One of the best ways to save tax is to know the right thing to do & proceed accordingly. There could be a number of ways to save tax as a freelancer.

Here are the most important & common things one must consider if they are working as a freelancer in India.

I. Using the Presumptive taxation Scheme

Presumptive taxation scheme has been made available to professionals listed u/s 44ADA. This scheme will presume your income to be 50% of your gross receipts, thus you would not be to claim any further business expenses while using this scheme.

This scheme is available for professionals having gross receipts up to Rs 50 lakhs.

Apart from presuming your income, this scheme also waives the taxpayer from maintaining any books of accounts.

II. Reporting the income as business income i.e. without using the presumptive taxation scheme

Freelancing income can be considered as your business income & this will have its own merits.

Often the freelancers earn revenue & consider the revenue as their income, while they must have incurred certain amount to provide the services, they are engaged in. Having business as a source of your income, one would be able to deduct the expenses.

Most common expenses could be:

1. Depreciation on assets

2. Office Overheads

3. Office Rent

4. Client meeting expenses

5. Contracting costs etc.

Important thing to note here is, personal expenses cannot be claimed while computing the freelancing income.

Important note: One can either use one of the above two reporting under income tax. So, it is pertinent to determine, which one of the above would be beneficial for your freelancing business.

 III. Investing the right way & claiming deductions

One of the most important steps towards saving tax is “Investing Right”, this will not only help you save tax, you will also have some portion of your money saved as Investments

Various deductions are available under Income tax of which most popular ones are Deductions u/s 80C, 80D, 80CCD, 80GG etc.

IV. Determining if GST registration is required

Apart from saving taxes under Income tax, a freelancer must also determine, if he/she is required to get the business registered under GST. This should be done proactively, to avoid any late fees or interest.

V. Filing correctly & in time to save Interest & penalties

One of the important ways to save money while filing taxes is to file correct and to file in time. Doing so, you will save unnecessary costs in the form of interest & penalties.

One must take care that:

1. They use the correct ITR form

2. Pay advance taxes, if applicable

3. Consider all sources of income & calculate accurately.

4. TDS credits are taken appropriately

5. Claim proper deductions

6. Determine if tax audit is applicable

Concluding, as you can see, there are a number of things which must fall right to be tax compliant & save tax.

The most important thing, is to find the right mix. Therefore, a lot will depend upon various other factors such as the other income sources of the Individual, eligibility of deductions, applicability of tax audit, importance of book-keeping for the freelancer etc.

Hence, it is best advised to consult a professional for the best desired results.

(The author is a CA in practice at Delhi and can be contacted at: E-mail:, Mobile: +91-9811741451))

Author Bio

Qualification: CA in Practice
Company: Abhinandan Sethia & Associates
Location: west delhi, Delhi, India
Member Since: 26 May 2018 | Total Posts: 56
I am a Practicing Chartered Accountant with over 8 years of professional service experience. My professional services experience include specialization in #Business formation, #Business consultancy #GST compliance, #Income tax compliance #Risk based Internal Audits, #Risk Management, #Business proce View Full Profile

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February 2024