How to File ITR for Freelancer and Consultants? | Tax Filing for Freelancers

Did you know India is the second fastest-growing freelance market globally? With the rise in remote opportunities, the last few years have been exponentially profitable for the country’s gig economy. so much so that freelancing has become the preferred employment model for many people in the country.

Besides a plethora of work opportunities, factors like favorable tax rules in the country make freelancing more fruitful than ever before. Like other earning individuals in India, freelancers are also expected to pay income tax in India and file ITR. 

Unfortunately, there is a lot of confusion among freelancers when it comes to filing income tax returns. In this blog, we will cover everything about freelance income, the tax on the same, and how you can file an ITR as a freelancer.

What are freelancing earnings?

When a person gets hired to work on specific assignments for a designated period of time, they receive compensation for completing and submitting this work. This compensation is known as freelancing income. In such cases, individuals aren’t employees of a particular company or person.

Think content writers, bloggers, designers, marketing consultants, teachers, etc., working on a per-project basis. Such individuals receive freelance income.

Freelancing income is classified as “profit and gains from business and profession” under Indian income tax laws.That is why freelancing is considered a profession or business from a tax filing perspective.

Why should freelancers pay taxes?

Freelance convenience comes at a cost. Contractors or freelancers, like salaried employees or other business people, are required to pay the Indian government taxes on their earnings under the Income Tax Act.

How much tax should freelancers pay?

In India, freelancers and contractors come under the purview of the Income Tax and the Goods and Services Tax (GST). If a freelancer’s aggregate turnover in a year exceeds INR 20 lakh, he needs to register under the latter. For most services, a GST rate of 18% is applicable.

Now coming to the infamous income tax, here are the income tax rates that are applicable to freelancers below the age of 60.

Annual Income Tax Rate 
Less than INR 2.5 Lakhs NIL
INR 2.5 Lakhs to INR 5 Lakhs 5% 
INR 5 Lakhs to INR 7.5 Lakhs 10% 
INR 7.5 Lakhs to INR 10 Lakhs 15% 
INR 10 Lakhs to INR 12.5 Lakhs 20% 
INR 12.5 Lakhs to INR 15 Lakhs 25% 
Above INR 15 Lakhs 30% 

Depending on the tax regime you opt for, deductions can be claimed.

How to file an ITR as a freelancer?

Due to incomes coming from multiple sources, filing income tax for freelancers can get slightly complicated. Besides, you don’t have an HR who will hand out the famous Form 16 and guide you through the entire process. We’ve tried to create a simple guide to help you through the ITR filing process.

Here’s a simplified process for filing income tax as a freelancer in India.

  1. Visit the income tax e-filing portal.
  2. Under the “Download” tab, you’ll find the ITR-4 form. Download it. 
  3. Now, fill in all the details in the form. These include gross-total income, deductions, taxable income, income from business and profession details, TDS (tax deductible at source), and self-assessment tax details.
  4. Using Form 26AS, compute your tax. You can claim tax deductions and exemptions under various sections. It’d allow you to save tax. Besides, you can claim any expenses incurred on the freelancing work done during the respective tax year. These include travel expenses, property rent, local taxes on business property, repair expenses, and domain registration expenses, among others.

You can also file an ITR offline by downloading the ITR-4 form, filling it out, generating an XML file, and uploading it. In addition, if your total tax liability exceeds INR 10,000, you’d have to pay an advance tax every quarter.

Payments of advance taxes can be made through the IT department’s Challan 280. All you have to do is fill in your personal information, select (0021) Income Tax Other Than Corporate, payment type, assessment year, address, PAN number, and contact details.

After that, you can select the payment mode and double-check the information. Once you make the payment, you’d receive a tax receipt and keep the receipt secured for future purposes.

How can freelancers save their taxes?

As mentioned earlier, freelancers can use tax deductions and exemptions to save on their taxes. Some of the applicable exemptions and deductions for freelancers in India are as follows:

  • Section 80 C: An exemption of up to INR 1.5 lakhs towards insurance, ULIPs, FDs, ELSS, etc.
  • Section 80 CCD: Investment in Central Government Schemes
  • Section 80 CCF: Freelancers can get an exemption of up to INR 20,000 on investments in infrastructure bonds notified by the government.
  • Section 80 D: Health Insurance Premium
  • Section 80 DD: Exemptions for disability treatments up to INR 1.5 lakhs
  • Section 80 E: Education Loan
  • Section 80 G: Donations to charitable trusts and relief funds

FAQs on how freelancers can file ITR

The frequently asked questions on how freelancers can file their ITR are given below:

Do freelancers need to pay tax in India?

Yes, they do. Like any other individual who pays taxes on their income, freelancers need to pay taxes under the Income Tax Act.

How can I file an ITR as a freelancer?

You can file income tax returns as a freelancer using the ITR-4 form under the presumptive taxation scheme on the Income Tax e-filing portal. After that, you’d have to fill in the required details and compute your tax using the 26AS form before finally paying the tax.

How do freelancers save tax in India?

Freelancers save taxes in India using tax deductions and exemptions under the income tax act. There are various deductions and exemptions under Section 80 that freelancers use.

Can a consultant file an ITR-1?

No, they cannot. The ITR-1 form is only for salaried employees. For tax purposes, consultants and freelancers must use the ITR-3 or ITR-4 form.

Is TDS applicable to freelancers?

Yes, it is. Like income taxes, freelancers have to pay TDS as well. As a freelancer, you can claim TDS deducted by your clients while paying taxes.

Do consultants have to pay income tax?

Yes, they do. Like any other individual who pays taxes on their income, contractors should pay taxes under the Income Tax Act. For consultants, the tax gets deducted at the source at 10%.

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