How Do I File My Taxes If I Am Self-Employed in India?
- Bhavika Rajput
- Jun 23
- 11 min read
Filing taxes as a self-employed individual in India requires careful planning and knowledge of the right processes. The Income Tax Department has set clear guidelines to ensure you meet your tax obligations. Let us explore the entire process, from understanding your tax regime options to choosing the appropriate ITR form. Whether you are a freelancer, consultant, or small business owner, learning how to navigate the tax filing process is crucial for compliance and financial health.
To file taxes as a self-employed individual, you need to calculate your gross income, identify eligible deductions, choose the appropriate ITR form (either ITR-3 or ITR-4), and file it online through the Income Tax Portal. Keeping track of your business expenses and making the right election between the new and old tax regimes is essential for minimizing your tax liability.
Table of Contents
Who Is Considered Self-Employed?
In India, a self-employed individual is anyone who earns income by offering goods or services and is not working under an employer. Unlike salaried individuals, self-employed people typically own and manage their businesses or work as freelancers in various professions. These include consultants, freelancers, shop owners, and professionals such as doctors, lawyers, architects, and chartered accountants.
Being self-employed means that you are directly responsible for your income generation and business operations. You are not on a fixed salary but instead receive compensation for the work you do or the products you sell. Self-employed individuals are also liable to pay taxes based on their income, and they must file tax returns annually.
Steps to File Taxes as a Self-Employed Person
Filing taxes as a self-employed individual requires a step-by-step approach to ensure compliance with the Income Tax Act, 1961. Below is a detailed breakdown of the key steps involved in the process:
Step 1: Calculate Your Gross Income
The first step in filing taxes as a self-employed person is to calculate your total income for the financial year. This includes all receipts from your business or profession. For example, if you are a freelancer, your income will be the sum of all payments you have received from clients. If you are running a business, your gross income will include all revenue generated from sales or services provided.
Besides business income, you must also consider any other income, such as interest earned on savings, dividends, or capital gains. Adding all these sources together will give you your total gross income for the year. This total is essential as it serves as the basis for calculating your taxable income.
Step 2: Identify and Deduct Eligible Business Expenses
As a self-employed individual, you are eligible to claim deductions for expenses incurred while running your business. These expenses must be directly related to earning your income. Common business expenses include:
Rent and utilities for office or workspaces
Travel expenses for business-related trips
Depreciation on business assets like computers, furniture, and machinery
Employee salaries if you hire others
Professional fees, including payments to accountants or consultants
It’s important to maintain accurate records and receipts for these expenses. Proper documentation will ensure you can claim the deductions accurately and avoid issues during tax assessments.
Step 3: Choose the Right ITR Form
Self-employed individuals typically file their taxes using either ITR-3 or ITR-4, depending on their accounting practices and income.
ITR-3: This form is used by individuals who maintain regular books of accounts and report income from multiple sources such as business, profession, capital gains, and house property.
ITR-4 (Sugam): This form is for those opting for the Presumptive Taxation Scheme under Section 44AD, 44ADA, or 44AE of the Income Tax Act. These schemes allow self-employed professionals to declare income at a prescribed rate, reducing the need to maintain detailed books of accounts.
Choosing the correct ITR form is crucial for ensuring accurate filing and compliance.
Step 4: Register and Log In to the Income Tax Portal
Once you've determined the appropriate form, you must register on the Income Tax e-filing portal (www.incometax.gov.in) if you haven’t already done so. The registration process involves creating a unique User ID (usually your PAN number) and a password. After registering, log in to the portal to begin the filing process.
Step 5: Fill and Submit the ITR Form
Once logged into the Income Tax Portal, select the appropriate assessment year (for example, AY 2025-26). The portal will guide you through filling in your ITR form. You will need to enter various details, such as:
Personal details (name, address, PAN, etc.)
Income details (gross income, business receipts, other income sources)
Eligible deductions (business expenses, tax-saving investments)
Tax credits (TDS, advance tax, etc.)
Many of these fields may be pre-filled based on the information from your Form 26AS or AIS (Annual Information Statement). Once all the details are filled in, review the information carefully for accuracy. Then, submit the form electronically.
Step 6: Calculate and Pay Tax Liability
After submitting your ITR, the portal will calculate your tax liability based on the information you provided. It will also show any tax dues you need to pay. If you have taxes pending, you can pay them using Challan 280, which is available on the Income Tax Portal.
The portal will provide options for paying taxes through various methods, including online banking, debit card, or NEFT. Ensure that you pay the taxes before the due date to avoid penalties or interest.
Step 7: Verify and Submit Your Return
After submitting your ITR form, the final step is to complete the e-verification process. You can verify your return using one of the following methods:
Aadhaar OTP: Use the OTP sent to your registered mobile number linked with Aadhaar.
Net banking: Some banks allow you to verify your return through their online banking portal.
ITR-V: If you prefer, you can download and sign the ITR-V form and send it by post to the Centralized Processing Centre (CPC) in Bengaluru within 30 days.
Once verified, your return is officially filed, and you will receive an acknowledgment from the Income Tax Department.
Latest Deadlines and News
For AY 2025-26, the deadline for self-employed individuals who do not require a tax audit has been extended to 15th September 2025, a significant change from the original deadline of 31st July 2025. This extension is due to updates in ITR forms and the introduction of new systems.
For those required to undergo a tax audit (i.e., gross receipts exceeding ₹1 crore for business or ₹50 lakh for professionals), the deadline is set for 31st October 2025.
Tax Regimes and Slabs
Tax Regimes and Slabs for FY 2024-25 (AY 2025-26)
New Tax Regime Slabs (Section 115BAC)
Income Slab (₹) | Tax Rate (%) |
Up to 3,00,000 | Nil |
3,00,001 – 7,00,000 | 5% |
7,00,001 – 10,00,000 | 10% |
10,00,001 – 12,00,000 | 15% |
12,00,001 – 15,00,000 | 20% |
Above 15,00,000 | 30% |
Old Tax Regime Slabs (FY 2024-25)
Income Slab (₹) | Tax Rate (%) |
Up to 2,50,000 | Nil |
2,50,001 – 5,00,000 | 5% |
5,00,001 – 10,00,000 | 20% |
Above 10,00,000 | 30% |
Tax Regimes and Slabs for FY 2025-26 (AY 2026-27)
New Tax Regime Slabs (Section 115BAC)
Income Slab (₹) | Tax Rate (%) |
Up to 4,00,000 | Nil |
4,00,001 – 8,00,000 | 5% |
8,00,001 – 12,00,000 | 10% |
12,00,001 – 16,00,000 | 15% |
16,00,001 – 20,00,000 | 20% |
20,00,001 – 24,00,000 | 25% |
Above 24,00,000 | 30% |
Old Tax Regime Slabs (FY 2025-26)
Income Slab (₹) | Tax Rate (%) |
Up to 2,50,000 | Nil |
2,50,001 – 5,00,000 | 5% |
5,00,001 – 10,00,000 | 20% |
Above 10,00,000 | 30% |
Key Differences in Deductions and Exemptions (FY 2024-25)
Deduction / Exemption | Old Regime Available? | New Regime (Section 115BAC) Available? |
Section 80C (PPF, ELSS, NSC, etc.) | Yes (up to ₹1.5 lakh) | No |
House Rent Allowance (HRA) | Yes | No |
Standard Deduction (Salaried) | ₹50,000 | ₹75,000 (FY 2024-25) |
Section 80D (Health Insurance) | Yes | No |
Interest on Housing Loan (Section 24) | Yes (up to ₹2 lakh) | No |
Section 80G (Donations) | Yes | No |
Leave Travel Allowance (LTA) | Yes | No |
Section 80E (Education Loan Interest) | Yes | No |
Section 80TTA/80TTB (Savings Interest) | Yes | No |
Professional Tax | Yes | No |
Transport Allowance (Specially Abled) | Yes | Yes |
Children’s Education Allowance | Yes | No |
Income from House Property Loss Set-off | Yes | No |
Additional Depreciation (Section 32) | Yes | No |
Employer’s Contribution to NPS (80CCD2) | Yes | Yes |
Suitability of New Tax Regime for Self-Employed Individuals
Feature | New Tax Regime | Old Tax Regime |
Tax Rates | Lower slab rates | Higher slab rates |
Deductions & Exemptions | Very limited; no Section 80C, 80D, HRA, etc. | Wide range of deductions and exemptions allowed |
Complexity | Simpler filing with fewer calculations | More complex due to multiple deductions and exemptions |
Benefit for Self-Employed | Beneficial if you claim few or no deductions | Better if you have significant deductible expenses or investments |
Default Regime | Default for business/profession income from FY 2024-25 | Option to opt out by filing Form 10-IEA before ITR due date |
Important Notes
The new tax regime is now the default for individuals and HUFs with business or professional income from FY 2024-25 onwards.
Taxpayers can still opt for the old regime by filing Form 10-IEA before the due date of filing the income tax return.
The standard deduction under the new regime for salaried individuals is increased to ₹75,000 for FY 2024-25 (from ₹50,000 earlier).
Some deductions like employer’s contribution to NPS (Section 80CCD(2)) and transport allowance for specially-abled persons are allowed under the new regime.
Deductions related to investments (Section 80C), health insurance (80D), home loan interest (Section 24), and others are not allowed under the new regime.
Self-employed individuals with significant deductions (e.g., home loan interest, health insurance premiums, investments) generally benefit more from the old regime.
Those with fewer deductions or investments and income mostly from business/profession may find the new regime simpler and more beneficial.
Conclusion
Filing taxes as a self-employed individual can seem like a daunting task, but breaking it down into manageable steps ensures the process remains organized and straightforward. The key to efficient tax filing lies in having a clear understanding of your income sources, business expenses, and the tax regime that best suits your financial situation. Choosing the right ITR form, maintaining accurate records of income and expenses, and keeping track of tax deadlines are all vital components of successful filing.
Self-employed individuals are also eligible for various deductions, whether under the old tax regime or the newer, simplified tax structure. By understanding these differences and how they impact your tax liabilities, you can make informed decisions about your tax filings.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience. It offers an AI-driven, user-friendly platform designed to make the tax filing process as seamless and stress-free as possible, ensuring you never miss a deadline and always file with confidence.
FAQs
Q1. What are the main differences between self-filing taxes and using a tax preparer for business taxes? Self-filing taxes involves filling out the required forms and submitting them to the Income Tax Department independently. It is cost-effective but demands a good understanding of tax laws, which can be complex for business owners. On the other hand, using a tax preparer ensures professional help in handling the tax filing process, reducing the risk of errors. A tax preparer will also help you maximize deductions and ensure compliance with the latest tax laws. However, their services come with a cost, which may not be ideal for businesses on a tight budget. The choice depends on your comfort level with tax laws and the complexity of your business finances.
Q2. How can a tax professional help me maximize my tax savings?
Tax professionals are experts in identifying tax-saving opportunities that business owners might miss. They are familiar with the latest amendments in tax laws, including exemptions, deductions, and credits. For instance, they can advise on how to take advantage of depreciation, business expense deductions, and special tax schemes like presumptive taxation. A professional can also ensure that all eligible deductions are claimed and that you don’t overlook any tax-saving strategies, ultimately lowering your overall tax liability.
Q3. What are the common mistakes businesses make when filing taxes themselves?
Some common mistakes businesses make when self-filing taxes include:
Incorrectly classifying income and expenses: Failing to properly categorize expenses can lead to missed deductions or an overstatement of taxable income.
Missing deadlines: Businesses often miss crucial deadlines for filing returns or paying taxes, leading to penalties and interest charges.
Not maintaining proper documentation: Inadequate record-keeping makes it difficult to justify deductions or income during an audit.
Ignoring tax regimes: Businesses sometimes fail to consider the benefits of choosing the old or new tax regime, resulting in a higher tax burden.
Filing with incomplete forms: Mistakes in filling out forms like ITR-3 or ITR-4 can lead to notices or penalties from the Income Tax Department.
Q4. Do I need to file taxes for my business if my revenue is below the taxable limit?
Even if your business revenue is below the taxable threshold, you may still be required to file taxes. For instance, if you have any deductions, carry forward losses, or are claiming refunds, filing is necessary. Additionally, businesses with turnover exceeding ₹2 crore (for some types of income) or ₹50 lakh (if opting for presumptive taxation) must file tax returns regardless of their taxable income. It’s important to check if your business meets these criteria to ensure compliance.
Q5. How do I choose the right ITR form for my business income?
The correct ITR form depends on your business structure and income sources. For businesses under the presumptive taxation scheme (like sections 44AD, 44ADA, and 44AE), you may need to file ITR-4. If your business income is higher and you maintain detailed books, you would typically use ITR-3. It is important to choose the right form to ensure that all applicable deductions, income, and expenses are reported accurately.
Q6. What records should I keep for business tax filing to ensure compliance?
To ensure compliance, businesses should keep records of:
Income statements (sales invoices, receipts, etc.)
Expense records (purchase invoices, receipts, etc.)
Bank statements and any documents related to financial transactions.
TDS certificates (Form 16A, etc.)
Books of accounts for businesses not under presumptive taxation.
Advance tax payment receipts and audit reports if applicable. Keeping these records ensures that your tax filing is accurate and can withstand scrutiny during audits.
Q7. How does TaxBuddy assist in making tax filing faster and more accurate?
TaxBuddy simplifies tax filing by automating key processes such as pre-filling ITR forms using PAN and Aadhaar details. It helps you select the correct ITR form based on your business type and income structure. The AI-driven platform also highlights deductions, exemptions, and tax-saving opportunities that you may otherwise miss. With the expert-assisted plans, TaxBuddy ensures that your return is error-free and compliant with the latest tax laws, saving time and reducing the chances of mistakes.
Q8. What are the most significant tax deductions available to businesses under Indian tax laws?
Some of the significant tax deductions available to businesses include:
Depreciation of assets like machinery, vehicles, and buildings.
Business expenses such as rent, utilities, and office supplies.
Interest on business loans.
Section 80G: Donations made to approved charitable organizations.
Presumptive taxation under Sections 44AD, 44ADA, and 44AE (for small businesses).
Employee benefit expenses, such as gratuity, pension, and insurance premiums.
Q9. Is it possible to file business taxes late? What are the consequences?
Yes, it is possible to file business taxes late, but there are penalties. The Income Tax Department imposes a penalty for delayed filing, and interest is charged on any unpaid tax. Additionally, a late return could trigger scrutiny from the tax authorities. It’s always advisable to file within the deadline to avoid extra costs and complications, although filing a belated return is allowed under Section 139(4).
Q10. How can I determine whether to opt for the old or new tax regime for my business?
The new tax regime (Section 115BAC) offers lower tax rates but removes most deductions and exemptions, such as the standard deduction, HRA, and NPS contributions. The old tax regime allows businesses to claim deductions and exemptions, but the tax rates are higher. To determine which regime is better for your business, you must compare the potential tax liability under both regimes. If your business has significant deductions and exemptions, the old regime might be more beneficial. However, if your tax savings from deductions are low, the new regime could result in lower tax payments.
Q11. Can I file my taxes without a PAN or Aadhaar card?
No, you cannot file taxes without a PAN (Permanent Account Number) or Aadhaar card. PAN is a mandatory requirement for tax filing in India as it helps track your financial transactions and tax payments. Aadhaar is also required for e-verification of your tax return. These two documents are crucial for ensuring that your tax filings are processed accurately and securely.
Q12. What benefits does TaxBuddy offer to freelancers and small business owners for tax filing?
TaxBuddy offers several benefits for freelancers and small business owners, including:
AI-driven tax filing that automatically fills in details and ensures compliance with tax laws.
Expert-assisted plans to help optimize your taxes and claim the maximum allowable deductions.
Seamless filing experience through an easy-to-use interface, saving you time and effort.
Post-filing support to address any notices or discrepancies with the Income Tax Department.
Affordable pricing options for freelancers and small business owners, making tax filing more accessible.
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