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How to File Income Tax Returns For Freelancers?

By Mohammed S Chokhawala

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Updated on: Jun 12th, 2024

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20 min read

Salaried individuals have it relatively easy when it comes to filing their income tax returns. The company HR department sends Form16, reminders and guidelines about tax filing deadlines as well as tax saving obligations. However, it’s slightly more complicated for freelancers and consultants as they have income from multiple sources and usually have more than one client. In this article, we have tried to simplify the concepts and the process for freelance professionals.

Freelancer Meaning

Freelancer is an individual who is self-employed, and has the freedom to choose their work, projects and companies they would like to be associated with. Freelancers are also liable to pay income tax on the income earned by them for their projects or freelancing work. Various consultants and professions, such as software developers, blog consultancy, content writers, tutors, web designers, fashion designers, etc. qualify as freelancers. 

As per Income Tax Act, any income generated by an individual by implementing their manual or intellectual skills is considered as ‘’profit and gains from business and profession’’. As per the tax perspective, freelancing is treated as a business and profession. 

Taxation for Freelancers

Freelancers must pay income tax as per the applicable rates. Freelancers can also claim deductions depending on which tax regime the freelancer opts for. They can also file tax under the Presumptive Taxation Scheme under Section 44ADA of the Income Tax Act, 1961. When they choose a presumptive taxation scheme they can pay tax on freelance income on only half of their gross annual income, provided the total income for the year is less than Rs. 50 lakhs. 

The due date for filing the income tax returns for freelancers for FY 2022-23 (AY 2023-24) is 31st July 2023. 

The following tax rates will apply for freelancers below 60 years of age for FY 2023-24:

Income Slab

Old Tax Regime

New tax Regime
(until 31st March 2023)

New Tax Regime
(From 1st April 2023)

₹0 - ₹2,50,000

---

₹2,50,000 - ₹3,00,000

5%5%-

₹3,00,000 - ₹5,00,000

5%5%5%

₹5,00,000 - ₹6,00,000

20%10%5%

₹6,00,000 - ₹7,50,000

20%10%10%

₹7,50,000 - ₹9,00,000

20%15%10%

₹9,00,000 - ₹10,00,000

20%15%15%

₹10,00,000 - ₹12,00,000

30%20%15%

₹12,00,000 - ₹12,50,000

30%20%20%

₹12,50,000 - ₹15,00,000

30%25%20%

>₹15,00,000

30%30%30%

TDS for Freelancers

Every professional service rendered by you is subject to 10% TDS (Tax Deducted from Source) under Section 194J of the Income Tax Act. You can claim a refund of TDS as well, just the way your salaried friends do. To read more about how to claim and check your TDS refund, click here

Advance Tax for Freelancers

If a freelancer’s total tax liability is above Rs 10,000, then they should pay the advance tax in each quarter of the financial year. The advance tax must be paid before the financial year ends in 4 instalments: 15th June, 15th September, 15th December and 15th March. Click here to know more about advance tax payment.

Deductions Available for Freelancers

Freelancers can claim the deduction on their income under Section 80C to 80U. Thus, freelancers can claim the following deductions while filing ITR:

  • Section 80C: Deductions on various investments such as life insurance premiums, ELSS, payments made towards the principal sum of a home loan, SSY, NSC, SCSS, payment made towards pension plans, NPS payment, etc.
  • Section 80D: Deduction on medical insurance premium
  • Section 80E: Interest on education loan
  • Section 80EEA: Interest on home loan for first-time home owners
  • Section 80G: Income tax benefits towards donations for social causes
  • Section 80GG: Income tax deduction on house rent paid
  • Section 80TTA: Interest on savings accounts
  • Section 80U: Deduction for disabled individuals

Applicable ITR form for Freelancers

The income tax form that freelancers and consultants need to fill out and submit is either ITR-3 or ITR-4. ITR-3 applies to income from business or profession. From AY 2017-18 (FY 2016-17), professional can opt for presumptive taxation and declare 50% of their gross receipts as their income by filing ITR-4.

How to File Income Tax for Freelancers?

Freelancers should file income tax returns within the due dates for the financial year by following the below steps:

Step 1: Calculate the gross income from 1st April to 31st March of the given financial year. 

Step 2: Calculate the expenses and deductions that can be claimed for the given financial year.

Step 3: Select the following appropriate form, i.e. either ITR-3 or ITR-4 and fill all the required details on the form by logging into the Income Tax e-Filing portal.

Freelancers can easily file ITR from ClearTax. ClearTax offers affordable pricing plans for freelancers and independent consultants. Not only do we make it hassle-free, but also enables you to deduct our fees from your income and claim it as an expense and minimise tax liability.

Frequently Asked Questions

Can a freelancer claim expenses like internet, rent, travelling, etc. under Section 44ADA?

In accordance with Section 44ADA, a freelancer who has selected the Presumptive Scheme is required to declare 50% of their gross income as income. It is feasible to report profit as a predetermined proportion of receipts without maintaining any accounting records. The freelancer is, therefore unable to submit any additional expense claims. However, he or she is still eligible to deduct Chapter VI-A expenses for things like  mediclaim premiums and LIC subscriptions.

What is the exemption under section 44ADA ?

Professionals mentioned in the section can pay tax on their gross receipts under section 44ADA, and they can opt for this scheme only if their total income does not exceed Rs.75 lakhs under the revised /increased limit. 

Can 44AD and 44ADA be claimed together?

Yes, an individual can use Section 44AD and Section 44ADA simultaneously if he/she has income from both professions as well as business.

About the Author

I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more

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Quick Summary

The process of filing income tax returns is explained for freelancers, highlighting their tax obligations, deductions, and forms to be filled out. It also covers TDS, advance tax, and how to claim refunds. Various deductions can be claimed by freelancers, and the steps for filing tax returns are outlined, including the use of ClearTax services. Freelancers must pay attention to specific deadlines and tax regimes according to their income levels.

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Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

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