Freelancer or Side Hustler? TaxBuddy Simplifies Your ITR Filing in 2025
- Asharam Swain
- Sep 2
- 8 min read
Freelancers and side hustlers form a growing segment of India’s workforce, contributing significantly to the gig economy. With increasing income sources,filing taxescorrectly has become essential to avoid penalties, ensure compliance, and plan finances efficiently. Understanding the tax obligations for both freelancers and side hustlers is crucial, as their income structures, eligible deductions, and reporting requirements can differ from salaried employees. Proper guidance and reliable tools simplify the filing process, helping taxpayers manage deadlines, claim appropriate deductions, and reduce errors. Platforms like TaxBuddy provide a seamless solution for freelancers and side hustlers to file their ITR accurately and efficiently, making compliance easier even with multiple income streams.
Table of Contents
Defining Freelancer vs Side Hustler
Freelancers are independent professionals who provide specialized services directly to clients without being tied to a single employer. They may operate in fields like IT consulting, software development, content writing, graphic design, digital marketing, photography, or other project-based services. Freelancers often handle multiple clients at the same time, setting their own rates and timelines. Their income is generally received on a per-project, hourly, or monthly retainer basis. Freelancers are responsible for managing their own taxes, maintaining invoices, and keeping proper records of earnings and expenses. For tax purposes, their earnings are typically treated as professional or business income, depending on the nature and scale of their work.
A side hustler, in contrast, is someone who earns supplemental income alongside a primary job or source of income. This could include selling handmade crafts, operating an online store, offering tutoring, or providing freelance services in addition to a full-time role. The scale and frequency of these activities often determine how the income is classified for taxation purposes. For example, occasional sales might be treated as casual income, while a regular, structured side business could be considered business income. Understanding this distinction is essential for accurate tax reporting, eligibility for deductions, and compliance with income tax regulations.
Correctly classifying income as either freelance or side hustle helps in choosing the right ITR form, claiming relevant deductions, and avoiding scrutiny or penalties from the tax authorities. It also ensures proper calculation of advance tax obligations if applicable.
Tax Filing Forms for Freelancers and Side Hustlers in 2025
For the Financial Year (FY) 2024-25, freelancers and individuals running side hustles need to carefully select the appropriate Income Tax Return (ITR) form to ensure compliance with the Income Tax Act and avoid complications. The two primary forms applicable for this category are ITR-3 andITR-4, each designed for different types of income and reporting requirements.
ITR-3 is meant for individuals and Hindu Undivided Families (HUFs) who earn income from a business or profession and maintain regular accounting records. Freelancers whose earnings exceed the threshold for presumptive taxation, or those with more complex sources of business income, should use ITR-3. This form allows detailed reporting of revenue, expenses, and professional deductions, ensuring transparency and proper documentation for both tax computation and potential audits.
ITR-4, on the other hand, is designed for individuals and professionals opting for presumptive taxation under Section 44ADA (for professionals) orSection 44AE (for small transport businesses). This form is suitable for freelancers or side hustlers whose turnover is below the prescribed limits—₹50 lakh for services under 44ADA and ₹2 crore for certain business activities under 44AE. Filing ITR-4 simplifies the process, as income is calculated on a presumptive basis, reducing the need for detailed bookkeeping.
Selecting the right ITR form is crucial. Using the incorrect form can result in processing delays, mismatched refunds, or even notices from the Income Tax Department. Proper selection ensures smooth filing, timely refunds, and compliance with all applicable tax provisions. Freelancers and side hustlers are advised to evaluate their income, business structure, and accounting practices before finalizing the ITR form for FY 2024-25.
Deductions and Expenses
Freelancers and side hustlers can claim various deductions to reduce taxable income. Business-related expenses like office rent, software subscriptions, professional tools, internet, and travel costs are deductible. Contributions to retirement schemes like NPS or eligible insurance premiums under Section 80C, 80D, and other sections can also be claimed. Maintaining proper invoices and receipts is essential to substantiate these expenses and prevent mismatches during scrutiny.
Common Tax Filing Challenges
Freelancers and side hustlers often encounter unique challenges when it comes to filing their Income Tax Returns (ITR) due to the diverse nature of their income sources and the complexity of applicable tax laws. One of the primary difficulties is tracking multiple income streams. Freelancers may earn income from different clients, platforms, or even from overseas, which requires meticulous record-keeping to ensure all earnings are reported accurately. Missing even a single income entry can trigger discrepancies during assessment and may lead to penalties or notices from the Income Tax Department.
Another common challenge is confusion over eligible deductions and tax exemptions. Freelancers often invest in work-related expenses, subscriptions, software tools, or equipment, and understanding which expenses qualify for deductions under Sections like 80C, 80D, or 80G is critical. Misinterpreting these provisions can result in missed tax savings or rejected claims during processing.
The correct selection of ITR forms is also crucial. Depending on income type—salary, freelance, capital gains, or business income—choosing an inappropriate ITR form can lead to errors or the need to file a revised return.
Calculating advance tax and TDSliability is another hurdle, as freelancers may need to estimate quarterly payments accurately to avoid interest or penalties for late payments.
Finally, ensuring proper documentation for all claimed expenses and income is essential. Without invoices, bills, or payment proofs, deductions can be disallowed, and refunds may be delayed.
If these challenges are not carefully managed, freelancers risk errors, penalties, or delayed refunds, making it vital to maintain organized records, use reliable accounting tools, and seek professional guidance when needed.
How TaxBuddy Simplifies ITR Filing for Freelancers and Side Hustlers
TaxBuddy provides an AI-driven, seamless platform for filing ITR. Freelancers and side hustlers can easily upload income details, expense receipts, and investment proofs. TaxBuddy automatically selects the correct ITR form, calculates taxable income, and applies eligible deductions. The platform also ensures timely filing, provides reminders for advance tax, and helps track refunds efficiently. With both self-filing and expert-assisted plans,TaxBuddyaccommodates users of all comfort levels.
Is Presumptive Taxation Allowed in New Tax Regime?
Yes, freelancers, consultants, and side hustlers can choose presumptive taxation under Section 44ADA even when opting for the new tax regime, provided their professional receipts do not exceed ₹50 lakh in a financial year. This scheme is designed to simplify tax compliance for small professionals who may not maintain detailed books of accounts. Under Section 44ADA, 50% of the total receipts are deemed taxable income, while the remaining 50% is considered as expenses. This drastically reduces the burden of record-keeping, accounting, and tax computation for eligible professionals.
For example, if a freelancer earns ₹30 lakh in a year, only ₹15 lakh will be taxable under the presumptive scheme, streamlining both filing and tax payment. TaxBuddy assists taxpayers in opting for this scheme correctly, ensuring all eligibility criteria are met and TDS or advance tax payments are accurately calculated. The platform guides users through seamless ITR filing, highlighting compliance limits and reducing the risk of errors or penalties.
This approach not only saves time but also helps optimize tax liability while staying fully compliant with the Income Tax Act.
Tips for Smooth Filing with TaxBuddy
Filing your Income Tax Return can be straightforward and error-free if approached systematically. One of the most effective steps is to keep digital copies of all invoices, receipts, and supporting documents for business expenses. Maintaining organized records of payments, bills, and investments ensures you can easily validate deductions and exemptions while avoiding last-minute searches or mismatched entries.
Another essential practice is to update your income records regularly throughout the financial year. Keeping track of all sources of income—including salary, business receipts, freelance earnings, and capital gains—helps maintain accurate reporting. This also reduces the chances of errors when consolidating income data during filing.
Using TaxBuddy’s guided workflow can greatly simplify ITR preparation. The platform walks you through each step of the filing process, from selecting the correct ITR form to claiming eligible deductions. This feature ensures that you do not miss any crucial sections and helps streamline the entire filing experience.
If you feel uncertain about deductions, presumptive taxation, or the choice of ITR form, it’s advisable to opt for expert-assisted filing. TaxBuddy provides professional guidance to ensure compliance and optimize tax savings without the stress of navigating complex rules alone.
Finally, always verify TDS (Tax Deducted at Source) and advance tax payments before submitting your return. Confirming that these entries are correctly reflected in your Form 26AS or Tax Credit Statement prevents discrepancies that can delay refunds or trigger notices from the Income Tax Department.
Following these steps not only reduces filing errors but also helps accelerate refund processing, giving you peace of mind and a smoother, hassle-free tax experience.
Conclusion
Freelancers and side hustlers can navigate the complexities of tax filing efficiently with the right tools and knowledge. Platforms like TaxBuddy simplify the process by providing accurate calculations, automatic form selection, and guidance for deductions and presumptive taxation. For anyone looking for assistance in filing taxes as a freelancer or side hustler, it is highly recommended todownload the TaxBuddy mobile appfor a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options? A. TaxBuddy offers flexible options to suit different comfort levels. Freelancers and side hustlers can choose self-filing, which allows them to complete their ITR using the platform’s AI-guided interface, or opt for expert-assisted filing, where professionals handle the process end-to-end. This ensures both beginners and those seeking professional guidance can file accurately and on time.
Q2. Which ITR form should a freelancer or side hustler use? A. The choice of ITR form depends on your income type and accounting method. Freelancers maintaining detailed accounts and books should use ITR-3, while those who prefer presumptive taxation under Section 44ADA can use ITR-4, which simplifies reporting by allowing income to be declared as a percentage of gross receipts.
Q3. Can side hustlers claim home office expenses? A. Yes. Expenses that are directly linked to your business operations, such as rent, utilities, internet, and office supplies, can be claimed. Keeping proper records and invoices ensures these deductions are accepted during filing or any future scrutiny.
Q4. Is presumptive taxation allowed under the new tax regime? A. Yes. Under Section 44ADA, professionals earning up to ₹50 lakh per year can adopt presumptive taxation. This simplifies compliance by calculating taxable income as a fixed percentage of gross receipts, eliminating the need for complex accounting.
Q5. How can I ensure accurate TDS reporting? A. Accurate TDS reporting begins with verifying Form 26AS, which reflects the TDS deducted by clients or employers. Cross-check these details against your client invoices or payment receipts to ensure there are no mismatches before filing.
Q6. Can TaxBuddy track advance tax payments? A. Yes. TaxBuddy helps freelancers and side hustlers calculate their advance tax obligations based on estimated income. It sends reminders for due dates, minimizing the risk of penalties for underpayment.
Q7. Are investment-related deductions applicable to freelancers? A. Absolutely. Freelancers can claim deductions under Sections 80C, 80D, 80E, and other eligible provisions. Investments like PPF, life insurance premiums, health insurance, or education loans can reduce taxable income and optimize your tax liability.
Q8. What happens if I miss the filing deadline? A. Late filing triggers penalties and interest under the Income Tax Act. Additionally, refunds may be delayed, and in some cases, belated returns are subject to restrictions on carrying forward losses. Filing on time ensures smooth processing and avoids unnecessary complications.
Q9. Can I file a revised return if I made errors? A. Yes. TaxBuddy allows freelancers and side hustlers to file revised returns within the permissible period underSection 139(5). Correcting errors in income, deductions, or TDS details ensures your tax records are accurate and prevents issues during scrutiny.
Q10. Is it necessary to maintain invoices digitally? A. Maintaining digital copies of invoices and receipts is highly recommended. It simplifies verification, ensures all claims are backed by evidence, and reduces the chances of disputes during assessment or scrutiny.
Q11. Does TaxBuddy help with presumptive taxation calculations? A. Yes. TaxBuddy automatically calculates presumptive income under Section 44ADA and incorporates it in the ITR. This ensures accurate reporting, eliminates manual errors, and saves time, especially for freelancers with multiple clients.
Q12. Can I file ITR for multiple side hustles in one return? A. Yes. All business or professional income from multiple side hustles can be aggregated in a single ITR. TaxBuddy allows easy entry of multiple income sources, automatically calculates total taxable income, and ensures deductions and TDS are correctly applied across sources.
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