FREELANCERS TAX – TAX VIC

How to File ITR if You Have Both Salary and Freelance Income

TAXVIC — Fri, 30 May 2025 04:59:52 +0000

In today’s economy, many professionals are no longer dependent on a 9-to-5 job. You’re not alone if you’re working full-time but also doing freelance work, like consulting, content writing, design, coding, or teaching. But come tax season, things get tricky: Which ITR form should you choose? How do you report both types of income correctly?

In this blog, we’ll explain how to file your Income Tax Return (ITR) if you have both salary and freelance income, with clear examples and compliance tips.

1. Understanding Your Two Income Sources

Let’s first distinguish your income types:

Salary Income: Received from your employer, usually with TDS already deducted under Section 192.
Freelance Income: Any payment you receive for services rendered in your capacity, usually without any employment contract. This is taxed under “Profits and Gains from Business or Profession”.

This combination makes your ITR more complex, but manageable with the right approach.

2. Choosing the Correct ITR Form

For AY 2025–26, you cannot use ITR-1 if you have freelance income.

Instead:

Use ITR-3: If you are maintaining books of accounts or do not want presumptive taxation.
Use ITR-4: If your freelance income qualifies for presumptive taxation under Section 44ADA, and your total income is within ₹50 lakh (₹75 lakh if cash receipts are less than 5%)

Tip: Most part-time freelancers opt for ITR-4 using presumptive taxation for simplicity, but if you have higher expenses or losses to claim, ITR-3 is better.

3. Reporting Salary Income

Your salary income goes under the standard “Income from Salary” head.

Enter salary as per Form 16 (Part B)
Report exemptions (HRA, LTA, etc.) and deductions (like 80C, 80D)
Match TDS from Form 26AS or AIS (Annual Information Statement)

4. Reporting Freelance Income

Here’s where things vary depending on how you choose to report:

A. Under Presumptive Taxation (Section 44ADA) – Simpler Option

Declare 50% of gross receipts as income. No need to maintain books.
For example, if you earned ₹6,00,000 from freelancing:
- ₹3,00,000 (i.e., 50%) is deemed your income
- You pay tax on ₹3,00,000 (after Chapter VI-A deductions like 80C)

B. Under Normal Provisions – More detailed

Show actual income minus expenses (advertising, tools, subscriptions, electricity, internet, etc.)
Maintain books of account and possibly get a tax audit if income exceeds ₹50 lakh

More suitable if you have significant business expenses or losses

5. Pay Advance Tax or Face Interest

Freelance income, such as salary, is not subject to TDS. So, if your total tax liability (after TDS) exceeds ₹10,000, you must pay advance tax quarterly.

If you don’t, you’ll be charged:

Interest under Section 234B & 234C for shortfall/delay
Even if your employer deducts TDS, you’re still liable for tax on freelance income.

6. Claim Deductions and Reduce Your Tax

Whether salaried or freelancer, you can claim standard deductions like:

80C (LIC, PPF, ELSS, etc.)
80D (Health insurance)
80G (Donations)
80TTA/80TTB (Savings interest)
For freelancers: you may also claim business expenses (only if not opting for 44ADA)

7. Example Case:

Riya, a software engineer, earns:

₹12,00,000 from her job (TDS deducted by employer)
₹4,00,000 from freelance coding projects on weekends

Her options:

File ITR-4, declare ₹2,00,000 as presumptive income under 44ADA
Add it to her salary income, claim deductions and pay the remaining tax
.
Or, if she has expenses (laptop purchase, co-working space), she can opt for ITR-3 and declare actual profits.

8. Documents to Keep Ready

Form 16 from the employer
Details of freelance income (invoices, payment proofs)
Proof of expenses (if not using 44ADA)
Form 26AS and AIS to reconcile TDS and income
Receipts for deductions under 80C, 80D, etc.

If you have both salary and freelance income, don’t panic—just plan. Choose the correct ITR form (ITR-3 or ITR-4), understand whether presumptive taxation works for you, and don’t forget advance tax.

More income means more responsibility—but also more flexibility. With proper reporting, you stay compliant and avoid tax notices or penalties.

The post How to File ITR if You Have Both Salary and Freelance Income appeared first on TAX VIC.

Taxes & Compliances you must know about if you provide services outside India

TAXVIC — Wed, 05 Apr 2023 10:52:15 +0000

This blog is helpful if you are an individual working for a company/entity outside India and providing services. If you are an Indian resident and working for a company outside India, you may have to pay taxes in both India and a foreign country.

Here is the most simplified version of getting to know your taxes and compliance if you are a self-employed or freelancer working for a company outside India:

1. Tax Residency:

You may be considered a tax resident in both India and foreign countries, depending on their respective tax laws. In such cases, you may have to pay taxes on your global income in both countries. If you are an Indian resident, you need to pay taxes on all your global income.

2. Double Taxation Avoidance Agreements (DTAA):

To avoid double taxation, India has signed DTAA with many countries. These agreements provide relief from paying taxes twice on the same income in both countries. You can claim credit for foreign taxes paid on your Indian tax return under the DTAA.

4. Taxation and compliance of professional/business income received from outside India:

If you are working for a project or as a consultant for any entity outside India, The amount you receive is considered as your business income or say professional income. There are some compliances you need to cross-check if you fall into this category:

i. GST Registration:

If the nature of work is such that it can be regarded as an Export of services, you must take GST registration irrespective of the limit of 20 lacs which means you take GST for any amount being received from the export of services as defined under GST law. Though the GST rate is Zero in the case of export of services outside India, in order to do that you must Furnish a LUT or Bond in case exports are intended to be made without payment of taxes. You must also ensure that the payments are received in convertible foreign exchange within the prescribed time period which is one year from the date of export of services, else GST would be payable on the transaction. Once GST registration is done-filing of gst return monthly/quarterly becomes mandatory irrespective of the fact that you may be paying zero gst or there is no sale during a particular month.

ii. Income Tax:

The tax rates depend on the structure of your business/profession. You may be an individual or you may have opened a company to operate and conduct your services providing business.
Typically, is you being an individual freelancer who is selling services, you have the option to adopt 44ADA if your total receipts during the year is up to 75 lacs (Till FY 22-23 the limit was 50 lacs). Under 44ADA which is also called a presumptive taxation method, the profit is presumed to be 50% of the gross receipts, and taxes are calculated on this profit. You get to save taxes and the method is quite simpler when you adopt 44ADA. Read about 44ADA in detail here.

iii. Import Export Code:

If you are an exporter in India, you must take Import Export Code-also called IE Code. you can apply by yourself following the instructions from this website of Government.

iv. FIRC:

Foreign Inward Remittance Certificate becomes important if you are an exporter or freelancer based in India since you will receive payments in the form of foreign currency. A FIRC is legal proof of the payment received from abroad in foreign currency. Therefore, as an exporter, you must request your banks to get a FIRC for every inward remittance you get from outside India. It is also important to ensure that you submit all the details correctly, especially the purpose of remittance.

Since the RBI monitors all remittances from outside India, all Authorized dealers are required to report foreign transactions to RBI’s Export Data Processing and Monitoring System or EDPMS. EDPMS is an online application that allows all Indian-authorized banks to report foreign currency remittances to RBI. This increases transparency in foreign currency transactions to and from India. In some cases, it may not seem mandatory to have FIRC but it is always a better practice to have an FIRC document as an exporter.

5. Income Tax Filing:

You are required to file your income tax return in India even if you have paid taxes in a foreign country. You can claim credit for foreign taxes paid on your Indian tax return. Income tax law and GST laws are separate so do not mix it up when you think of compliance with income tax return filing.

The financial year which you can call a tax year is a 12-month period that begins on the 1st of April and ends on the 31st of March of the next year. No matter when you start your business, your tax year closes on 31st March and a new tax year starts on 1st April. Therefore, planning your taxes in advance is important. Assessment year is another term that you may have heard in relation to tax filing. The assessment year is the year that comes after the Financial Year. Income earned during the financial year is assessed and taxed in the Assessment year. Both FY and AY start on the 1^st of April and end on the 31^st of March. For instance, for the Financial year FY 2022-2023, the assessment year is AY 2023-24. Your income tax return filing for FY 2022-2023 will be done before July 2023 or September in specific cases.

6. Advance tax Payment:

If your tax liability exceeds 10000 in a year, Advance tax payment becomes mandatory. You may have to pay it on a quarterly basis or before 15^th March (once in a financial year), depending on which taxation method are you adopting in income tax.

7. Having a good Tax Consultant:

Taxation can be quite confusing if you are not from this background, and it is advisable to consult with a tax professional who has expertise in your sector of work. You can always do research, and find consultants through your network of friends who are already availing of services. Or you can always change your consultant if you feel you can switch to a better one. After all, you are paying fees and it is a matter of managing your finances and your confidential data such as bank statements, invoices etc.

Overall, as an Indian resident working for a company outside India, it is important to be aware of the tax laws in both India and the foreign country to ensure compliance and minimize your tax liabilities. Tax Vic has experts who are already handling tax planning & Tax Saving, Compliance filings such as GST, Foreign Remittance, Tax Filing, and other compliance of self-employed individuals such as engineers, software consultants, influencers, actors etc. If you want to connect and have a consultation with our expert CA REETU connect with her directly. You may reach out to info@taxvic.com to book free tax consulting with CA. As a compliance service provider, our aim is to simplify your finances and taxes and take away all your stress and at the same time provide you with the highest value at an affordable cost.

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