Income tax returns: How freelancers in India can file ITR

Freelancers in India do not receive a Form 16 like salaried employees, which means they need to take extra care while filing their annual income tax returns.

As freelancers have multiple clients, irregular payments and varying sources of income, keeping records of earnings and expenses is essential for them to avoid errors or penalties.

Filing options and deductions

Freelancers can report their income under “profits and gains of business or profession.”
If they choose the regular route, they must file ITR-3 and declare both income and actual expenses. Another option is ITR-4 under the presumptive taxation scheme (Section 44ADA), which allows 50% of total receipts to be treated as taxable income without the need to list expenses.

Expenses directly related to work – such as internet bills, laptops, software subscriptions, rent for office space, or travel for assignments – can be claimed as deductions if filing with ITR-3. Under presumptive taxation, however, such deductions cannot be claimed separately.

Calculating tax

To compute the tax payable, a freelancer must first calculate income from all sources and then deduct eligible expenses. In some cases, employers may already deduct tax at source (TDS) before making payments, and this amount should be adjusted while arriving at the final tax liability.

Advance tax

If the net taxable liability is ₹10,000 or more in a financial year, freelancers are required to pay advance tax in quarterly instalments by the specified due dates.

Missing deadlines attracts interest charges. Maintaining invoices, keeping a separate bank account for freelance payments, and cross-checking income with Form 26AS and the Annual Information Statement (AIS) can make filing smoother.

Also Read: New income tax code for influencers: How content creators should file ITR this year

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