Self-employed means a person who sells his or her services to different employers without a long-term contract with any of them.
Income Tax Act, 1961, levies tax on income of Self-employed persons under the head “Profit and gain from Business or Profession”. In the act, self-employment is called a profession.
Business has been defined in the Act as, “any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture”. But Profession has not been defined in the Act. Profession also includes Vocation as given in the Act. Thus, a painter, a sculptor, an author, an auditor, a lawyer, a doctor, an architect, an astrologer comes under profession or Vocation.
Profit should be computed after deducting all losses and expenses incurred for earning the income in the regular course of business, profession or vocation.
Professional Income earners have to get their accounts audited by Chartered Accountant and submit tax audit report if their Gross receipt is Rs. 25 lakhs or more in a financial year. This limit of Rs. 25 lakhs has been increased to Rs. 50 lakhs from financial year 2016-2017.