership firms or LLPs, the same can be converted to companies if the business is growing. The firms and LLPs are continued to being taxed at the rate of 30%, however there is a concessional tax regime for the companies. Such structuring, however, should be done keeping other business dynamics in mind and not just to save taxes,” informs Bhuta.
One of the major tax costs borne by self-employed is also the litigation cost for not doing timely compliances. The self-employed needs to ensure that the compliances like filing GST and tax returns are done on time to avoid unnecessary interest and delay fees.
Paying advance taxes on time can help in lesser interest burden on tax. Also, complying to every notice which comes from the tax department on time saves lots of money, time and effort - which may duplicate if the notices are unattended to.
