How to Report Multiple Freelance Projects in One Income Tax Return
- PRITI SIRDESHMUKH
- Jul 29
- 9 min read
Freelancers, whether they are providing services in design, writing, programming, or consulting, have a unique set of challenges when it comes to tax filing. Unlike salaried employees who receive Form 16 from their employer, freelancers need to manage their own income reporting, deductions, and tax filings. With the Financial Year 2024-25 (Assessment Year 2025-26) approaching, it's crucial for freelancers to understand how to properly report their freelance income in the Income Tax Return (ITR) to ensure compliance and avoid penalties. One of the most important things freelancers need to consider is how to organize their various sources of income, ensure deductions are accurately applied, and file their returns in an efficient way.
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How to Report Freelance Projects in One Income Tax Return
When filing your Income Tax Return (ITR) as a freelancer, the first step is to categorize your income correctly. Freelancers typically earn income through multiple sources, such as clients, projects, or business activities. To report freelance income accurately, here are the steps you should follow:
Determine the Correct ITR Form: Freelancers must file ITR-3 or ITR-4, depending on their tax regime and business classification. ITR-3 is for individuals and HUFs who earn income through a business or profession. On the other hand, ITR-4 applies to taxpayers opting for the presumptive taxation scheme under Section 44AD, 44ADA, or 44AE.
Report Freelance Income under "Profits and Gains of Business or Profession": Freelancers need to report their income under the "Profits and Gains of Business or Profession" section in their ITR. This section requires you to input the total income earned, including payments for your services, freelance projects, or any contract work you have completed.
Account for Expenses: Freelancers are allowed to claim expenses that are directly related to their work, such as the cost of materials, software subscriptions, office rent, internet bills, travel expenses for business purposes, etc. You need to keep track of all receipts and records of such expenses and report them in the appropriate section.
Include Other Income: If you have additional sources of income, such as interest income, rental income, or dividends, make sure to report them separately in the relevant sections of the return.
Paying Advance Tax: Freelancers often have to pay advance tax, which is due quarterly. Ensure you have paid the appropriate advance tax installments and report them under the section for advance tax payment in your ITR.
How TaxBuddy Simplifies Freelance Income Reporting
Filing taxes as a freelancer can be complex, but platforms like TaxBuddy streamline the entire process. Here’s how TaxBuddy helps:
AI-Driven Tax Filing: TaxBuddy uses AI-powered tools to simplify tax filing. The platform automatically calculates your total income from freelance projects, applies deductions, and generates the required forms for filing your ITR.
Expense Tracking and Deduction Assistance: TaxBuddy helps you track your eligible business expenses throughout the year. It categorizes your expenses, ensuring that you don't miss out on any tax-saving deductions. The platform also provides guidance on what qualifies as a deductible expense, ensuring compliance with tax laws.
Pre-Filled ITR Forms: TaxBuddy pre-fills ITR forms with relevant data from your freelance income and expenses, making the filing process faster and reducing the chances of errors. It ensures that your ITR is filed accurately, with all the required details.
Expert Assistance: If you are unsure about any aspect of filing, TaxBuddy offers expert assistance. Tax professionals can help clarify any doubts and guide you in claiming all applicable deductions, reducing the chances of errors or missed opportunities.
Faster Refund Processing: TaxBuddy helps you file your ITR on time, ensuring that you get your refunds faster. With accurate filing and minimized errors, your refund is processed quickly, ensuring a smooth experience.
Addressing Specific FAQs
Freelance income reporting often raises specific, long-tail questions that can be confusing. Here are some frequently asked questions about reporting freelance income and how to handle them effectively:
What if I have freelance income from multiple sources? It is essential to combine all freelance income from various sources into a single total amount under "Income from Business or Profession." Each project or client will likely contribute to different amounts, but for tax reporting, they should be aggregated.
Can I claim deductions for freelance-related expenses? Yes, you can claim deductions for expenses that are directly related to your freelance work. This may include travel expenses, office supplies, and any professional fees you incur to maintain or grow your freelance business.
Do I need to maintain books of accounts? If your gross income exceeds ₹2.5 lakh from freelancing, you are required to maintain books of accounts and get them audited. However, if you opt for the presumptive taxation scheme under Section 44ADA, you are not required to maintain detailed books of accounts, provided your income is less than ₹50 lakhs.
What is the presumptive tax scheme under Section 44ADA? Freelancers whose income is below ₹50 lakhs can opt for the presumptive taxation scheme under Section 44ADA. This allows for a simplified taxation process, where 50% of your gross receipts are deemed to be your income, and the rest is considered as business expenses.
Conclusion
Filing taxes as a freelancer doesn’t have to be a daunting task. By following the right steps, you can easily report your freelance income and ensure that your tax return is accurate and compliant. With platforms like TaxBuddy, the entire process becomes significantly easier. From selecting the correct ITR form to claiming deductions and ensuring accurate reporting, TaxBuddy streamlines freelance tax filing. For anyone looking to simplify their tax filing process, it is highly recommended to download theTaxBuddy mobile app for a hassle-free, secure, and efficient experience.
Frequently Asked Question (FAQs)
Q1: Can I claim deductions for my home office expenses as a freelancer?
Yes, freelancers can claim deductions for home office expenses, as long as they are directly related to freelance work. These expenses may include a portion of rent, electricity bills, internet costs, and other utilities used in the home office. To claim these deductions, you need to establish that the space is exclusively used for work purposes. The deduction is generally calculated based on the proportion of your home used for business—such as the size of the office relative to the overall size of the home. Keep in mind that proper documentation, such as bills and receipts, is required to substantiate your claim. TaxBuddy can guide you through claiming these deductions, ensuring you comply with tax regulations.
Q2: What should I do if I receive income in foreign currency for my freelance work?
When you receive freelance income in foreign currency, you must convert the amount into Indian Rupees (INR) using the exchange rate applicable on the date of receipt. The Income Tax Department mandates that foreign income be reported in INR, and the conversion rate used should be from a recognized source, such as the Reserve Bank of India (RBI). TaxBuddy can help you with currency conversion and ensure that the foreign income is reported accurately on your tax return, in compliance with Indian tax regulations.
Q3: How do I file taxes if I have freelance income from both Indian and international clients?
If you have freelance income from both Indian and international clients, you are required to report all income in your ITR, irrespective of the source. Both Indian and foreign income are combined in the same tax return, and the income must be reported under the appropriate sections. Income from international clients should be converted to INR at the prevailing exchange rate on the date of receipt. TaxBuddy's platform ensures that all income sources are accurately combined and reported, making the filing process simple and efficient. Additionally, TaxBuddy will assist you with any deductions, exemptions, or credits you may be eligible for based on your total income.
Q4: Do I need to maintain records for my freelance income and expenses?
Yes, maintaining accurate records for both your freelance income and business-related expenses is essential. These records will support your deductions and ensure that you can justify your claims if you are ever audited by the tax authorities. It’s important to keep track of receipts, invoices, bank statements, and any other financial documents related to your freelance work. Proper documentation is critical for claiming deductions such as home office expenses, travel expenses, and professional services. TaxBuddy provides tools to help you track your income and expenses and offers guidance on the required documentation for tax filing.
Q5: Is the presumptive taxation scheme under Section 44ADA beneficial for me?
The presumptive taxation scheme under Section 44ADA is beneficial for freelancers whose gross receipts do not exceed ₹50 lakhs in a financial year. Under this scheme, you are allowed to claim 50% of your gross receipts as business expenses, simplifying the process. This means you don’t need to maintain detailed books of accounts or submit supporting documents for business expenses. Instead, the scheme allows for a standard deduction of 50%, reducing your taxable income. TaxBuddy can help you determine if this scheme is the best option for your situation, based on your income and expenses, and guide you through the process.
Q6: How do I report income from multiple freelance projects?
When reporting income from multiple freelance projects, you need to aggregate all income from various clients into one sum and report it under the appropriate section of the Income Tax Return (ITR). Each project or client’s income is typically categorized as part of your freelance income. It's important to keep track of the amount received from each client for accurate reporting. TaxBuddy’s platform allows you to easily consolidate this income and file it correctly, ensuring no income is missed and all sources are properly accounted for.
Q7: Can I claim tax deductions for professional development expenses like courses or certifications?
Yes, you can claim tax deductions for professional development expenses, such as courses, certifications, and training that are directly related to your freelance business. These deductions can help reduce your taxable income and lower your overall tax liability. The expenses should be relevant to the work you do as a freelancer, and you must keep receipts or invoices to substantiate your claims. TaxBuddy can guide you in identifying eligible expenses and ensuring they are correctly reported on your ITR.
Q8: Can I claim deductions for health insurance premiums under Section 80D as a freelancer?
Yes, as a freelancer, you can claim deductions for health insurance premiums paid under Section 80D of the Income Tax Act. This deduction is available for premiums paid for yourself, your spouse, children, and parents. The maximum deduction allowed depends on the age of the insured, and it can significantly reduce your taxable income. TaxBuddy can help you determine the maximum deductions you can claim under this section and ensure that your health insurance premiums are correctly reported.
Q9: What tax documents do I need to file as a freelancer?
As a freelancer, you need to file several tax documents, including:
Income details: A summary of all freelance income, whether domestic or foreign.
Receipts and invoices: Proof of income earned from various clients.
Bank statements: For tracking payments received and identifying income sources.
Expense records: Documentation for business-related expenses such as home office expenses, travel, equipment, and professional services.
TDS certificates: If tax has been deducted at source, you’ll need the TDS certificates (Form 16A).
Q10: How do I calculate my taxable income as a freelancer?
Your taxable income as a freelancer is calculated by adding up all the income earned through freelance work and subtracting any eligible deductions and expenses. This includes income from Indian and international clients, which must be converted into INR. Then, deduct business-related expenses, such as home office expenses, travel, equipment, and any other costs directly related to your freelance work. TaxBuddy can help you calculate your taxable income accurately, ensuring that all deductions and exemptions are properly applied.
Q11: Is it necessary to file an ITR if my income is below the taxable limit?
It is not mandatory to file an ITR if your income is below the taxable limit; however, it is still advisable. Filing an ITR provides you with a record of your income and can help you build a track record for loans or financial transactions. Additionally, if you have any TDS deducted from your income, you will need to file an ITR to claim a refund. TaxBuddy can guide you through the decision-making process and help you understand when it is beneficial to file an ITR, even if your income is below the taxable threshold.
Q12: Can I file my taxes without a PAN card?
No, a PAN card is required to file taxes in India. It is a unique identification number necessary for filing your Income Tax Return, processing refunds, and claiming deductions. If you don’t have a PAN card, you must apply for one before filing your taxes. If you are a freelancer or self-employed, it is especially important to have a PAN card for tax reporting and compliance purposes. TaxBuddy can assist you in obtaining a PAN card and ensuring your tax filings are compliant with Indian regulations.
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