What Business Codes to Use When Filing ITR for Freelance Work
- Farheen Mukadam
- Jul 31
- 8 min read
Filing an Income Tax Return (ITR) as a freelancer comes with its own set of requirements, especially when it comes to choosing the correct business codes. Business codes are essential for properly categorizing your work in the tax filing system, and making sure you choose the right one ensures that your return is processed without delays. The code you use indicates the type of business or profession you are engaged in, helping the Income Tax Department identify the nature of your income and its taxability. Let us explore the correct business codes freelancers should use, how to select the right one, and why it’s important for the proper filing of your ITR.
Table of Contents
What Business Codes Should Freelancers Use for ITR Filing?
Freelancers are typically required to use specific business codes when filing their ITR under the “Profits and Gains of Business or Profession” section. The code you select depends on the nature of your freelancing work. For instance, if you work as a content writer, a graphic designer, or an IT consultant, the business code will reflect these activities accurately. Choosing the correct business code is crucial for proper tax calculation and to ensure you are classified under the right tax bracket.
Business codes are assigned by the government and are generally based on the type of service provided or the nature of income generated. Incorrect codes may result in filing errors or unnecessary scrutiny from tax authorities.
Which Business Codes Apply for Freelancers?
For freelancers, there are several business codes based on the nature of their services. Some of the most common business codes for freelancers include:
Professional Services: Freelancers engaged in consultancy, writing, designing, and other professional services typically fall under this category. The code for “Professionals” includes services such as:
Consultants (Business, Tax, etc.)
Software Development
Content Writing
Graphic Designers
Chartered Accountants
Technical and IT Services: Freelancers offering IT-related services like web development, software development, and data analysis also have specific business codes under technical services.
Creative Services: Freelancers in creative fields such as photography, video editing, and artistic design fall under this classification.
Education and Training Services: Tutors, trainers, and educational consultants working independently should use codes specific to educational services.
Other Services: For freelancers whose work does not fall into the above categories, there are "other services" codes available. This may include miscellaneous freelancers such as translators or marketers.
Each of these codes is categorized under specific sections of the Income Tax Act and will reflect your profession or business type.
Where to Enter the Code in Your ITR Form?
The business code is entered under the “Schedule BP (Business or Profession)” section of the ITR form. Specifically, it is required when you file under the “Profit and Gains of Business or Profession” section (for taxpayers earning income from freelancing or self-employment).
Here is how to enter it:
Choose the correct ITR form (usually ITR-3 or ITR-4) based on your income source.
Under the Schedule BP, you will find a field to enter the business code.
Select the appropriate code from the provided list or use the search option to find the one that best represents your freelancing profession.
It is critical to select the correct code to avoid discrepancies or delays in your ITR filing process. If you are uncertain about which code applies, consulting a tax professional or using a platform like TaxBuddy can help you make the right choice.
Step-by-Step Guide: Claiming the Right Code as a Freelancer
Here’s a simple guide to ensure you select the right business code for your freelancing work:
Identify the Nature of Your Work: Determine the type of freelancing services you provide. Is it related to content writing, graphic design, consulting, or something else? Your profession will directly influence the business code you should select.
Access the Correct ITR Form: Most freelancers will need to file ITR-3 or ITR-4, depending on whether they opt for the presumptive taxation scheme or not.
Go to the Business/Profession Section: In the ITR form, locate the “Schedule BP” section and find the field that asks for the business code.
Select the Code: Use the drop-down menu or search option to choose the code that most accurately reflects your profession. Make sure to review the list of available codes before selecting.
Complete Your Return: Once the business code is entered, continue filling out the rest of your return, ensuring all necessary income and deductions are reported.
Verify Your Entries: Before submitting the return, double-check that all details, including the business code, are correct. Inaccuracies may lead to delays or issues with the filing.
If you are unsure about any of the steps, consider seeking professional advice to ensure compliance.
Recent Updates for AY 2025-26: New Business Codes for Freelancers
For the Assessment Year 2025-26, there have been updates to the business codes to make the filing process more comprehensive and precise. New business codes have been introduced to cover emerging freelance sectors like digital marketing, online education, and content creation.
These new codes are designed to capture the growing trends in freelancing and self-employment, making it easier for freelancers to accurately categorize their income. As the freelancing landscape evolves, the government continuously updates these codes to ensure they reflect all types of freelance work. Freelancers should keep an eye on these updates during the filing season to ensure they select the most accurate code.
Special Considerations for Bank Account Opening and Freelancers
Freelancers often face unique challenges when it comes to opening a business or professional bank account. Unlike salaried individuals, freelancers are self-employed, which can lead to complications in proving their income source. To mitigate these challenges, it’s important to maintain clear records of your freelancing income and use a business code that accurately represents your profession when filing your taxes.
Bank accounts specifically meant for business or professional use allow freelancers to separate personal and business finances. This separation can be beneficial for financial tracking, loan applications, and tax filing. Additionally, opening a professional account under the correct business code helps establish credibility and ensures smoother transactions for tax purposes.
How TaxBuddy Can Help with Business Code Selection and ITR Filing
TaxBuddy simplifies the process of selecting the correct business code by guiding you through the ITR filing process. The platform ensures that freelancers choose the appropriate code for their profession based on their income sources. With TaxBuddy’s AI-driven tools and expert assistance, freelancers can accurately file their taxes, reducing the risk of errors or penalties. TaxBuddy also offers a personalized filing experience, where freelancers can track their returns and make adjustments as needed, ensuring a smooth, hassle-free process.
Conclusion
Selecting the correct business code is essential for freelancers to ensure their Income Tax Return (ITR) is filed accurately and processed without delays. By understanding which business codes apply to their work and ensuring proper entry in the ITR form, freelancers can simplify the filing process. With updates for the Assessment Year 2025-26, freelancers have more options for accurate categorization of their profession. TaxBuddy provides valuable support in this process, ensuring a smooth and error-free filing experience. By using the right business code, freelancers can avoid penalties and optimize their tax filing. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1: What is a business code in ITR?
A business code is a numerical code used by the Income Tax Department to classify different types of business or profession for tax purposes. It helps the tax authorities determine the nature of your income and apply the appropriate tax rates and regulations. The business code you select in the ITR form ensures that your income is categorized accurately and processed accordingly.
Q2: How do I choose the correct business code for my freelancing profession?
To select the correct business code, you need to identify the specific nature of your freelancing work, such as content writing, graphic design, web development, or consulting. The ITR form provides a comprehensive list of business codes associated with various professions. Carefully review the list and choose the code that most accurately reflects the type of service you provide to ensure your tax filing is correct.
Q3: Can I change my business code if I made a mistake in filing?
Yes, if you realize that you have selected the wrong business code after submitting your ITR, you can file a revised return before the end of the assessment year. Filing a revised return allows you to correct any errors, including the business code, and ensure that your return is accurate and compliant with the regulations.
Q4: Do freelancers need to file ITR if they have low income?
Yes, freelancers are required to file an Income Tax Return (ITR) if their income exceeds the basic exemption limit, regardless of how low their income is. The basic exemption limit for individuals depends on their age and type of income. Even if a freelancer's earnings are below the taxable income threshold, filing an ITR is still mandatory to stay compliant with tax laws and report income correctly.
Q5: Can TaxBuddy help with selecting the right business code?
Yes, TaxBuddy assists freelancers in selecting the appropriate business code based on their profession. The platform simplifies the process by suggesting the best business code for your freelancing work. This ensures that your ITR is filed accurately, reducing the chances of errors and ensuring compliance with tax regulations.
Q6: How can I track the status of my ITR filing as a freelancer?
TaxBuddy provides real-time updates on the status of your ITR filing. By logging into your TaxBuddy account, you can track the progress of your return, receive notifications about its processing status, and be informed when your refund is issued, ensuring that you stay updated throughout the filing process.
Q7: What should I do if I miss selecting the correct business code?
If you accidentally select the wrong business code, you can file a revised return to correct the mistake. It's important to make this correction as soon as possible to avoid discrepancies in your tax filing, potential delays in processing, and possible penalties. Always double-check your business code before submitting your return to ensure accuracy.
Q8: How do I ensure my freelancing income is properly reported in ITR?
To ensure your freelancing income is accurately reported, make sure you categorize your income under the correct section in the ITR form. You should also report any eligible deductions, such as expenses related to your freelancing work. Selecting the correct business code ensures your income is properly categorized, and any expenses are reported correctly, minimizing the risk of errors in your filing.
Q9: Is there a penalty for incorrectly selecting a business code?
While there is no direct penalty for incorrectly selecting a business code, it can lead to errors in the calculation of your taxes, which could result in penalties, interest on unpaid taxes, or delays in processing your return. It’s crucial to choose the right code to avoid any issues and ensure a smooth filing process.
Q10: Does TaxBuddy assist with both self-filing and expert-assisted options for freelancers?
Yes, TaxBuddy offers both self-filing and expert-assisted options for freelancers. Freelancers who are comfortable with the tax filing process can choose the self-filing option, where they are guided through the process with tools and support. For those who need more help, TaxBuddy also offers expert-assisted filing, where professional tax experts guide freelancers through every step, ensuring accuracy and compliance.
Q11: How often do business codes for freelancers get updated?
Business codes are periodically updated by the government to reflect emerging professions, services, and industry trends. For the Assessment Year 2025-26, several new codes have been introduced to accommodate new freelance sectors that have gained prominence in recent years. It's important to stay updated on the latest codes to ensure that you select the correct one during your filing.
Q12: Can I file ITR using the business code if I am a first-time freelancer?
Yes, as a first-time freelancer, you must select the appropriate business code when filing your ITR. It is essential to classify your freelancing profession accurately from the beginning to avoid complications with your tax filing. Properly selecting a business code ensures that your income is categorized correctly and that your tax obligations are met without issues.
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