0 hidden charges. 0 forex
debit-card

A Guide to Filing Taxes for Freelancers

FACT CHECKED
Reviewed by
.
Created on
June 17, 2023

Summary

What’s Inside

Income tax for freelancers is the tax that they need to pay on their earned income. Freelancers form a significant part of India's economy. Just like all other individuals who earn money, freelancers are also required to pay taxes on their income. Here is a comprehensive guide on filing the Income Tax Return (ITR) for freelancers.

Income Tax for Freelancers in India

Taxation for salaried employees is well-known and often discussed, but it can be daunting for freelancers. However, with a proper guide, the process is straightforward and simple.

Defining freelancers

Freelancers are people who work for themselves and make money through their skills. According to the Income Tax Act, they have to pay taxes on this income under the category "Profits and Gains from Business or Profession.”.

The due date for filing ITR

For the financial year 2022-23, freelancers need to file their ITR before the deadline of July 31st, 2023. If you don't want to do accounting, you can choose to file taxes under the Presumptive Taxation Scheme - section 44AD of the Income Tax Act, as long as your total income for the year is less than ₹50 lakhs.

Deductions

If you're a freelancer, you can save money on taxes by using sections 80C, 80D, 80E, 80EEA, 80G, 80GG, 80TTA, and 80U. These sections let you save on things like investments, interest you pay on home loans, and education loans.

ITR Form

Use ITR-3 or ITR-4 to file freelance income tax. File taxes online at Income Tax e-Filing Portal. Choose a form, fill in details, and pay tax from home.

Tax rates for freelancers

Depending on your income and the tax regime you choose, the following are the tax rates:

Income slab

Old Tax Regime

New Tax Regime (until March 31st, 2023)

New Tax Regime (Beginning April 1st, 2023)

₹0 - ₹2,50,000

-

-

-

₹2,50,000 - ₹3,00,000

5%

5%

-

₹3,00,000 - ₹5,00,000

5%

5%

5%

₹5,00,000 - ₹6,00,000

20%

10%

5%

₹6,00,000 - ₹7,50,000

20%

10%

10%

₹7,50,000 - ₹9,00,000

20%

15%

10%

₹9,00,000 - ₹10,00,000

20%

15%

15%

₹10,00,000 - ₹12,00,000

30%

20%

15%

₹12,00,000 - ₹12,50,000

30%

20%

20%

₹12,50,000 - ₹15,00,000

30%

25%

20%

>₹15,00,000

30%

30%

30%

A Simple Step-By-Step Guide to Filing Income Tax for Freelancers

1. Calculate your earnings: Add up all the money you made from freelancing between April 1st and March 31st of the financial year.

2. Keep track of your expenses: Write down all the eligible expenses and deductions that you can take off from your earnings.

3. Choose the right form: Pick the right form (ITR-3 or ITR-4) based on your earnings and the type of freelancing you do.

4. Log in to the Income Tax e-Filing portal: Sign in to the Income Tax e-Filing portal to access the correct form and fill it out carefully.

5. Provide accurate information: Make sure you enter all the right details in the form, including your earnings, expenses, and deductions.

6. Check and submit: Look over the form for any mistakes or missing information. Once you're sure it's accurate, submit the form electronically on the e-Filing portal.

7. Keep your documents: Save all your invoices, receipts, bank statements, and other relevant papers to prove your earnings and expenses.

8. File your taxes on time: Submit your tax return by the deadline for the financial year to avoid any fees or extra charges.

Remember, if you have any questions or problems, talk to a tax expert or a chartered accountant to make sure you're following the income tax rules correctly.

Conclusion

Freelancers in India are required to pay income tax on their earnings and can file their Income Tax Return (ITR) before the deadline of July 31st, 2023. Deductions can be made using sections 80C, 80D, 80E, 80EEA, 80G, 80GG, 80TTA, and 80U. Tax rates vary depending on income and tax regime chosen. There have been many landmark changes in income tax slabs introduced in this year’s budget, and you can capitalise on those by choosing the tax regime that’s right for you.

Sort, categorise, and manage your finances with Fi

If you find it hard to understand your savings account statement at the end of the year, let our AI-powered expense categoriser on Fi Money do the work for you in real-time!

You can gain insights into your spending habits and make informed decisions about your money. The Fi app lets you track your expenses by merchants, brands, categories, and time frames, so you can see exactly where your money is going. Plus, it provides helpful nudges to help you save and invest more. You can even check your credit score on Fi's Insights Hub. It's no wonder over 2.5 million people trust Fi to get a 360-degree view of their money.

Frequently Asked Questions

1. What is freelance income tax?

Freelance income tax is the tax paid by freelancers on the income they earn.

2. How is freelance income taxed?

Freelance income is taxed under "Profits and Gains from Business or Profession".

3. Do I need to pay freelance income tax if I earn a small amount?

You do not need to pay freelance income tax if you earn less than ₹2,50,000 per year.

4. Are there any deductions or expenses I can claim as a freelancer?

You can claim deductions for things like investments, medical insurance premiums, interest on home loans, and education loans.

5. How can I stay organised for freelance income tax purposes?

Keeping track of your earnings and spending, on your own or with an accountant, can help you stay organised when filing taxes as a freelancer. You can automate this using Fi Money’s expense categorising feature.

Disclaimer

Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
Share this article
Copied Link!
Blog
>
Tax
>
A Guide to Filing Taxes for Freelancers

Sources

View similar articles in
Tax
Get the Fi app