Your creativity earns the money, but your compliance is your safeguard. Freelancers thrive when both work in harmony.

1. FREELANCERS – LEGAL STATUS

A freelancer is a self-employed individual who earns by applying their intellectual or manual skills, without being tied to a single employer. Writers, designers, coders, photographers, influencers, bloggers and other independent professionals all fall within this category. Under the Income Tax Act, such individuals are treated as carrying on a profession or business, and their earnings are taxable under “Profits and Gains from Business or Profession” and not salary or income from other sources.

2. WHAT COUNTS INCOME? – LITERALLY EVERYTHING

Freelancers report taxable income as Gross Receipts, which includes payments from

• Brand collaborations
• Instagram/YouTube monetization, commissions
• Foreign clients (Upwork/Fiverr/PayPal/Wise)
• Sponsorships
• Barter deals, where you receive gadgets, stays, clothing or any benefit in place of cash, are treated as income

Simply, if money, product, or benefit flows to you, that will be counted as income.

3. EXPENSES – THE BIGGEST TAX SAVER

Under Section 37, freelancers can claim deductions for expenses incurred “wholly & exclusively for business/profession” This may include

• equipment such as a Camera, mic, lighting, laptop
• Editing/supporting team, Workspace/coworking cost
• Internet, mobile bills
• Travel & shoots expenses
• Even partial home-office expense

When claimed correctly, these expenses can significantly reduce your taxable profit.

4. PRESUMPTIVE TAXATION – SECTION 44AD or 44ADA

For Freelancing Business Activities (44AD):

If the turnover ≤ ₹2 crore, then declare 8% of turnover as income or 6% if receipts are through digital mode. This limit increases to ₹3 crores if cash receipts ≤ 5%.

For Freelancing Professionals (44ADA):

If the gross receipts ≤ ₹50 lakh, then declare 50% as income. The limit increases to ₹75 lakh if cash receipts ≤ 5%.

5. TDS – WHY YOU GET LESS MONEY

Brands and agencies deduct TDS before paying you:

• 10% under Section 194J, and
• 1% / 2% under Section 194C.

This deduction is not an additional tax burden; it is simply tax paid in advance on your behalf.

6. FOREIGN CLIENTS – FULLY TAXABLE IN INDIA

If you are a resident, payments received through PayPal, Wise, Remitly, Skrill or any other gateway are fully taxable in India, regardless of where the client is located.

7. ADVANCE TAX – The Hidden Trigger for Freelancer Notices

Advance tax is one of the biggest compliance gaps for freelancers. If your total tax liability (after TDS) exceeds ₹10,000, you must pay advance tax quarterly to avoid interest and penalties under Sections 234B and 234C.

8. AIS TRACKS YOU – MORE THAN YOU THINK

Most freelancers underestimate how much financial information the Department already receives through AIS and TIS .Department can see high-value bank credits, brand payments, TDS reported by companies, GST data, foreign remittances and digital platform payouts. Even if you skip filing your ITR, your income is still recorded.

9. IT NOTICES  & HOW TO AVOID

Freelancers receive IT notices mainly when the information visible in AIS does not match what you report in your ITR. These mismatches include

• Brand payments in AIS not shown in ITR
• TDS claimed but income underreported
• large unexplained bank deposits
• foreign payments PayPal/Wise income not declared
• Very high expenses claimed without proof

These issues are easy to avoid: keep proper invoices, maintain expense proofs, track all receipts, reconcile AIS/TIS/26AS before filing, pay advance tax on time.

Freelancing gives freedom. But tax laws follow you everywhere. Understand the rules — before the department reminds you.