Salary Income + Freelance Side Gig? How to File ITR Without Scrutiny
- Farheen Mukadam
- Aug 11
- 9 min read
Filing your Income Tax Return (ITR) can be a complicated task, especially when you have multiple sources of income. For many individuals, combining salary income with freelance or side gig earnings is a common scenario. However, understanding which ITR form to use, disclosing income accurately, and ensuring tax compliance are crucial steps to minimize the chances of scrutiny from the Income Tax Department. Let us explore the best approach for individuals with both salary and freelance income, what necessary disclosures are required, key taxation provisions like presumptive taxation under Section 44ADA.
Table of Contents
Combining Salary and Freelance Income: Which ITR Form to Use
When you have both salary and freelance income, choosing the right ITR form is vital for smooth and accurate filing. For individuals with only salary income, ITR-1 (Sahaj) is generally used. However, if you have additional income from freelance or side gigs, you need to file either ITR-3 or ITR-4, depending on the nature of your freelance work.
ITR-3: This form is applicable if you have income from a profession or business, such as freelancing in fields like writing, design, or consulting. It includes sections for reporting your salary income as well as profits and gains from the business or profession.
ITR-4: If you are eligible for presumptive taxation under Section 44ADA (applicable to professionals like freelancers), you can opt for this simplified form. This form is designed for individuals whose gross receipts do not exceed ₹50 lakh in a financial year.
The key difference between ITR-3 and ITR-4 is whether you want to report your freelance income under the presumptive taxation scheme, which allows you to declare a fixed percentage of your income as taxable, simplifying the process.
Detailed Disclosure: Minimise Scrutiny Triggers
To minimize the risk of scrutiny from the Income Tax Department, you must ensure full disclosure of all income sources. This includes salary, freelance earnings, interest income, capital gains, and any other income streams. Avoiding selective reporting or omitting income can lead to penalties, notices, or even a tax audit.
When filing your return, ensure that:
All freelance income is accurately reported, including payments from clients, receipts for services rendered, and any advances received.
Bank account details are correctly mentioned, as the tax department may match your reported income with bank transactions.
Any tax paid in advance (like TDS deducted by clients) is accounted for to avoid discrepancies.
Transparent and comprehensive disclosures help ensure that your return is processed smoothly and that the likelihood of audit is minimized.
Presumptive Taxation (Section 44ADA) for Side Gigs
For freelancers or professionals whose income does not exceed ₹50 lakh annually, Section 44ADA of the Income Tax Act offers a simpler method of taxation called presumptive taxation. Under this provision, you can declare 50% of your gross receipts or turnover as taxable income, which reduces the complexity of maintaining detailed books of accounts.
This section is specifically designed for professionals such as doctors, lawyers, architects, and consultants. If you qualify under this section, you need to declare only 50% of your gross receipts as income, and you are not required to maintain detailed accounting records. However, you must ensure that your total gross receipts fall within the ₹50 lakh limit.
Opting for presumptive taxation is beneficial if you want to simplify your filing process and minimize your tax liabilities. Keep in mind that even if you opt for this scheme, you can still claim deductions under sections like 80C, 80D, and others.
GST Registration Triggers
If you are a freelancer or small business owner, understanding when you need to register for Goods and Services Tax (GST) is important. As per the current GST law, registration is mandatory for businesses whose turnover exceeds ₹20 lakh in a year (₹10 lakh for special category states). Freelancers who provide taxable services and exceed this threshold must register for GST and charge GST on their invoices.
Even if your turnover is below the threshold, voluntary GST registration might be beneficial if you want to claim input tax credits (ITC) on your business-related expenses. Additionally, some clients may prefer working with GST-registered individuals, especially if they are businesses themselves and need to avail of input tax credits.
Deductions and TDS Compliance
When filing ITR, freelancers must also focus on tax deductions and Tax Deducted at Source (TDS) compliance. Freelancers typically have taxes deducted by clients, so it is crucial to ensure that TDS deductions are correctly reflected in your return.
You can also claim deductions under various sections of the Income Tax Act, such as:
Section 80C: For contributions to provident funds, life insurance premiums, and other qualifying investments.
Section 80D: For premiums paid on health insurance policies.
Section 44ADA: If you are claiming presumptive taxation, this section automatically assumes 50% of your receipts as taxable income, simplifying the filing process.
Ensure that all TDS certificates received from clients are included in your filing and that the amounts deducted are correctly reflected to avoid discrepancies.
How to File ITR to Minimise Scrutiny
To file your ITR while minimizing the chances of scrutiny, follow these steps:
Choose the Correct ITR Form: As discussed, selecting the right form (ITR-3 or ITR-4) is crucial to ensure compliance and accurate reporting of your income.
Report All Sources of Income: Be honest and transparent about all your income sources, including salary and freelance earnings, to avoid raising red flags with the tax authorities.
Claim Eligible Deductions: Utilize tax-saving opportunities by claiming deductions under sections like 80C, 80D, and 44ADA (if applicable). These deductions help reduce your taxable income and lower the overall tax burden.
Verify TDS Deductions: Cross-check TDS deductions with the details on Form 26AS to ensure accuracy and avoid discrepancies during processing.
Keep Proper Documentation: Maintain records of your freelance contracts, payments, and expenses to support your income and deductions in case of future inquiries.
Being thorough, transparent, and meticulous with your filing can go a long way in ensuring a smooth process with minimal scrutiny.
Conclusion
Filing taxes when you have both salary and freelance income requires careful attention to detail. By choosing the correct ITR form, disclosing all income sources, and taking advantage of provisions like presumptive taxation under Section 44ADA, freelancers and side gig workers can streamline the process and reduce their tax liability. It’s essential to comply with all TDS requirements, ensure accurate deductions, and report income truthfully to minimize the risk of scrutiny. With the right approach, you can file your return confidently and avoid unnecessary issues with the tax authorities. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy 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?
Yes, TaxBuddy offers both self-filing and expert-assisted plans for ITR filing. For taxpayers who prefer to handle the process themselves, the self-filing option provides access to a user-friendly platform, step-by-step guidance, and helpful tools. However, if you prefer professional support to ensure your filing is accurate and fully compliant, you can opt for the expert-assisted plan. TaxBuddy's experts will handle all aspects of the filing process, ensuring accuracy, reducing the risk of errors, and maximizing your deductions. Both options are designed to make your tax filing experience seamless and stress-free.
Q2: Which is the best site to file ITR?
TaxBuddy stands out as an excellent platform for filing ITR. With its comprehensive, easy-to-use interface and AI-driven features, TaxBuddy ensures a hassle-free experience for both self-filers and those opting for expert assistance. It offers tools that simplify tax filing, reducing the complexity of the process, especially for those unfamiliar with tax laws. In addition to filing ITR, TaxBuddy provides valuable support throughout the process, ensuring your return is accurate and submitted on time. If you're looking for a simple, guided, and efficient way to file your taxes, TaxBuddy is an ideal choice.
Q3: Where to file an income tax return?
You can file your Income Tax Return (ITR) directly on the official Income Tax Department portal at incometax.gov.in. However, if you prefer a smoother filing experience, platforms like TaxBuddy are great alternatives. TaxBuddy offers a streamlined filing process with additional support, making it easier to navigate the complexities of tax laws. Whether you choose the government portal or TaxBuddy, the key is to file accurately and on time to avoid penalties and delays in processing your refund.
Q4: Can I file my ITR after the deadline without penalties?
No, filing your ITR after the deadline will incur penalties. While you can still file a belated return after the deadline, you will face additional charges, including a penalty of up to ₹5,000, depending on the timing of your filing. Additionally, you will also be charged interest on any unpaid taxes under sections 234A, 234B, and 234C of the Income Tax Act. To avoid penalties and ensure timely processing of your refund, it’s best to file your ITR before the deadline.
Q5: What happens if I fail to file ITR within the extended deadline?
If you miss the extended deadline of September 15, 2025, you can still file a belated return until December 31, 2025, for FY 2024-25 (Assessment Year 2025-26). However, filing after the deadline will result in penalties and interest. A belated return will be processed after on-time returns, causing delays in your refund processing. Therefore, it’s best to file your return as early as possible to avoid penalties and delays.
Q6: How do I check the status of my income tax refund?
To check the status of your income tax refund, visit the official Income Tax Department's e-filing portal at incometax.gov.in. You’ll need your PAN (Permanent Account Number) and assessment year details. Alternatively, if you filed using TaxBuddy, you can track your refund status within the platform, where you will receive updates regarding the processing and status of your refund.
Q7: Does TaxBuddy assist with TDS credit verification?
Yes, TaxBuddy helps ensure that your TDS credits are properly reflected in your return. TDS (Tax Deducted at Source) credits are an essential part of the tax filing process, and TaxBuddy verifies them to ensure they match the records in the system. If there are discrepancies or missing credits, TaxBuddy’s platform alerts you, helping you avoid filing errors that could delay your refund. By verifying TDS credits, TaxBuddy ensures that your tax return is accurate and that you don’t face delays or penalties due to mismatched records.
Q8: How long does it take for TaxBuddy to process an ITR filing?
The processing time for an ITR filing with TaxBuddy can vary depending on the complexity of your return. For simple tax returns, such as those with basic income sources, TaxBuddy can typically process the filing within a few hours. For more complex returns, such as those requiring expert assistance or involving business income, the process may take longer. Regardless, TaxBuddy works efficiently to ensure your filing is completed and submitted accurately, minimizing the time it takes to process your return.
Q9: What if I file ITR after the extended deadline?
If you file your ITR after the extended deadline of September 15, 2025, you can still submit a belated return by December 31, 2025. However, this will result in penalties, including late filing fees and interest on any unpaid taxes. Additionally, the Income Tax Department processes belated returns after timely returns, so you may experience delays in refund processing. Filing on time or as early as possible is the best way to avoid these issues and ensure a smooth tax filing experience.
Q10: Are there penalties for errors in my ITR filing?
Yes, errors in your ITR filing can result in penalties, including fines and interest on unpaid taxes. Common mistakes include incorrect income reporting, missed deductions, or discrepancies with TDS credits. These errors can lead to scrutiny from the tax authorities and delays in processing your refund. To avoid these penalties, it’s essential to file accurately. Platforms like TaxBuddy help reduce the risk of errors by providing guidance and verification checks during the filing process.
Q11: Can I make corrections in my ITR after filing?
Yes, you can make corrections to your ITR after filing by submitting a revised return. If you discover any mistakes or omissions in your original return, you can file a revised return before the end of the assessment year. The revised return will replace the original filing and correct any errors, ensuring that your tax records are accurate. TaxBuddy makes it easy to file revised returns, helping you avoid penalties and ensuring compliance with tax laws.
Q12: Does TaxBuddy support all tax regimes for ITR filing?
Yes, TaxBuddy supports both the old and new tax regimes. Depending on your specific financial situation, TaxBuddy helps you choose the most beneficial regime for filing your ITR. Whether you prefer the old tax regime with exemptions and deductions or the new regime with lower tax rates but fewer deductions, TaxBuddy ensures that your return is filed correctly under the tax regime that suits you best. The platform provides clear guidance on which regime is optimal for your tax savings.
Comments