Income Tax for Freelancers in India

“In this world nothing can be said to be certain, except death and taxes.”

So remarked Benjamin Franklin, scientist, philosopher, inventor, reformer, statesman, and one of the most remarkable and influential figures in shaping independent America in the late 18th century, including his contribution to the Declaration of Independence and the Constitution.

Taxation is also a great equalizer. Nearly everyone has to pay or at least evaluate the need to pay.

While taxation could be stressful for some, many others look forward to matching their wits against those of the government in ensuring they are within the law while ensuring they pay the minimum required. Why should freelancers miss out on the fun? This freelancer tax guide India tells them what they need to know about taxes for freelancers in an easy way.

• Freelancing income is taxed as per the rules applicable to “profits and gains of business or profession”
• A freelancer could have income other than “profits and gains of business or profession” 
• income from business and profession
• Profits and gains from a profession can be computed through the “Accounting” method, in which detailed books need to be maintained, or the “Presumptive” method, under which a fixed percentage of receipts is deemed to be the income for the year. 
• At this point, there are two regimes running concurrently, with the option to choose between them given to the freelancer. Usage of the new tax regime is rising. 
• Goods and Services Tax (GST) is applicable to freelancers on transactions with Indian clients. 
• If the freelancing income exceeds Rs. 20 lacs in a year, 
• GST registration, and charging and collection from clients, is mandatory for freelancing income in excess of Rs. 20 lacs in a year.

Taxes for freelancers India: Scope

Some of the taxes we pay are transparent to the type of person paying them or the nature of their work. In other words, they are equally applicable to everyone. It does not matter whether you are a doctor, a teacher, a salaried employee, or a freelancer. For example:

• If you import a restricted item from a foreign country, you could be liable to pay Customs Duty, whether you are a government official or a sportsperson.
• If you cross a toll barrier on a tolled expressway, you will pay a Highway Toll regardless of whether you are an artist or a salaried person.

There are other taxes that could have different implications for different people and take into account the person liable to pay and/ or the nature of their work. As these are directly impacted by the nature of your freelancing work, these are the taxes that this guide on freelancer tax in India will focus on. These are:

• Income Tax
• Goods and Services Tax

Who is a freelancer?

While we all understand who a freelancer is and what freelancing means, tax laws may have their own versions and interpretations. Hence, it becomes important to make the distinction, especially for the purpose of Income Tax for freelancers in India.

Firstly, let us look at the English language definition of a freelancer. Indeed.com defines a freelancer as “a self-employed individual who offers professional services to clients for a pre-determined fee. Although freelance work is typically short-term, freelancers may choose to work with a client or company over an extended period of time. Freelance work usually involves working for multiple clients at the same time or in succession.”

One will find similar definitions in many other sources.

Let us move on to the definition for the purpose of income tax.

At first, freelancers might find it disconcerting that the Indian Income Tax Act (IT Act) of 1961 neither uses the word “freelancer” nor refers to a type of income that is “freelance income” or “income from freelancing.”

So, how do freelancers assess their liability and file income tax returns?

The Indian INCOME-TAX ACT, 1961, AS AMENDED BY FINANCE ACT, 2025, provides for income to be classified under the following heads:

“A. —Salaries.

B. —[***] 

C. —Income from house property. 

D. —Profits and gains of business or profession. 

E. —Capital gains. 

F. —Income from other sources”

Though freelancing is not specifically mentioned as a profession, the above, read in conjunction with Section 2(36) which says ‘“profession” includes vocation,’ income tax for freelancers in India includes them under the broad definition of a profession.

Helpful Hint: Freelancers, thus, are self-employed professionals providing services on their own, without being in an employer–employee relationship. Freelancing income is taxed as per provisions sections covering “Profits and Gains of Business or Profession (PGBP)” under the Income Tax Act.

Freelancing income versus freelancer’s income

There is an important distinction to be made here; the Act requires you to file your income tax returns as an individual (as opposed to corporations, HUFs, societies, etc.) and not as an individual typified as being a certain type, either salaried or professional, etc. 

Every individual could generate income from multiple sources in a financial year. You could have income from:

• Salary + Business
• Property + Freelancing (a type of Business and Professional income)
• Capital Gains + Salary
• Salary + Other sources
• Any combination of the above

In short, there is nothing like a freelancer tax in India. Thus, you do not file your return as a freelancer, but as an individual who generates income from freelancing. 

For each type of income, the provisions specified in the Act need to be followed. If you have multiple income types during a year, they will all be reported as per the provisions applicable to that type of income, and finally added up to determine your income tax liability.

Income Tax for freelancers in India

Freelancers need to track their earnings and expenses to be in a position to calculate the profits and gains on which income tax is payable.

Methods of calculating profits and gains

There are two methods offered by the law:

Accounting method

Freelancers can maintain books of accounts through which they can track earnings and deduct allowable expenses. Evidence would need to be maintained for the expenses in case an audit is conducted, since expenses reduce the profits, and hence tax liability, and could be treated as a case of tax avoidance if incorrectly done. 

Presumptive income method

Section 44ADA of the Act provides for computing profits and gains of profession on presumptive basis. If the “total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year…shall be deemed to be the profits and gains of such profession chargeable to tax under the head “Profits and gains of business or profession.”

Effective AY 2025-26, the 50 lac limit increases to 75 lacs “in case of an assessee where the amount or aggregate of the amounts received during the previous year, in cash, does not exceed five per cent of the total gross receipts of such previous year…”

Note of Caution: It must, however, be noted that this provision applies to freelancers “engaged in a profession referred to in sub-section (1) of section 44AA.” Further, section 44AA refers to such professionals as those who are “…carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette.”

Income Tax Rates

How much income tax do you need to pay?

India follows a slab structure for income tax. What this means is that the rate at which income tax is payable rises with your marginal income.

At this point, there are two regimes running concurrently, with the option to choose between them given to the taxpayer.

Legacy Regime

Tax rates for individuals (resident or non-resident) less than 60 years of age anytime during the previous year are as follows:

Lower Limit	Upper Limit	Tax Rate (%)	Surcharge (%)
0	2,50,000	Nil	Nil
2,50,001	5,00,000	5	Nil
5,00,001	10,00,000	20	Nil
10,00,001	50,00,000	30	Nil
50,00,001	100,00,000	30	10
100,00,001	200,00,000	30	15
200,00,001	500,00,000	30	25
500,00,001		30	37

Under the legacy regime, several incentives are offered that reduce the tax liability for freelancers if they invest in specified schemes or spend on defined items. Some of the popular ones are:

• Section 80C – ELSS, PPF, LIC, etc. (up to ₹1.5 lakh)
• Section 80D – Medical insurance
• Section 80E – Education loan interest
• Section 80G – Donations

New Regime

A Press Information Bureau (PIB) release explains the rationale behind the introduction of the new regime: “…building a streamlined, simplified tax framework aimed at enhancing transparency, equity, and economic efficiency…By simplifying tax slabs, rationalizing exemptions, and integrating digital compliance mechanisms, the Act seeks to reduce administrative burdens while fostering a culture of voluntary compliance.”

The rates and slabs under the new regime:

Lower Limit	Upper Limit	Slab Rate (%)	Surcharge (%)
0	4,00,000	Nil	Nil
4,00,001	8,00,000	5	Nil
8,00,001	12,00,000	10	Nil
12,00,001	16,00,000	15	Nil
16,00,001	20,00,000	20	Nil
20,00,001	24,00,000	25	Nil
24,00,001	50,00,000	30	Nil
50,00,001	1,00,00,000	30	10
1,00,00,001	2,00,00,000	30	15
2,00,00,001	5,00,00,000	30	25
5,00,00,000		30	25

More details about the tax slabs and forms can be accessed on the government’s income tax portal.

For filers failing to choose, the new tax regime has been made the default regime. “Eligible taxpayers having income from business and profession, if assessee wants to opt out of default tax regime, they have to furnish Form-10-IEA on or before the due date u/s 139(1) for furnishing the return of income.”

Differences between the two regimes

While the legacy regime has higher slab rates, it allows various types of deductions to taxpayers through which the net taxable income can be reduced. These deductions have been historically allowed as a means to incentivize people to invest in certain types of assets and to support government schemes and target populations from time to time. 

The new tax regime, on the other hand, does away with many of the allowable deductions but offers lower tax rates. One way of interpreting the change is that the taxpayer has matured and can take his/ her own decisions without the need for the government’s guidance on where to invest and how to plan for retirement.

The Central Board of Direct Taxes has issued a booklet that explains the differences between the two regimes and even provides a comparative table. For freelancers used to filing under the old regime, here is a quick summary of some of the deductions and set-offs allowed in the old regime but not in the new:

• Leave Travel Concession under Section 10(5)
• Deductions under Sections 80C to 80U
• Interest on housing loan for self-occupied house property under Section 24(b)

Helpful Hint: At lower levels of income, along with deductible investments and expenses reaching Rs. 3 lacs, the old regime could work better. However, as income rises, the new regime becomes more tax-efficient for freelancers in India.

According to an article in the Economic Times, for Assessment Year 2024-25, 74% of the income tax returns were filed under the new regime. 

Other relevant details

TDS for freelancers

Some clients may deduct TDS, or tax deducted at source, from the gross billed amount. This amount will be credited to your income tax account, which you can claim as a credit and set off against your income tax liabilities to the government. The client will also issue a TDS certificate on Form 16A to you certifying the deduction and credit.

Advance Tax

Income tax needs to be paid proportionately through the year and not in a lump sum at the end. For this, a projection of income and gains for the financial year needs to be done by the freelancer. 

Should the income tax liability on the projected financials be more than Rs. 10,000, advance tax needs to be deposited in four instalments spread through the year. 

At the end, when the final calculations are done, the balance, if any, can be claimed back as a refund or additional paid, along with interest. The government, while issuing refunds, also pays interest on the amount refunded.

ITR form to be used for filing the return

• When keeping books and filing for actual expenses incurred – ITR-3
• When filing on the basis of presumptive income – ITR-4

Case Study

Let us walk through an example of income tax calculation under various situations for a freelancer. These are:

Gross receipts during the year

• Rs. 75 lacs
• Rs. 12 lacs

Regime

• Old
• New

Accounting method:

• Keeping books of accounts
• Presumptive taxation

With three variables at play and two possible values of each, we will get eight different outcomes.

The Situation

		Old Regime	New Regime	Old	New
A	Gross Receipts	75,00,000	75,00,000	12,00,000	12,00,000
B	Deductible business expenses (rental, staff salary, phone)	30,00,000	30,00,000	5,00,000	5,00,000
C1	Net income (A-B) – Accounting method	45,00,000	45,00,000	7,00,000	7,00,000
C2	Net income (50% of A) – Presumptive method	37,50,000	37,50,000	6,00,000	6,00,000
D	Deduction eligible investments and expenses under Section 80C (LIC premia, PPF, etc.)	1,50,000		1,50,000
E	Deduction eligible investments and expenses under Section 80D (Health insurance premia)	25,000		25,000
F	Standard deduction		50,000		50,000
G1	Taxable Income (C1-D-E-F) – Accounting	43,25,000	44,50,000	5,25,000	6,50,000
G2	Taxable income (C2-D-E-F) – Presumptive	35,75,000	37,00,000	4,25,000	5,50,000
H1	Tax liability – Accounting	11,10,000	9,15,000	17,500	12,000
H2	Tax liability – Presumptive	8,85,000	6,90,000	8,500	7,500

Most beneficial choices for this case:

• For gross receipts of Rs. 75 lacs, using the presumptive taxation method under the new regime would minimize the income tax liability.
• For gross receipts of Rs. 12 lacs, using the presumptive method under the new regime would minimize the income tax liability.

Calculation of income tax liability

The tax liability (H) is calculated as follows, using the slabs shared earlier:

Old Regime

				Accounting Method		Presumptive Method
Lower Limit	Upper Limit	Tax Rate (%)	Surcharge (%)	Receipts = 75,00,000	Receipts = 12,00,000	Receipts = 75,00,000	Receipts = 12,00,000
0	2,50,000	Nil	Nil
2,50,001	5,00,000	5	Nil	12,500	12,500	12,500	8,750
5,00,001	10,00,000	20	Nil	1,00,000	5,000	1,00,000
10,00,001	50,00,000	30	Nil	9,97,500		7,72,500
50,00,001	1,00,00,000	30	10
1,00,00,001	2,00,00,000	30	15
2,00,00,001	5,00,00,000	30	25
5,00,00,000		30	37
			Total	11,10,000	17,500	8,85,000	8,750

New Regime

				Accounting Method		Presumptive Method
Lower Limit	Upper Limit	Slab Rate (%)	Surcharge (%)	Receipts = 75,00,000	Receipts = 12,00,000	Receipts = 75,00,000	Receipts = 12,00,000
0	4,00,000	Nil	Nil
4,00,001	8,00,000	5	Nil	20,000	12,500	20,000	7,500
8,00,001	12,00,000	10	Nil	40,000		40,000
12,00,001	16,00,000	15	Nil	60,000		60,000
16,00,001	20,00,000	20	Nil	80,000		80,000
20,00,001	24,00,000	25	Nil	1,00,000		1,00,000
24,00,001	50,00,000	30	Nil	6,15,000		3,90,000
50,00,001	1,00,00,000	30	10
1,00,00,001	2,00,00,000	30	15
2,00,00,001	5,00,00,000	30	25
5,00,00,000		30	25
			Total	9,15,000	12,500	6,90,000	7,500

 

Note:

The above example illustrates the difference in tax liability based on the regime and accounting method chosen by the freelancer at different levels of income. There are several other nuances applicable at various income levels and other conditions that need to be borne in mind while assessing income and filing returns, such as:

• Surcharge on income tax
• Marginal relief
• Rebate
• Health and education cess

GST for freelancers

According to a flyer issued by the GST Council, GST stands for Goods and Services Tax which is levied on the supply of goods or services or both in India. GST subsumes a number of existing indirect taxes which were earlier levied by the Centre and State Governments, including Central Excise duty, Service Tax, VAT, Purchase Tax, Central Sales Tax, Entry Tax, Local Body Taxes, Octroi, Luxury Tax, etc. It was introduced on July 1, 2017.

Helpful Hint: Pursuant to ongoing reforms, GST rates applicable to various categories of goods and services have been rationalized and will be applicable effective 22nd September, 2025. An updated list of applicable rates was shared through a press release by the Ministry of Finance.

Most services, however, continue to attract a GST rate of 18%, even after the rationalization.

GST Input and Output

GST Output is the tax collected by you from a client while invoicing for a transaction. If you are raising an invoice of Rs. 1,00,000 for a website development project, you will add 18% as GST on the amount. The client, thus, will pay you Rs. 1,18,000, less TDS if any. The Rs. 18,000 you collect as GST will need to be deposited with the government treasury periodically, net of any GST you have paid for goods or services purchased.

When you purchase from a GST-registered vendor, they will, similarly, add a GST component to their product or service. If the purchase is business-related, you can set off the GST you have paid against the GST you collected from a client. This is also known as Tax Input Credit.

Rationale for the introduction of GST

An explanation of the rationale behind the introduction of GST by the Department of Revenue, Government of India:

1. “…resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry. Firstly, there is no uniformity of tax rates and structure across States. Secondly, there is cascading of taxes due to ‘tax on tax’. No credit of excise duty and service tax paid at the stage of manufacture is available to the traders while paying the State level sales tax or VAT, and vice-versa.
2. The credit of GST paid on inputs at every stage of value addition would be available for the discharge of GST liability on the output, thereby ensuring GST is charged only on the component of value addition at each stage. This would ensure that there is no ‘tax on tax’ in the country.
3. It is also expected that introduction of GST will foster a common or seamless Indian market and contribute significantly to the growth of the economy.
4. GST will broaden the tax base, and result in better tax compliance due to a robust IT infrastructure.”

GST for freelancers – applicability

A freelancer providing expert services such as accounting, digital marketing, coding, website development, teaching, without being an employee of an organization or another individual or service provider, is treated as a service provider under the law, and hence covered by GST. Services are what a freelancer supplies.

So, the answer is that GST is applicable to freelancers.

An additional caveat is that GST is applicable to transactions with Indian clients. It is not applicable to services rendered to overseas clients.

Mandatory and recommended registration

If the freelancing income exceeds Rs. 20 lacs in a year, GST registration, charging, and collection from clients become mandatory.

Non-mandatory but recommended registration:

• Even though foreign clients are not charged GST, if, as a freelancer you provide services to foreign clients, GST registration is recommended as that enables reporting of such transactions to the authorities.
• GST registration is recommended for freelancers who offer services through aggregator platforms such as Fiverr and Upwork.
• You work for clients whose internal policies mandate vendors to be GST-registered.

Limitations of registration

Be prepared for:

• Your pricing being considered expensive in comparison to non-GST registered vendors by clients who cannot claim the GST paid to you as Input Credit.
• Carrying out the compliance-related task of filing returns and depositing GST collected, and facing penalties in case of failure to do so.

How to register

Registration is usually a simple online process and can be completed on the GST portal. Be prepared to provide the following information in two steps:

Step 1

• Legal Name of the Business (As mentioned in PAN) 
• Permanent Account Number (PAN)
• Email Address
• Mobile Number

Step 2

• Personal and business details
• Address
• Bank account information
• Upload documents required such as PAN, Aadhaar, Photo, Bank account proof, and Address proof.

Conclusion

This guide seeks to empower freelancers with essential knowledge on taxes for freelancers in India, essentially income tax and GST. As we conclude, a few points on freelancer tax in India they should bear in mind:

Laws can change

It must be noted that tax laws, like any law, are subject to change. Hence, for any action that could have a regulatory impact, it is recommended that reference is made to the most updated laws.

Seek expert advice when needed

While this guide will cover a majority of situations that freelancers encounter, no two situations are exactly the same. Hence, if you feel your situation is an exception and may not be covered by this freelancer tax guide India, you should consider seeking expert advice.

Tax management versus evasion

Every tax system comes with a set of incentives and disincentives, depending on the government’s evaluation of the needs of society and developmental goals. All individuals and other entities subject to the taxation regime are entitled to benefit from such incentives to the extent applicable to them. This is referred to as tax management. This is expected and encouraged.

Tax evasion, on the other hand, refers to a taxable entity’s wilful avoidance of tax, thereby depriving the exchequer of justified revenue. This is an unlawful activity and punishable by law. Common examples of tax avoidance for freelancers would be understating income and overstating expenses, both of which result in a reduction of the net income and therefore the applicable taxes, which are calculated as a percentage of the income or profits.

Freelancers need to ensure they are able to distinguish between tax management and tax avoidance.

FAQs Q. Do I need to pay income tax on my freelancing income? A. Yes. Freelancing income is liable to income tax. It is treated as equivalent to “Profits and Gains of Business or Profession” in the Income Tax Act. Q. My client has deducted TDS from the billed amount. How do I get it back? A. TDS deducted by a client is credited to your tax account. It can be set off against your tax liabilities or claimed back if you have paid more than your liability. Q. Do I need to maintain an account of my freelancing income and expenses. A. Yes, if you are using the “Accounting” method. Another option available to you is the “Presumptive” method under which a fixed percentage of receipts is treated as your income. Q. Do I have to pay advance tax? A. If your total tax liability in a financial year is more than ₹10,000, advance tax must be paid in 4 instalments. Q. Do I need to include money received from overseas clients in my income? A. All receipts on account of services delivered are part of your income, regardless of where they have come from. Q. Is it mandatory to have a GST registration? A. It is mandatory if your gross receipts exceed Rs. 20 lacs in the financial year.