So, you are running a side hustle. Perhaps you work on code at night, design logos on the weekends or teach guitar lessons after your job. It’s exciting to watch your bank account grow by a bit. However, there’s one thing that isn’t so exciting- taxes.
If you’re in your 30s or early 40s, trying to juggle a job, family and freelance work, tax season can be very confusing. This guide will explain things clearly and help you reach your life goals without having to worry about compliance.
Understanding Your Tax Obligations
Your freelance earnings are categorised under ‘profits and gains from business or profession’. Here, every rupee counts. But you do have options that can ease compliance.
For example, the presumptive taxation scheme under Section 44ADA can be a significant relief for freelancers. If your freelance earnings during the year do not exceed ₹75 lakh, you may declare just 50% of your gross receipts as taxable. No detailed accounting of expenses is required. It is basically a tax shortcut that saves effort and time.
On the other hand, for higher income or if one wants to claim real expenses, you will need to keep proper records and file ITR-3. This route involves more documentation, but usually results in lower tax liability for you.
How to Declare Your Income
So, how do you tell the tax department about your earnings? It depends on whether you use the presumptive scheme or not.
- Choosing your filing route-
ITR-4 (presumptive taxation): Convenient filing for taxpayers who are choosing the 50% presumptive income rule.
ITR-3 (regular taxation): Full filing wherein you disclose actual income and expenses.
Note: The deadline for filing is crucial. For most individuals and non-audit cases, the due date for FY 2024-25 (AY 2025-26) has been extended to September 15, 2025. If your turnover exceeds ₹5 crore and you require a tax audit, the deadline is October 31, 2025. Missing these deadlines will incur penalties. So be sure to mark the dates.
- Understanding TDS- How It Affects Your Income
TDS can be challenging to understand as it involves clients withholding a portion of your money. Whenever a client pays you more than ₹30,000 per year, they can deduct 10% as TDS before paying you.
Treat TDS as an advance payment toward your final tax bill. Such money withheld is credited when you file returns. To be safe, always collect Form 16A from clients who deduct TDS. Without the form, it’s difficult to claim credit.
Let’s say you have a client who owes you ₹50,000 for a project. They are going to pay you ₹45,000 after withholding ₹5,000 as TDS. The ₹5,000 goes toward your annual tax liability. Now, let’s say your actual tax is ₹3,000. You will be eligible for a refund of the excess ₹2,000 after filing your income tax return and completing e-verification.
- Expenses You Can Claim – Your Tax-saving Arsenal
This is how astute freelancers can potentially save a significant amount. Any legitimate business expense reduces your taxable income. In other words, think of expenses as legal ways to lower your tax bill.
Common claimable expenses
| Expense type | What you can claim | Monthly example |
| Home office | Portion of rent/utilities for workspace | ₹3,000 (15% of ₹20,000 rent) |
| Internet & phone | Work-related communication costs | ₹1,200 for an internet plan |
| Travel | Client meetings, work trips | ₹2,500 for local travel |
| Equipment | Laptops, cameras, software depreciation | ₹833 (₹10,000 laptop over 12 months) |
| Professional services | Accountant, lawyer fees | ₹500 monthly retainer |
| Supplies | Stationery, materials for work | ₹300 for basic supplies |
Real-world example
Meet Priya, a content writer working from home. She claims 20% of her ₹15,000 rent (₹3,000) as an office expense since her workspace occupies one room. Additionally, she includes her internet bill (₹1,000), laptop depreciation (₹800), and client meeting travel (₹1,500). That’s ₹6,300 monthly in legitimate deductions.
Over the course of a year, these deductions could potentially total ₹75,600. If she’s in the 20% tax bracket, she could potentially save around ₹15,120 annually by maintaining proper records.
New Tax Regime and Standard Deduction
The 2025 Budget brought freelancer-friendly changes. The standard deduction increased to ₹75,000, available and is now available to both salaried individuals and freelancers, even under presumptive taxation. This means you get an automatic ₹75,000 reduction from your taxable income.
Moreover, new tax slabs under the updated regime are gentler:
Up to ₹4 lakh: No tax
₹4–8 lakh: 5%
₹8–12 lakh: 10%
So, for someone earning ₹7 lakh annually, taxes could potentially be significantly reduced after applying the standard deduction and rebates. It could be perceived as the government acknowledging your efforts.
Taking care of your taxes as a freelancer can seem tough, but with proper information and tools, it’s totally doable. If you know how to declare your income, manage your TDS, and claim your expenses, you can ensure you’re not paying more than you need to. Besides, the new standard deduction and revised tax slabs in the 2025 Budget are meant to help you save more money.
