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According to the Indian Income Tax Rules, ‘income from freelancing' is the earning from a profession using your intellectual or physical capabilities and can be placed under "Profits and Gains from Business and Profession".
Thus, freelancers are individuals who generate a certain income by implementing their manual or intellectual skills without being employees or placed under direct payroll. Thus, freelancers must pay taxes based on their income. Moreover, they need to file ITR in a given assessment year.
Are you a new freelancer thinking of filing for ITR? Then let’s learn about how to file ITR for freelancers and other associated vital information.
The ITR filing process for freelancers in India is varies from that of salaried individuals. Freelancers involved in legal, medical, architectural, accounting, engineering, technical consultancy, film, interior decoration, and similar other professions can file ITR.
Freelancers belonging to non-specified areas, such as CA, doctors, lawyers, etc., can also file income tax returns.
Now the question arises, how to file ITR for a freelancer? Here’s the following stepwise guide:
Step 1 - Calculate the gross income from 1st April to 31st March of the given fiscal year. Omit any debt obligations such as loans as it is not considered as income.
Step 2 - Compute expenses incurred in freelance business to claim a tax deduction.
Step 3 - Select the following appropriate form and fill in the essential information-
• The ITR-3 applies to individuals benefiting from business profits. Such individuals might carry on such business or profession with returns including incomes from house property, capital gains, salary/pension, etc.
• ITR-4 applies to people choosing presumptive income schemes as per the Income Tax Law Section 44AD, 44ADA and 44AE. If freelancers belong from professions under Section 44ADA, have business incomes as specified in Sections 44AD and gross receipt from profession does not exceed ₹50 Lakhs, ITR-4 Form will be applicable.
Individuals can either download the forms from the official portal of the Income Tax Department, fill them in offline and upload the XML file in this IT portal. Alternatively, individuals can fill them in the portal and submit forms after digital verification.
Step 4 - Fill in the necessary details such as taxable income, deductions, expenditures, paid advance tax.
If the gross receipt from profession exceeds Rs 50,00,000, then individuals need to get an account by Chartered Accountant u/s 44AB, In case of the audit the assessee need to file income tax return before 31st October. And in case the assessee gross receipt does not exceed rs 50,00,000, he may opt the provision of 44ADA and file the return before 31st July.
The important dates for filing income tax for the Financial Year 2022-23 and Assessment Year 2023-24 is as follows. Failing to file the ITR or missing the deadline will attract certain penalties and even imprisonment.
|
Category of Taxpayer |
Due Date for Tax Filing - FY 2022-23 |
|
Individual/Hindu Undivided Family/AOP/BOI (no auditing required |
31st July 2023 |
|
Businesses that require auditing |
31st October 2023 |
|
Businesses that require Transfer Pricing Report |
30th November 2023 |
|
Revised ITR |
31st December 2023 |
|
Belated/late ITR |
31st December 2023 |
There has been no extension to these dates as of April 20, 2023.
If a freelancer’s total tax liability is above ₹10,000, then they are liable to pay the advance tax in each quarter of the financial year by following simple steps:
Note that there are different forms to help file returns of income tax for freelancers in India.
Here are the due dates to pay advance tax for FY 2023-24, as prescribed by the Income Tax Department. If you fail to pay your advance tax on or before the dates, you will have to pay additional interest as penalty under Section 234B and Section 234C.
| Due Date or Advance Tax Filing FY 2023-24 | Nature of compliance | Tax paid |
| 15th June 2023 | First instalment | 15% of tax liability |
| 15th September 2023 | Second instalment | 45% of tax liability |
| 15th December 2023 | Third Instalment | 75% of tax liability |
| 15th March 2024 | Fourth instalment | 100% of tax liability |
| 15th March 2024 | Presumptive scheme | 100% of tax liability |
| Section | Tax Levied | Details |
| Section 194J | 10% TDS | Every professional service of a freelancer is subject to TDS. |
| Section 44ADA | Income shall declare at least 50% of the overall Gross Receipt. And accordingly tax to be paid. | Levied when Gross Receipts are lower than ₹50 Lakhs. The income tax is then computed on the presumptive basis. |
| Section 44AB | The difference between Gross Receipts and business expenses is taxed. | Levied when Gross Receipts of a freelancer exceed ₹50 lakhs or if the Net Profit is lower than half of the Gross Receipts. In this case, they can keep a Book of Accounts. |
Depending on the income tax regime chosen for the stipulated financial year, freelancers’ income is subject to the following income tax slab rates.
| Income tax slabs | Rate of Taxation |
| Up to ₹3,00,000 | Nil |
| Between ₹3,00,001 and ₹6,00,000 | 5% of your total income that exceeds ₹3,00,000 |
| Between ₹6,00,001 and ₹9,00,000 | ₹15,000 + 10% of your total income that exceeds ₹6,00,000 |
| Between ₹9,00,001 and ₹12,00,000 | ₹45,000 + 15% of your total income that exceed ₹9,00,000 |
| Between ₹12,00,001 and ₹15,00,000 | ₹90,000 + 20% of your total income that exceeds ₹12,00,000 |
| More Than ₹15,00,000 | ₹1,50,000 + 30% of your total income that exceeds ₹15,00,000 |
| Income Tax Slabs | Rate of Taxation |
| Up to ₹2,50,000 | Nil |
| Between ₹2,50,000 and ₹5,00,000 | 5% of your total income that exceeds ₹3,00,000 |
| Between ₹5,00,000 and ₹7,00,000 | ₹12,500 + 10% of your total income that exceeds ₹5,00,000 |
| Between ₹7,50,000 and ₹10,00,000 | ₹37,500 + 15% of your total income that exceeds ₹7,50,000 |
| Between ₹10,00,000 and ₹12,50,000 | ₹75,000 + 20% of your total income that exceeds ₹10,00,000 |
| Between ₹12,50,000 and ₹15,00,000 | ₹1,25,000 + 25% of your total income that exceeds ₹12,50,000 |
| Above ₹15,00,000 | ₹1,87,500 + 30% of your total income that exceeds ₹15,00,000 |
| Income tax slabs | Rate of Taxation |
| Up to ₹2,50,000 | Nil |
| Between ₹2,50,001 and ₹5,00,000 | 5% of your total income that exceeds ₹2,50,000 |
| Between ₹5,00,001 and ₹10,00,000 | ₹12,500 + 20% of your total income that exceeds ₹5,00,000 |
| Above ₹10,00,000 | ₹1,12,500 + 30% of your total income that exceeds ₹10,00,000 |
Similar to other taxpayers, freelancers can also claim tax benefits on freelancing income in the form of deduction only if they fulfil certain conditions, such as:
Tax deductions are only applicable for expenses directly related to the freelancing being carried on.
It is completely utilized only for the purpose of your freelancing work.
The expenses are spent during a fiscal year.
The freelancing expenses should not be a capital expenditure or used for freelancer’s personal use.
It is not incurred for any illegal purpose.
Rental Property
Expenses on repairing
Depreciation
Office expenses
Expenses on travelling
Expenses on food, entertainment, or hospitality
Local taxes and insurance for your business property
Other expenses including Domain registration and apps purchased for testing purposes
Here are the following Sections that allows freelancers to claim tax deductions to lower their tax liability:
| Section | Tax Deduction/ Exemption |
| Section 80C | Freelancers can claim a maximum tax deduction of ₹1.5 lakhs against their investment in tax-saving schemes such as life insurance policies, provident fund, ELSS and ULIP insurance. |
| Section 80 CCC | Exemption up to ₹1.5 lakhs on investments made in the pension plans. |
| Section 80 CCD | Tax deduction on investments made in government schemes. |
| Section 80 CCF | It provides tax benefits against investment towards government-specified infrastructure bonds, up to a maximum exemption of ₹20,000. |
| Section 80 D | Tax deduction is available against paying premiums for health insurance policy bought for self, spouse or child. |
| Section 80 DD | Eligible freelancers can claim a maximum tax deduction of ₹75,000 against treatment expenses of disabled dependent of an assessee, which may go up to ₹1.25 lakhs. |
| Section 80 DDB | Tax deduction is available towards treatment of certain specified diseases. |
| Section 80 E | Freelancers can claim a tax deduction on interest paid towards an education loan. |
| Section 80 EE | Individuals are exempted from paying taxes on loans for buying a property for residential purposes. |
| Section 80 G | Tax deduction is available against charitable contributions, either partial or full. |
The GST applicable to freelancers is as follows:
If your total revenue from freelancing work is less than ₹20 lakh per annum, then you don’t have to pay any GST.
For freelancers selling goods the rate of GST will depend on the type of items sold.
If you earn freelancing income through providing services, then you must charge GST @ 18% from your clients.
You don’t have to pay any GST on zero-rated supplies such as exports.
Freelancers can avail of benefits under the composition scheme if they are selling goods or providing services with a turnover less than the specified limit.
Once your GST Identification Number is generated, filing a return is compulsory for you.
All your invoices should be GST-compliant.
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