Introduction

The field of freelancing is growing rapidly in India as more professionals set out to choose work schedules and a variety of work. But while freelancing opens the door to flexible work, it pays the freelancer to consider taxes too. In this case, it is essential for a freelancer to learn everything about tax compliance, although it might seem quite confusing. From selecting the right tax law to completing your Income Tax Return (ITR), the process is fraught with difficulty.

In this guide, you will learn all the information you need to be able to file your ITR without a hitch in 2025, as well as how to maximise deductions, which form to fill out, and the benefits of using applications such as Infinity. Let’s dive in!

Understanding Freelance Income and Taxes

Freelance Income Classification

Freelancing income is recognised by the Income Tax Act in India as income from business and profession. This can determine your tax bracket hence why it is important that freelancers learn about this classification. Freelancers work for themselves and they have their own separate business, so they are required to make taxes depending on the income they make.

This classification also determines your tax rate depending on the total income that you receive per annum.

GST and TDS Compliance

Freelancers also may need to get served Goods and Service Tax (Goods and Service Tax) if the annual pay is more than Rs. 20 lakhs (Rs. 10 lakhs for the special states which include the northeast regions). There is customarily 18% GST rates available for freelancing services.

Further, when the client pays more than Rs. 30,000 to a freelancer, TDS or Tax Deducted at Source is mandatory. To avoid falling foul of the law you need to ensure that you are familiar with these compliance requirements. GST Portal

Choosing the Right Tax Regime and ITR Form

India offers two tax regimes: the old tax regime, which allows deductions, and the new tax regime, which offers reduced tax rates but no deductions. As a freelancer, you can choose the regime that best suits your financial situation.

Old vs. New Tax Regime

Freelancers typically benefit from the old tax regime if they have significant deductions like insurance, housing loan interests, etc. However, if your income is straightforward and you don’t have many deductions, the new tax regime might be more beneficial.

ITR Forms

ITR-3 or ITR-4 is the form normally used by freelancers for filing returns. Based on your income, if it grosses more than Rs. 50 lakh then you should fill out ITR-3. In case the taxpayer prefers opting for the Presumptive Taxation Scheme under section 44ADA of the IT Act, then ITR-4 form is suggested. Income Tax e-filing portal

Tax Deductions and Benefits for Freelancers

Section 80C to 80U Deductions

Freelancers, like anyone else, can use several tax exemptions allowed under sections 80C to 80U. These deductions include expenses like:

• Life insurance premiums

• Home loan interest payments

• Deduction on account of medical insurance premium (up to 80D)

• Education loans (section under section 80E)

Any of these deductions could lead to a drastic reduction of your taxable income hence the need to ensure you record all your eligible expenses and the same would be claimed in your tax returns.

Section 44ADA of the Income Tax act is known as Presumptive Taxation Scheme.

If you earn up to Rs. 50 lakhs from freelance work then you are eligible for Presumptive Taxation Scheme 44ADA. This enables one to declare income tax on fifty percent of the total income earned thus bringing down the figured amount of-income tax payable. It’s a great way to reduce one’s tax preparation time and make the process faster and easier.

GST Compliance and TDS for Freelancers

GST Registration

Earlier, it was mentioned that GST registration is compulsory for freelancers having a turnover of Rs. 20 lakh per annum (Rs. 10 lakh in some states). It means once registered you have to apply GST on your invoices and pay to the government.

It is crucial to remain compliant with GST so that you don’t get into trouble with the authorities and especially useful if you are working with clients across different states or even across the world. GST Registration Process

TDS for Freelancers

TDS applies when freelancers make payments exceeding Rs. 30,000 to any professional or service provider. This means you must withhold tax at the source and deposit it with the government.

Step-by-Step Guide to Filing ITR for Freelancers

Step 1: Visit the Income Tax Portal

Head to the official Income Tax e-filing portal. Register for a new account or log in to your existing one.

Step 2: Choose the Right ITR Form

Select ITR-3 or ITR-4, depending on your income and tax regime. The system will guide you through the appropriate form based on your selections.

Step 3: Enter Income Details

Enter all relevant income details, including your freelance earnings, any deductions, and tax payments already made (e.g., TDS).

Step 4: File and Submit the Form

Once your details are entered, submit the form online. You may also need to upload supporting documents like your bank statements or invoices.

Step 5: Verification

Finally, you’ll need to verify your ITR using methods like Aadhaar OTP or Digital Signature Certificate.

Best Practices for Freelancers to Manage Their Taxes

Maintaining Organised Financial Records

Record every income and expenditure as much as possible. This includes bank statements, invoice, receipt and other documents whereby deductions are likely to be made. And this will not only aid in the filing of taxes but also in the financial planning which you achieve in a given financial year.

Better yet, ensure that the incomes and expenditure frequencies are up to date.

It is advisable to record your income and expenditure on a monthly basis this way you will be ready when filing your return. Other apps of its nature and caliber like the Infinity can assist a user to monitor the finances in real-time.

Seeking Professional Advice

Perhaps you should engage the services of a tax consultant or chartered accountant if your income is complicated or if you will claim a number of, usually, complicated deductions.

Avoiding Common Mistakes

Self-employed people involve several pitfalls that include declaration of low income, forgetting some of the deductions. It is important that you make sure that your returns are properly checked before they are returned.

Infinity’s Multi-Currency Banking

Infinity account management tools enable keeping track of money received from clients across the globe, whether one’s bank account is in USD or other currencies. Infinity helps freelancers handle global payments, GST, and TDS compliance, ensuring that you stay on top of the latest tax laws in India and abroad.

Conclusion

It can be daunting to file your ITR as a freelancer in the year 2025, but it doesn’t have to be. Being aware of the taxes that are due, deciding on the proper forms, and correctly claiming the allowances mean that you can be certain you are keeping with the law to prevent penalties.

Infinity makes holding your own finances and helping you manage them, and sorting out your taxes a breeze.

Start filing your ITR today and explore how Infinity can help you streamline your finances!