How to File ITR for Freelancer

What is an Income Tax Return?

Income Tax Return (ITR) is submitted to the Income Tax Department of India.

It is a form that a person is supposed to submit and it should contain the person’s income, and taxes to be paid on it during a financial year.

What shall an income tax return include from a person’s information?

Income of the person from other methods such as investment, dividend, royalty income, interest on deposits, winning of a lottery, interest on bank investments, etc.

At the end of a financial year, the person has to pay the taxes on the income in that financial year.

Income Tax Rules:

Any income which is earned by an individual by putting their skills into action is considered to be as “Profit and gains from business and profession.”

The ITR has announced it to be a mandate that every company and a firm has to file a return of their company’s income.

However, the HUF, AOP, BOI, and the individuals have been exempted from this mandatory rule but they are required to file a return of their income if income exceeds the exemption limit of 2.5 lakhs.

Freelancer from Income Tax point of view:

From the Income Tax point of view, freelancing is taken to be as a profession and business.

The freelancers include web designers, fashion designers, software developers, bloggers, blog consultancy, content writing, etc.

Since the income of a freelancer comes from multiple numbers of sources, it makes tax filing slightly complicated for them.

Deduction of TDS from your payment:

Under Section 194J of the Income-tax Act, every professional service that has been made by you is subject to a 10% Tax Deducted from Source (TDS).

When to file a return as a freelancer?

If a certain freelancer has a yearly income of more than 20 lakhs, in other states 20 lakhs but for the North Eastern and hill stations it is 10 lakhs, the freelancer needs to register himself under GST.

18% of GST is a standard percentage for most services offered by him/her. The GST goods may also vary from service-to-service offerings by the freelancer.

Opt for reducing your tax liability:

For reducing your tax liability, you can opt for claiming your expenses.

Your expenses might include the rents you paid, repairs of certain things around the year, office expenses, depreciation, traveling charges, hospitality expense, cleaning expense, electricity bills, and other expenses incurred around the year.

You may claim them which would in turn reduce some of your tax liability.

Which forms shall freelancers fill?

The freelancers either have to file ITR-3 or ITR-4. The ITR-3 is only applicable to the individuals and HUFs who have generated income from their business or profession during the financial year.

After the declaration of dividends by the company from which the taxpayer earns income, advance taxes need to be paid.

What is the ITR-4 Form?

Those taxpayers who have chosen for presumptive income schemes as per the Section 44ADA, Section 44aE, and Section 44AD stating the condition that his/her income should not be more than 50 lakhs, so as to file an income tax return form.

How to file an ITR?

Being a freelancer, first of all, you need to file your taxes as if you are the owner of a small business.

This will imply that you have to report your annual income, subtract the expenses that you had spent on your business that was related to earning that income.

After the subtraction of the expenses, report your income as the profit or loss you gained or incurred over the year.

When and how much do we need to file ITR?

You need to file an ITR at the end of a financial year after calculating your profit and loss in the entire year. The old income tax regime charged a more percentage of taxes:

Annual income Applicable Tax (OLD)
Less than 2.5 lakhs Not applicable
Between 2.5 lakhs to 5 lakhs 10%
Between 5 lakhs to 10 lakhs 20%
Above 10 lakhs 30%


Tax percentage as per the New Tax Regime:

Annual income Applicable tax rate (NEW)
Less than 2.5 lakhs Not applicable
Between 2.5 lakhs to 5 lakhs 5%
Between 5 lakhs to 7.5 lakhs 10%
Between 7.5 lakhs to 10 lakhs 15%
Between 10 lakhs to 12.5 lakhs 20%
Between 12.5 lakhs to 15 lakhs 25%
Above 15 lakhs 30%


What accounts do freelancers have to maintain?

Freelancers also have to maintain a certain set of books of accounting to keep a check on the transactions they do, the income they receive, expenses they incur, etc.

They need to maintain the following books of accounts:

a. Accrual basis of accounting/ Mercantile basis

b. Cash basis of accounting

What are the conditions for filing a deduction in expenses?

a. The expense must be related to the freelancing job.

b. The expense should be related to that financial year itself.

c. The personal expense of the freelancer should not be included.

The expense which is related to freelancing work such as buying furniture for the office, delivery of a service, transportation fare, or any expense incurred due to freelancing work will be exempted.

Process of filing an Income Tax Return:

  • Visit the Income-tax e- filing portal.
  • Under the download tab, download the ITR-4 form.
  • Fill in the details. The details asked will be general information, details of income from business/ profession, gross total income, taxable amount in the total amount of income, details of the TDS, details of self-assessment tax.
  • To save tax, claim tax deductions and exemptions under various sections. Compute your tax using Form 26AS. Property rent, travel expenses, property taxes, etc can also be deducted.
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