New Delhi: With the ITR 2025 filing season around the corner, many freelancers and consultants are wondering how their income is taxed and why the rules differ from those for salaried employees.
“This classification determines what deductions you can claim and how you maintain records,” said a Mint report. For salaried workers, tax paperwork is often straightforward with Form 16 from their employer. Freelancers, however, need to handle extra steps like obtaining Form 16A from each client and cross-checking it with Form 26AS to make sure all tax credits are correctly reflected.
TDS Rules
For salaried employees, taxes are cut by the employer before the salary reaches their account. Freelancers, however, need to handle taxes themselves. Usually, when clients pay freelancers, they deduct 10 per cent TDS and submit it to the government under the freelancer’s PAN. To ensure the tax is credited correctly, freelancers should collect Form 16A from each client and match it with Form 26AS.
Salaried vs Freelancers: Expense Deductions
Salaried employees get a flat deduction up to Rs 50,000 under the old tax regime or Rs 75,000 under the new one without having to show any bills.
Tax Deductions Available for Freelancers (Old Regime)
Freelancers can claim many of the same benefits as salaried individuals, such as:
– Section 80C: PPF, ELSS, life insurance, and other eligible investments
– Section 80CCD: National Pension System (NPS) contributions
– Section 80D: Health insurance premium payments
– Section 80TTA: Interest earned from savings accounts
– Section 80GG: Rent deduction (up to Rs 5,000/month) if HRA is not received
Choosing the Right ITR Form
If you’re a freelancer and don’t qualify for presumptive taxation, you’ll need to file ITR-3. For example, if you work as a content writer, presumptive taxation doesn’t apply—so you must report your income and expenses in detail.
The tax rates are the same for freelancers and salaried individuals, but the differences lie in how income is classified, what deductions you can claim, and the level of compliance required. Keeping invoices, receipts, and expense records organised will make filing easier and more accurate.