Navigating taxes as a freelancer, YouTuber, or influencer can feel complicated, especially with new rules for the 2024–25 financial year (AY 2025–26). The Income Tax Department is now closely tracking all digital income, from small UPI payments to major brand deals. This means it’s more important than ever to understand your tax obligations.
Here are five crucial tax traps to avoid to stay compliant and financially healthy.
1. Don’t Assume Your Side Income Is Tax-Free
One of the biggest mistakes is thinking that income from a side hustle, like freelance writing or a YouTube channel, doesn’t need to be declared. This income is officially considered “Profits and Gains from Business or Profession” and must be reported. Ignoring it can lead to tax notices and penalties down the road.
2. Don’t Skip Invoices and Documentation
Without a proper record of your earnings, it’s tough to justify your income or claim expenses. Even for payments received via UPI or PayPal, you need a paper trail. Use simple tools like Google Sheets, Vyapar, or Zoho to create and track invoices for every project. Accurate records are your best defense.
3. Don’t Forget to Claim Work-Related Expenses
You can significantly lower your taxable income by deducting expenses related to your work. Think about costs you incur every day:
- Phone bills and internet charges
- Camera gear, lighting, and microphones
- Editing software subscriptions
- A portion of your home-office rent
The key is to save all your bills and link them to your bank statements.
4. Don’t Ignore Advance Tax Requirements
Unlike salaried employees who have tax deducted from their paychecks, freelancers and creators are responsible for paying their own taxes. If your tax liability for the year exceeds ₹10,000, you are required to pay advance tax in quarterly installments. Missing these deadlines can result in interest charges.
5. Don’t File the Wrong ITR Form
Using the wrong form is a common mistake that can trigger a “defective return” notice. If you have business or professional income, do not file ITR-1. Instead, choose:
- ITR-3: If you maintain detailed books of accounts.
- ITR-4 (Sugam): If you opt for the presumptive taxation scheme.
What’s New for Creators in 2025?
The tax landscape is evolving, and here’s what you need to know:
- Official Recognition: The Income Tax Department has created a new profession code (16021) for influencers and content creators. Use this when you file ITR-3 or ITR-4.
- TDS on Barter Deals: Receiving free products or non-cash benefits from brands is now considered taxable income.
- Presumptive Taxation: You have two simplified options for declaring your income without maintaining detailed books:
- Section 44AD: Declare 6% to 8% of your gross receipts as income.
- Section 44ADA: Declare 50% of your gross receipts as income. Note that there’s some debate among experts about whether content creation qualifies under this section, so it’s wise to consult a professional.
In today’s digital world, visibility equals tax liability. By properly declaring your income, documenting expenses, and filing the correct forms, you can avoid tax traps and build a more stable financial future.