If you’re a freelancer in India, filing your income tax return (ITR) is different from what a salaried employee does. Since you don’t get a Form 16, it’s up to you to keep a precise record of your earnings and expenses to avoid any mistakes or penalties.
Filing Options and Deductions
As a freelancer, you’ll report your income under the heading “Profits and Gains of Business or Profession.” You have two main choices for filing:
- ITR-3 (Regular Route): This is the form you use to declare your total income and deduct all your actual business expenses. You can claim deductions for things like your internet bill, laptop, software subscriptions, office rent, or travel for assignments.
- ITR-4 (Presumptive Taxation): This is a simplified option for those who qualify under Section 44ADA. With this scheme, 50% of your gross annual receipts are considered your taxable income. The best part? You don’t need to maintain detailed records of your expenses, but you also can’t claim them separately.
Key Things to Remember
- Calculate Your Tax: First, figure out your total income from all sources and subtract any eligible expenses. If a client has already deducted tax at source (TDS) from your payments, make sure to adjust this amount when calculating your final tax liability.
- Advance Tax: If your net tax liability for the year is ₹10,000 or more, you’re required to pay advance tax in quarterly installments. Missing these deadlines can lead to interest charges.
- Keep Good Records: To make filing smoother, it’s smart to maintain all your invoices, use a separate bank account for your business, and cross-reference your income with Form 26AS and the Annual Information Statement (AIS).