How to File ITR for Salary, Freelance, and Business Income

Filing an Income Tax Return (ITR) is a crucial financial responsibility for every taxpayer. With India’s evolving tax landscape, understanding the new tax regime is essential for individuals earning through salary, freelancing, or business. Choosing the right ITR form and tax-saving strategies can significantly impact your tax liability.

The new tax regime, introduced as an alternative to the old system, eliminates various deductions and exemptions in favor of lower tax rates. While it simplifies tax calculations, it may not always be the most beneficial option for all taxpayers. Understanding its impact on advance tax payments and Section 87A rebate can help optimize tax planning.

Table of Content

Overview of Income Tax Return (ITR) Filing

Understanding the New Tax Regime

ITR Filing for Salary Income

ITR Filing for Freelancers

ITR Filing for Business Income

Advance Tax and Its Role in ITR Filing

Section 87A Rebate: How to Lower Your Tax Burden

Step-by-Step Process to File ITR for Salary, Freelance, and Business Income Under the New Tax Regime

ITR Filing Deadlines and Penalties

Conclusion

FAQs

Overview of Income Tax Return (ITR) Filing

An Income Tax Return (ITR) is a document filed annually with the Income Tax Department, declaring total income, deductions, and tax liability. Filing ITR is mandatory for individuals whose income exceeds the basic exemption limit or those with other tax obligations like advance tax payments.

For individuals with salary, freelance, or business income, filing the correct ITR form ensures compliance and avoids penalties. Additionally, the new tax regime impacts how income is reported, as many traditional deductions are no longer available.

Importance of Understanding the New Tax Regime

The new tax regime aims to simplify the tax structure by offering reduced tax rates in exchange for forgoing most deductions and exemptions. However, choosing between the old and new tax regimes requires careful evaluation based on income sources and tax-saving potential.

For taxpayers earning through multiple sources like salary and freelancing, the new regime affects:

Eligibility for deductions (e.g., HRA, 80C, 80D).
Advance tax obligations based on total estimated income.
Section 87A rebate, which can lower tax liability.

Understanding the New Tax Regime

Key Features of the New Tax Regime

The new tax regime, introduced in FY 2020-21 and revised in Budget 2023, offers the following:

Lower tax rates without requiring deductions.
Higher basic exemption limit of ₹3 lakh.
Standard deduction of ₹50,000 (applicable from FY 2023-24).
Section 87A rebate extended for incomes up to ₹7 lakh.
No mandatory selection every year, once chosen for business income, it stays fixed unless changed within allowed limits.

Taxpayers earning from salary, freelancing, or business must evaluate whether lower tax rates compensate for the loss of deductions.

Comparison with the Old Tax Regime

Criteria	Old Tax Regime	New Tax Regime
Tax Rates	Higher	Lower
Deductions & Exemptions	Available (80C, HRA, etc.)	Not Available
Standard Deduction	₹50,000	₹50,000
Advance Tax Applicability	Based on taxable income	Based on total income
Section 87A Rebate	Up to ₹5 lakh	Up to ₹7 lakh
Applicability	Default	Optional

Under the old tax regime, deductions like 80C (₹1.5 lakh), 80D (health insurance), and HRA helped reduce taxable income. The new tax regime, however, eliminates these deductions but compensates with lower tax rates and an increased rebate under Section 87A.

Who Should Opt for the New Tax Regime?

The new tax regime is beneficial for taxpayers who:

Do not claim significant deductions and exemptions.
Have a straightforward salary or business income without major tax-saving investments.
Earn freelance or business income and prefer a simplified tax structure.

However, individuals who claim higher deductions (HRA, 80C, 80D, home loan interest, etc.) may find the old tax regime more beneficial despite its higher tax rates.

Choosing the right tax regime depends on income composition, deductions, and long-term financial goals. Taxpayers should calculate their tax liability under both regimes before making a decision.

ITR Filing for Salary Income

Filing an Income Tax Return (ITR) for salary income under the new tax regime is relatively straightforward, as the regime eliminates most deductions and exemptions. However, salaried taxpayers must carefully assess whether the new regime benefits them compared to the old regime before making their choice.

Applicable ITR Form for Salaried Individuals

Salaried individuals need to file their ITR using one of the following forms:

ITR-1 (Sahaj): Applicable if total income is up to ₹50 lakh from salary, one house property, and other sources (excluding lottery winnings and income from racehorses).
ITR-2: Required if income exceeds ₹50 lakh or includes capital gains.
ITR-3: Needed if the salaried taxpayer also has business or professional income.

Exemptions and Deductions (or Lack Thereof) Under the New Regime

Unlike the old tax regime, the new tax regime does not allow common exemptions and deductions such as:

House Rent Allowance (HRA)
Leave Travel Allowance (LTA)
80C investments (e.g., EPF, PPF, LIC premiums)
80D deductions for health insurance
Standard deduction of ₹50,000 (previously unavailable but reintroduced in Budget 2023)

Since the new tax regime has lower tax rates, it may be beneficial for individuals who do not claim significant deductions.

Advance Tax Requirement for High-Salary Earners

Salaried employees usually have tax deducted at source (TDS) by their employers, making advance tax payments unnecessary.
However, if a salaried individual has additional income (e.g., rental income, capital gains, or interest exceeding ₹10,000) and the total tax liability exceeds ₹10,000 after considering TDS, advance tax payments must be made in installments as per the schedule.
Failure to pay advance tax results in interest penalties under Sections 234B and 234C.

ITR Filing for Freelancers

Freelancers earning income from multiple sources must ensure compliance with tax laws, including advance tax payments and presumptive taxation schemes, to avoid penalties and simplify tax calculations.

Choosing the Right ITR Form for Freelance Income

ITR-3: Required if freelancers maintain books of accounts and report actual profits and expenses.
ITR-4 (Sugam): Suitable if the freelancer opts for presumptive taxation under Section 44ADA, which allows taxation on 50% of gross receipts without maintaining detailed books.

Applicability of Presumptive Taxation (Section 44ADA)

Under Section 44ADA, professionals (e.g., consultants, designers, IT developers) can declare 50% of their gross receipts as taxable income if their total earnings do not exceed ₹75 lakh.
This scheme simplifies tax compliance, as freelancers do not need to maintain extensive records of expenses.
Freelancers opting for this scheme cannot claim additional deductions on actual expenses.

Advance Tax Liability for Freelancers

Since no TDS is deducted from freelance earnings (except in specific cases where clients deduct TDS under Section 194J), freelancers must self-assess their tax liability and pay advance tax in quarterly installments if the total tax due exceeds ₹10,000.
The advance tax schedule is:
- 15th June: 15% of total tax liability
- 15th September: 45%
- 15th December: 75%
- 15th March: 100%
For freelancers under presumptive taxation, the entire advance tax amount must be paid by 15th March instead of quarterly installments.

Section 87A Rebate for Freelancers

Freelancers with a taxable income up to ₹12 lakh (under the new tax regime) can claim a rebate of up to ₹60,000 under Section 87A, reducing their tax liability to zero.
This rebate applies only to resident individuals and does not cover income taxed at special rates, such as capital gains.
If a freelancer qualifies for the rebate, they may not be required to pay advance tax if their total post-rebate tax liability falls below ₹10,000.

By leveraging presumptive taxation, advance tax planning, and Section 87A rebate, freelancers can simplify tax filing and optimize savings under the new tax regime.

ITR Filing for Business Income

For business owners, filing Income Tax Returns (ITR) under the new tax regime requires an understanding of the applicable tax rules, forms, and compliance requirements. Unlike salaried individuals, businesses have additional considerations such as presumptive taxation, advance tax obligations, and deductions that influence their tax liability.

Selecting the Correct ITR Form for Business Owners

Business owners must choose the right ITR form based on their income type and structure:

ITR-3: For individuals and HUFs running a proprietorship business or earning income from a partnership firm (excluding those opting for presumptive taxation).
ITR-4 (Sugam): For individuals, HUFs, and firms (except LLPs) who opt for presumptive taxation under Sections 44AD, 44ADA, or 44AE.

Choosing the Right Form:

If your business turnover is below ₹3 crore and you wish to use presumptive taxation, ITR-4 is the easiest option.
If you maintain books of accounts and do not opt for presumptive taxation, ITR-3 is required.

Presumptive Taxation Under Section 44AD

What is Presumptive Taxation?

Section 44AD allows small businesses (except those in professions) to declare profits at a fixed percentage of turnover instead of maintaining detailed books.

Eligibility for Section 44AD:

Turnover ≤ ₹3 crore (increased from ₹2 crore under the new regime).
Applicable only to resident individuals, HUFs, and partnerships (LLPs are excluded).
Businesses engaged in trading, manufacturing, or services (except professions like legal, medical, or consultancy).

Presumed Income Calculation:

6% of turnover (if all receipts are digital).
8% of turnover (for cash transactions).
No need to maintain books of accounts or audit if opting for presumptive taxation.

Example: If a business earns ₹50 lakh in annual revenue, tax is calculated on ₹3 lakh (6%) or ₹4 lakh (8%), regardless of actual profits.

Advance Tax Payments and Compliance

Business owners not opting for presumptive taxation must pay advance tax in installments throughout the year if their tax liability exceeds ₹10,000.

Key Rules:

Advance tax applies to businesses not covered under Section 44AD or those with higher taxable income after deductions.
If a business owner opts out of presumptive taxation, books of accounts must be maintained, and advance tax must be paid based on actual income.

Presumptive Taxation & Advance Tax:

Businesses opting for Section 44AD need to pay the full advance tax amount by 15 March (instead of quarterly payments).

Tax Planning and Section 87A Benefits for Small Businesses

Section 87A provides a rebate of up to ₹25,000 for eligible taxpayers under the old regime and ₹60,000 under the new tax regime (for income up to ₹12 lakh).

How Business Owners Can Benefit:

If the taxable income after deductions and presumptive taxation falls below ₹12 lakh, the rebate can reduce tax liability to zero.
Small businesses can optimize tax payments by structuring revenue under the presumptive scheme to stay within the rebate limits.

Example:

Business income after deductions = ₹12 lakh.
Tax payable under the new regime = ₹60,000.
Section 87A rebate = ₹60,000.
Net tax payable = ₹0.

Advance Tax and Its Role in ITR Filing

Advance tax is a prepaid tax system that helps businesses distribute tax payments over the financial year rather than paying a lump sum at the end. It applies to individuals, freelancers, and businesses with tax liability exceeding ₹10,000 in a financial year.

Who Needs to Pay Advance Tax?

Business owners with income tax liability exceeding ₹10,000.
Individuals earning from business, freelancing, or investments.
Not required for senior citizens (aged 60+) without business income.
Exemptions: Businesses under presumptive taxation only need to pay once by 15 March.

Advance Tax Due Dates and Payment Schedule

For Regular Taxpayers (Not Under Presumptive Scheme):

Due Date	% of Tax Payable
15 June	15%
15 September	45%
15 December	75%
15 March	100%

For Businesses Under Presumptive Taxation (Section 44AD/44ADA):

Full payment by 15 March of the financial year.

Penalties for Non-Payment or Late Payment

Failing to pay advance tax on time results in interest under Sections 234B and 234C:

Section 234B: Interest @ 1% per month if total advance tax paid is less than 90% of total tax liability.
Section 234C: Interest @ 1% per month for delay in each installment.

Example:If a business owner has a tax liability of ₹1,00,000 but pays only ₹80,000 as advance tax, the remaining ₹20,000 will attract interest under Section 234B.

Section 87A Rebate: How to Lower Your Tax Burden

The Section 87A rebate is a powerful tool that reduces the tax burden for individuals earning within a certain threshold. Under the new tax regime, this rebate can significantly lower your overall tax liability, potentially reducing it to zero if your taxable income falls within the eligible range. Understanding how it works and its interaction with advance tax can help taxpayers optimize their savings.

Eligibility Criteria Under the New Tax Regime

To claim the Section 87A rebate under the new tax regime, you must meet the following conditions:

You must be a resident individual (HUFs, firms, and companies are not eligible).
Your total taxable income must not exceed ₹12 lakh (as per the latest Union Budget updates).
The rebate is applicable only under the new tax regime. Individuals filing under the old tax regime cannot claim this benefit.
The rebate does not apply to special-category incomes such as short-term capital gains (STCG) under Section 111A or long-term capital gains (LTCG) under Section 112.

Maximum Rebate Allowed for Salary, Freelance, and Business Incomes

The maximum rebate available under Section 87A is ₹60,000 for individuals whose taxable income is ₹12 lakh or below. This means that:

If your calculated tax liability is ₹60,000 or less, the rebate reduces it to zero.
If your tax liability exceeds ₹60,000, you must pay the remaining amount after applying the rebate.

Example Calculations

Taxable Income	Tax Payable (Before Rebate)	Rebate (₹)	Final Tax Payable
₹7,00,000	₹25,000	₹25,000	₹0
₹9,00,000	₹45,000	₹45,000	₹0
₹12,00,000	₹60,000	₹60,000	₹0
₹12,50,000	₹62,500	₹60,000	₹2,500

This rebate is highly beneficial for salaried individuals, freelancers, and small business owners whose taxable income falls within the eligible range.

How the Rebate Interacts with Advance Tax Obligations

If you qualify for the Section 87A rebate, it directly impacts your advance tax liability. Since advance tax is payable only if your total tax liability exceeds ₹10,000, the rebate can potentially exempt you from advance tax payments.

Example

A freelancer with an estimated taxable income of ₹11,50,000 has a pre-rebate tax liability of ₹57,500. Since this is within the rebate limit, the final tax payable becomes ₹0, and no advance tax is required.
A business owner earning ₹13,00,000 has a tax liability of ₹70,000. After applying the ₹60,000 rebate, the final tax payable is ₹10,000, meaning they must pay advance tax.

Taxpayers must carefully calculate their expected income and tax liability to determine if advance tax applies to them.

Step-by-Step Process to File ITR for Salary, Freelance, and Business Income Under the New Tax Regime

Filing your Income Tax Return (ITR) correctly ensures compliance and avoids penalties. Below is a structured guide to completing the process smoothly.

Documents Required for Filing

Before filing your ITR, ensure you have the following documents:

PAN Card: Mandatory for ITR filing.
Aadhaar Card: Required for e-verification.
Form 16 (For Salaried Individuals): Issued by employers, showing salary details and TDS deductions.
Form 26AS: Tax credit statement showing tax deducted at source (TDS).
Bank Statements: To verify interest income and other financial transactions.
Freelance/Business Income Documents: Invoices, profit/loss statements, and GST details (if applicable).
Investment Proofs: Details of tax-saving investments (if applicable under the old tax regime).
Advance Tax Payment Receipts: If advance tax was paid.

Online ITR Filing Process on the Income Tax Portal

Filing ITR online is a straightforward process using the Income Tax e-Filing Portal. Follow these steps:

Login to the Income Tax Portal
- Visit https://www.incometax.gov.in/ and log in using your PAN and password.
Select the ‘File Income Tax Return’ Option
- Choose the assessment year (e.g., AY 2025-26).
Select the Appropriate ITR Form
- ITR-1: Salaried individuals with no business income.
- ITR-3: Freelancers and business owners with income exceeding presumptive limits.
Enter Income Details
- Upload Form 16 for salaried individuals.
- Enter income from freelance or business sources manually.
Claim Deductions & Tax Rebates
- Select the new tax regime (if applicable) and verify the Section 87A rebate eligibility.
Verify Tax Calculation
- Ensure no additional tax is due before submission.
Submit the Return and Verify It
- E-verify using Aadhaar OTP, net banking, or digital signature.

Common Errors to Avoid While Filing

Incorrect ITR Form Selection: Choosing the wrong form can lead to rejection.
Not Reporting All Income Sources: Salary, freelance, business, or interest income must be included.
Incorrect Bank Account Details: This may delay tax refunds.
Ignoring Advance Tax Payments: Missing advance tax obligations can result in penalties.
Not E-Verifying the ITR: Filing is incomplete without verification.

ITR Filing Deadlines and Penalties

Due Dates for Different Taxpayers

Taxpayer Type	ITR Due Date
Salaried Individuals & Freelancers	31st July of the assessment year
Businesses Requiring Audit	31st October of the assessment year

Consequences of Late Filing

Filing your ITR after the deadline can lead to:

Late Filing Penalty: ₹1,000 to ₹5,000 depending on delay.
Interest on Due Tax: 1% per month under Section 234A.
Loss of Refunds: Delayed filings can lead to processing delays in tax refunds.

How to Revise Your Return If Needed

If you make errors in your filed ITR, you can revise it by:

Logging into the e-Filing Portal.
Selecting ‘File Revised Return’ (Under Section 139(5)).
Correcting Errors and Resubmitting the Return.

The last date to revise your ITR is 31st December of the assessment year.

Conclusion

Filing ITR under the new tax regime requires a strategic approach, especially for those with salary, freelance, and business income. The Section 87A rebate can significantly reduce tax liability, and understanding advance tax obligations ensures compliance. By preparing documents in advance, filing on time, and avoiding common errors, taxpayers can streamline the process and avoid penalties.

FAQs

Q1. What are the major differences between the old and new tax regimes?

The old tax regime allows taxpayers to claim various deductions and exemptions, such as HRA, 80C, 80D, and others, reducing taxable income. In contrast, the new tax regime offers lower tax rates but removes most exemptions and deductions. Taxpayers must choose the regime that benefits them based on their income and eligible deductions.

Q2. Can salaried employees claim HRA and standard deduction under the new regime?

Under the new tax regime, HRA and most exemptions (such as LTA) are not available. However, the ₹50,000 standard deduction for salaried individuals and pensioners was introduced in Budget 2023 and is applicable under both tax regimes.

Q3. Do freelancers need to register a business entity to file ITR?

No, freelancers do not need to register a business entity. They can file their ITR as individuals under ITR-3 (if maintaining books of accounts) or ITR-4 (if opting for presumptive taxation under Section 44ADA). Registering a business entity (like an LLP or Pvt Ltd) is optional but may have additional tax and compliance benefits.

Q4. How does presumptive taxation help freelancers and business owners?

Presumptive taxation under Section 44ADA (for professionals) and Section 44AD (for businesses) simplifies tax filing by allowing taxpayers to declare a fixed percentage of their gross income as taxable profit instead of maintaining detailed books of accounts. This reduces compliance burden and allows for a lower taxable income in many cases.

Q5. What happens if I don’t pay advance tax on time?

Failure to pay advance tax results in interest penalties under Sections 234B and 234C.

Section 234B: If at least 90% of total tax liability is not paid before 31st March, interest at 1% per month is levied.
Section 234C: If advance tax installments are delayed, interest is charged at 1% per month on the unpaid amount.

Q6. Can I claim the Section 87A rebate if I have multiple sources of income?

Yes, you can claim the Section 87A rebate as long as your total taxable income (after deductions but before rebates) does not exceed ₹12 lakh (as per the latest update for FY 2025-26) and your income does not include special-rate capital gains (such as short-term capital gains under Section 111A).

Q7. Which ITR form should I use for salary and freelance income combined?

If you have both salary and freelance income:

Use ITR-3 if you maintain books of accounts.
Use ITR-4 if you opt for presumptive taxation under Section 44ADA (for professionals).

Q8. Are GST and income tax filings linked for business owners?

While GST and income tax are separate filings, they are cross-verified by the Income Tax Department. Mismatches between GST turnover and income declared in ITR can lead to scrutiny or tax notices. Businesses must ensure consistency in reported income across both filings.

Q9. Is it mandatory to file ITR if my income is below the taxable limit?

ITR filing is not mandatory if your total income (before deductions) is below the taxable limit. However, filing is recommended if:

You want to claim a refund of TDS deducted by banks or employers.
You need an income proof for loans, visas, or financial purposes.
Your gross income exceeds ₹2.5 lakh (for individuals under 60), ₹3 lakh (for seniors), or ₹5 lakh (for super seniors) but is reduced below the taxable limit after deductions.

Q10. Can I switch between the old and new tax regimes every year?

Salaried individuals can switch between the old and new tax regimes every year while filing their ITR.
Business owners and freelancers opting for the new tax regime must continue with it unless they opt out (once opted out, they cannot return to the new regime).

Q11. How do I correct mistakes in my ITR after submission?

If you make an error in your ITR, you can file a revised return under Section 139(5) before 31st December of the relevant assessment year. The revised return replaces the original one, and the latest filed return will be considered final.

Q12. What happens if I miss the ITR filing deadline?

If you miss the ITR filing deadline:

You can still file a belated return under Section 139(4) before 31st December of the relevant assessment year.
A late filing fee of ₹1,000 (if income < ₹5 lakh) or ₹5,000 (if income > ₹5 lakh) will be charged.
If you don’t file by the due date, interest under Section 234A will be levied at 1% per month on any unpaid tax.

File Your ITR now