Gig Economy: How Gig Workers Taxed in India?

Today, the COVID19 pandemic hit hard on the economy, considerable number of jobs are lost and many at risk. Most start-ups and small businesses are forced to streamline their operations towards more flexible, agile working environments. Hiring Gig workers are the main relief in accomplishing their goals and timelines, remotely and efficiently without any long-term commitments.

This document covers

1. Who is a Gig Worker?
2. What is Gig Economy?
3. How did the Gig economy started?
4. Little background on Gig Economy in India?
5. What is considered a Gig job?
6. Does Gig Workers pay income tax in India?
7. How do Gig Workers pay taxes in India?
8. What kind of work done through Gigs?
9. What are the examples of the Gig Jobs in India?
10. Type of Industries that include Gig Economy Jobs in India?
11. How Gig Workers benefit from Gig Economy?
12. How EZTax.in sees future forward on Gig Economy?

1. Who is a Gig worker?

The dictionary meaning of Gig is 'a job, that lasts only a short time'.

Gig Worker the term derived in recent history states someone who is independent contractor, temporary worker, online platform worker who can get into a quick formal agreement for a company, enterprise, individual, initiative.

Most engagements for Gig Workers are to do a job on a timebound basis with a clear outcome from his work.

Example: EZTax.in like to offer the content writing work on an online platform to attract potential talent. The work specification is on “How Bitcoins Taxed in India?” to be completed in 2 days must have 900 words and that include latest happenings on this subject.

In this eg. Gig Worker would be the Content Writer, Gig would be to write content with a specialisation in Taxes and exposure to bitcoins and crypto currencies that should be completed within 2 days from the date offering.

2. What is Gig Economy?

A Gig Economy is an economy consists of temporary workers for a short-term engagement without a notable relationship or a contract between an Requester and an Worker as the relationship is bridged by a technology or similar web platform to connect the both.

Gig economy mostly consists of "Services" that are temporary, flexible, independent, non-relationship, less worker rights in comparison with a traditional full-time employment that focus on career development etc.

Gig Economy is a buzzword in 2021 as the COVID19 pandemic stressed the need for shared resources in these toughest economic conditions. Many small and medium businesses may not afford to have full time employment for a seasonal or semi-seasonal jobs anymore.

3. How did the Gig Economy Started?

The Gig economy get its name from Gig as 'one time work / engagement'. The other names that are popular are "shared economy" or "sharing economy", "collaborative economy", that were first attributed to the company Air BNB (online marketplace company for shared rental space to accommodate lodging, vacations in USA).

Though such or similar practices were there in Indian informal economy for a quite long time

4. Little background on Gig Economy in India?

Gig Economy is nothing new to India as it has been accommodating / offering such temporary, independent, quick jobs all along in the history of India, through it's informal economy which is estimated to be 3-7 times bigger than the formal economy if it all measured as economic activity.

Most economists failed to understand the real economy of India that includes both formal, informal (shared, product, instrument, service exchanged economy where the value is not directly considered in terms of money 'Rupee').

In India, Gig work across urban and rural areas from temporary farm workers to daily-wagers to construction workers, and the household domestic help, the economy is huge in terms of number of person hours and / or the money equivalent. Most such economy is a cash based, product based, service-based exchanges.

Formal Gig Economy in India was highlighted through the efforts from companies like Ola, Uber, Zomato, Oyo who made a great success in shared economy space where a worker is not limited to one job or a specific time.

The Potential for Indian Gig economy could be extremely high that includes.

1. Skilled and semi-skilled jobs
2. Shared services roles like Accounting, Facility management, and Transportation
3. Household demand for services
4. Unskilled jobs

5. What is considered as a Gig Job?

A Gig Job is a temporary on-demand worker employed on a task-based or a time-based engagement that are typically done by an individual, without any future commitment of work, with a flexibility to work onsite or off-site and flexibility to work any time chosen by the worker for certain jobs.

6. Does Gig Workers pay Income Tax in India?

By law, every resident of India must file their taxes whose taxable income is more than Rs. 2.5 Lakhs and pay the income tax based on the tax brackets defined for a financial year. Consider below

1. A gig worker who is primarily dependent on the Gig Economy need to consider his taxes to be paid as a self-employed taxpayer.
2. A gig worker can avail deductions under 80C, and other deductions like any other taxpayer in India.
3. An advance tax to be paid on a quarterly basis if the Gig Worker's total tax liability on projected taxable income is Rs. 10,000 or more in a financial year. A minimum of 15% of the advance tax is payable by june15th, 45% by September 15, 75% by December 15 and 100% by march 15 of the financial year.
4. A Gig worker's TDS (Tax Deducted at Source) may be deducted by the person / entity that uses his/her services if the total pay-out is more than certain limit. Hence, the Gig worker needs to consider checking Form 26 AS periodically to know whether TDS deducted is actually paid to the Income Tax Department or not?
5. Appropriate TDS deductions to be made at the appropriate tax rates for the money paid towards rent, sub-contractors, and other service providers, if his / her gross total income from the business (Gig work or otherwise) exceeds Rs. 1 Crore in a fiscal year (Rs. 50 lakh for professional income). In addition, one need to file TDS Returns and deposit the tax deducted at source with the Income Tax Department on a timely basis.
6. As a Gig worker, one should also register under GST if the total receipts exceed Rs. 20 Lakh in a financial year (Rs. 10 Lakh for certain north-eastern states in India). In addition, if required, pay GST to the department, file periodic GST Returns and issue a GST compliant invoice to the clients. You may consult Team EZTax.in to understand more on this.

7. How do Gig Workers pay taxes in India?

Refer "Does Gig Workers pay Income Tax in India?" for more comprehensive answer, but based on the income levels, the worker needs to pay the taxes in India either as an advanced tax and or tax payout at the end of the year or at the time of filing the IT Return for that Financial Year.

8. What kind of work done through Gigs?

Many industries switching to micro projects, or tasks that can be offered to wide variety of talent available over the internet to complete them in a more efficient manner. Some of the industries that offer Gigs given below (Sorted by High to Low number of Gigs).

1. Professional and Business Services
2. Construction
3. Education and Health Services
4. Financial Activities
5. Other Services
6. Retail Trade
7. Manufacturing
8. Leisure and Hospitality
9. Transportation and Utilities
10. Information
11. Public Administration
12. Wholesale Trade
13. Agriculture
14. Mining, Quarrying, Oil and Gas Extraction

9. What are the examples of the gig Jobs in India?

As India is getting more urbanised, the need for Gig Workers is growing and accommodated through various technology platforms. Many Gigs in the form of Services are already popular and many getting converted into Virtual Services. Below are some of the Gigs sorted in alphabetical order.

1. Accommodation
2. Blogger / Content Writer
3. Business Services
4. Child Caretaker
5. Cleaner
6. Cook / Chef
7. Courier Delivery Person
8. Craftsperson
9. Data Collector
10. Food Delivery Driver
11. Freelancing Platforms
12. Gardening Services
13. Graphic Designer
14. Health Services
15. Legal Services
16. Massage Therapist
17. Moving Services
18. Nursing Services for COVID19
19. Old Age Care Taker
20. Personal Shopper
21. Pet Sitter
22. Photographer
23. Plumbing Services
24. Remote Diagnostics Services
25. Renter
26. Retail
27. Rideshare Driver
28. Survey Taker
29. Tasker
30. Tax Consultant
31. Virtual Accounting Services
32. Virtual Assistant
33. Virtual Doctor

10. Type of Industries that include Gig Economy Jobs in India?

Literally there is no single industry that is not experimenting with Gig Economy today, but below are some of the industries that are in the forefront of this wave.

1. Information Technology
2. Accounting and Finance
3. Arts and Design
4. Construction
5. Education
6. Freelance Writing
7. Informal Domestic Help
8. Material Moving
9. Media and Communication
10. Project Management
11. Software Development
12. Transportation

11. How Gig Workers benefit from Gig Economy?

As more companies and businesses reducing their workforce due to difficulties from COVID-19 pandemic and automation, the Gig Economy jobs are a Holy Grail for many. Below are the key benefits from Gig Economy.

1. Working on projects for multiple companies simultaneously can help to grow skillsets and expose workers to more opportunities.
2. More independence and freedom to choose when and where to work
3. Less risk of job and income loss with multiple employers.
4. In some fields, gig workers can earn more while working less than full-time employment.

12. How EZTax.in sees future forward on Gig Economy?

Team EZTax.in has long predicted the rise in Gig Economy and advised it's clients to utilise the services where possible, in particularly the Small and Medium Businesses (SMBs)..

Our advise early-COVID19 times as "Possible mass unemployment, layoffs across many countries including India may occur starting from May 2020. Possible shift from a 'Permanent' employment towards an emerging employee-lite modals, similar to target based work-from-anywhere 'Consulting' culture."

Gig Economy is here to stay and continue to lead in micro-small services / projects space for years to come.