ITR Filing 2025: Freelancers, Read Carefully! Ignoring THESE Tax Rules Could Cost You Big

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New Delhi: Freelancing is rapidly gaining popularity in India as more people seek flexible work options, better work-life balance and the freedom to choose their projects. However, many beginners are unaware that it also comes with tax responsibilities. Freelancers must take charge of filing and paying their own taxes unlike salaried employees. Missing out on this can lead to unwanted penalties or legal trouble from the Income Tax Department.

Understanding TDS: A Must-Know for Freelancers

For freelancers, understanding TDS (Tax Deducted at Source) is crucial. When clients make payments, they often deduct 10 per cent as tax and deposit it with the government using your PAN. This isn’t money lost, you can claim it back while filing your Income Tax Return (ITR). Just remember to collect Form 16A from your clients and match it with your Form 26AS to make sure everything adds up correctly. Staying on top of this helps you avoid tax surprises later.

Is GST Registration Mandatory for Freelancers?

Yes, freelancers do need to register for GST, if their total annual income crosses Rs 20 lakh (or Rs 10 lakh in some special category states). Once registered, you'll need to charge 18 per cent GST on invoices raised for Indian clients. However, if you're working with foreign clients, your services are considered exports and are usually exempt from GST. Still, even in such cases, GST registration may be required. So, it’s important to keep an eye on your earnings and understand the rules to stay compliant.

How to File Your Taxes: A Simple Guide for Freelancers

- Choose the Right ITR Form: Most freelancers file their taxes using ITR-3 or ITR-4, depending on their income type and structure.

- Opt for Presumptive Taxation (Section 44ADA): If your annual income is under ₹50 lakh, you can choose presumptive taxation. This allows you to declare 50% of your income as taxable without maintaining detailed books of accounts.

- Claim Work-Related Expenses: Keep bills and receipts for expenses like internet, laptop, software, office rent, or co-working space. These can help reduce your taxable income.

- Maintain Basic Records: Even if you're under presumptive taxation, it's good practice to keep invoices, payment proofs, and expense records for your reference and safety.

What Happens If You Ignore Tax Rules?

Not following tax or GST rules can land you in trouble. If you miss the deadline for filing your ITR or forget to pay advance tax, you might receive a notice from the Income Tax Department. Similarly, if you're required to register for GST but don’t, you could face heavy penalties. Staying compliant not only saves you money but also helps you avoid unnecessary stress and legal issues.