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

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

Salary and Freelance Income

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

tax consultant

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.

Name