Business, professionals and freelancers · Tax Year 2025-26
How freelancers file ITR
Freelancers are taxed on professional income. Most can choose a presumptive scheme that treats half of receipts as profit and files ITR-4, or keep books and file ITR-3. Learn the limits, TDS credit, advance tax, due dates and records to keep.
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Most freelancers file either ITR-4, using the presumptive scheme for professionals (section 44ADA of the 1961 Act), or ITR-3, when they keep full books. Under 44ADA half of your gross receipts is treated as profit, and you do not claim expenses separately. It is available up to ₹50 lakh of receipts, or ₹75 lakh when cash receipts are within 5%.
From the tax year 2026-27 the Income-tax Act, 2025 carries the presumptive schemes (the old sections 44AD, 44ADA and 44AE) in one section, section 58.
The figures are signed off for the tax year 2025-26. For the tax year 2026-27 they are provisional, repeating those values.
Are you a professional or a business?
The presumptive scheme for professionals is open only to the professions it names: legal, medical, engineering or architectural, accountancy, technical consultancy, interior decoration, and any other profession notified by CBDT. If your work is not on that list, 44ADA does not apply, and a Tax Expert can tell you which scheme fits. Selling goods or trading is business income and uses a different presumptive scheme, section 44AD, at 8% of turnover (6% for digital receipts).
Presumptive or books?
| Presumptive (44ADA) | Books of account |
|---|---|---|
Profit | 50% of gross receipts | Actual: receipts less expenses |
Form | ITR-4 | ITR-3 |
Receipts limit | ₹50 lakh (₹75 lakh if cash is within 5%) | None |
Expense claims | Not claimed separately | Allowed, with records |
Audit | Not needed within limits | Needed above ₹50 lakh of receipts, or if you declare less than the presumptive profit |
If your real costs are well under half your receipts, the presumptive scheme is simple and fair. If your costs are higher (office rent, staff, equipment), keeping books and declaring a lower profit may save tax, but it brings accounts and possibly an audit.
Worked example
An architect invoices ₹18,00,000 in the tax year, all by bank transfer. Under 44ADA the profit is 50% of ₹18,00,000, which is ₹9,00,000. She files ITR-4 and declares ₹9,00,000 as professional income. If she has no other income and chooses the new regime with no standard deduction (a standard deduction is for salary), her taxable income is ₹9,00,000.
At the new regime slabs of the tax year 2025-26 the slab tax on ₹9,00,000 is ₹20,000 + ₹10,000 = ₹30,000 (₹4,00,000 at 5% and ₹1,00,000 at 10%), and the rebate removes it because income is below ₹12,00,000. Her tax is nil. Client TDS deducted during the year is refunded on filing.
TDS on your receipts
Clients often deduct TDS from professional fees (the 1961 Act section is 194J, which the 2025 Act carries as part of section 393). You claim it as a credit, but only if it shows in Form 26AS (up to the tax year 2025-26) or Form 168 (from 2026-27) under your PAN. Check these before filing. TDS also appears in the AIS under business receipts.
Foreign clients pay without TDS. That income is still yours to report.
Advance tax
If your tax after TDS is ₹10,000 or more, advance tax applies. The usual dates are 15 June (15%), 15 September (45%), 15 December (75%) and 15 March (100%). If you use the presumptive scheme for professionals, the whole amount is due in one instalment by 15 March.
Late or short advance tax brings interest under sections 234B and 234C of 1% a month.
Due dates
For business or professional income whose accounts need no audit, the due date is 31 August after the tax year (31-Aug-2027 for the tax year 2026-27). With an audit it is 31 October. A late return costs ₹5,000, or ₹1,000 if income is ₹5,00,000 or less.
Under the Income-tax Act, 2025 the 31 August date covers anyone with income from business or profession whose accounts need no audit (section 263(1)(c), as amended by the Finance Act 2026).
Records to keep
- Invoices, contracts and bank statements.
- Form 26AS or Form 168, AIS and TIS.
- GST returns, if registered.
- For ITR-3: expense bills, a ledger, a profit and loss account and a balance sheet.
Common mistakes
- Ignoring foreign or cash receipts.
- Using ITR-1 for professional income.
- Declaring less than 50% under 44ADA without books.
- Not paying advance tax and then paying interest.
- Missing TDS in Form 26AS or Form 168.
See ITR-3: business and professional income and which ITR form to file.
How TaxCare helps
TaxCare picks ITR-4 when your income fits the presumptive rules and ITR-3 when it does not, calculates tax under both regimes, checks your TDS against Form 26AS or Form 168 and shows advance tax and late-payment interest. Audit-level cases are handed to a Tax Expert. See pricing.
This guide gives general information and is not professional tax advice.
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