How to File ITR for Freelancers?

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.

For Detailed Practical Calculation for Filing ITR – Practical Income Tax Calculation for FY 2024-25 (AY 2025-26) in the New Tax Regime

What are the Due Dates for Filing ITR for FY 2024-25 (AY 2025-26)?

The important dates for filing income tax for the Financial Year 2024-25 and Assessment Year 2025-26 is as follows. Failing to file the ITR or missing the deadline will attract certain penalties and even imprisonment.

When and How Can Freelancers Pay Advance Tax?

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.

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.

What are the available for Tax Deductions for Freelancers

Freelancers can claim tax deductions on their freelancing income if they meet certain conditions. These deductions are available only for expenses directly related to the freelancing business. Below are the key conditions and eligible expenses:

Conditions to Claim Tax Deductions

• Directly Related to Freelancing: The expense must be directly linked to your freelancing work.
• Exclusively for Freelancing: The expense must be used solely for your freelancing business, not for personal use.
• Expenses Incurred During the Financial Year: The deduction can only be claimed for expenses incurred within the fiscal year.
• No Capital Expenditure: The expense should not be capital expenditure (i.e., long-term assets).
• Legal and Legitimate: The expense should not be incurred for any illegal purpose.

Eligible Freelancing Expenses for Deduction

1. Rental Property: Rent paid for office space or workspace used for freelancing.
2. Repair and Maintenance: Expenses on repairs and maintenance of business premises.
3. Depreciation: Depreciation on assets like computers, office equipment, and furniture used for business.
4. Office Expenses: Costs for office supplies, stationery, and utilities.
5. Travel Expenses: Expenses incurred for travel related to freelancing work.
6. Food, Entertainment, and Hospitality: Expenses on meals and entertainment that are business-related.
7. Local Taxes and Insurance: Taxes paid on business property and insurance premiums for your freelancing business.
8. Other Expenses: Includes costs like domain registration, apps for testing, and other software tools used for freelancing work.

By claiming these deductions, freelancers can reduce their taxable income, which helps in lowering the overall tax liability.

How Much Tax is Applied on Indian Freelancers?

GST Rules for Freelancers

The GST (Goods and Services Tax) rules applicable to freelancers are as follows:

1. No GST for Small Turnover: If your total annual revenue from freelancing is less than ₹20 lakh, you are not required to pay any GST.
2. GST on Services: If you provide services as a freelancer, you must charge 18% GST on your invoices to clients.
3. GST on Goods: If you sell goods, the GST rate depends on the type of goods sold.
4. Zero-Rated Supplies: You do not need to pay GST on zero-rated supplies, such as exports.
5. Composition Scheme: Freelancers with a turnover below the specified limit can opt for the Composition Scheme if they are selling goods or providing services.
6. Filing GST Returns: Once your GST Identification Number (GSTIN) is generated, you are required to file GST returns.
7. GST-Compliant Invoices: All invoices issued by freelancers must be GST-compliant.

To stay tax-compliant, freelancers should also file their Income Tax Return (ITR), which helps in managing taxes efficiently and staying within legal requirements.