I recently started working as a freelance graphic designer and came across some updates in Budget 2025 regarding tax slabs. I heard that freelancers/professionals can now pay zero tax on professional income of ₹24 lakhs. Could you explain how this works?
Hey @Siddharth_Jogi,
Yes, If you’re a freelancer earning up to ₹24 lakh in professional fees, you may not have to pay any income tax on it. That’s because of the presumptive taxation scheme u/s 44ADA along with the revised tax slabs in Budget 2025. Here’s how.
See, under the presumptive taxation scheme, you declare a fixed percentage of your revenue as profits. In case of professionals/freelancers, instead of taxing you on your total earnings, the government assumes that only 50% of your total receipts is profit—the rest is considered expenses.
Under this scheme,
- You don’t have to maintain detailed books of accounts.
- You declare 50% of your annual gross receipts as profits.
- Your total receipts should be less than ₹75L (₹50L if more than 5% of transactions are in cash)
Now, as per amendments in Union Budget 2025, the tax rebate u/s 87A has been increased to ₹60,000, which effectively makes income up to ₹12 lakh tax-free under the new regime.
So, if your gross receipts are ₹24L and you opt for presumptive taxation scheme, you can declare 50% of the receipts as profit. Hence, your net taxable income becomes 50% of ₹24L, which is ₹12L.
Now, as this income is taxed as per slab rates, you’ll be eligible for rebate u/s 87A and as the income is within the threshold of ₹12L, you’ll have to pay zero tax on your income.
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Read first Section 44ADA and 44AA(1) from Income tax act 1961:
Yes, but NOT ALL.
“ONLY SPECIFIED PROFESSIONALS” can effectively pay zero tax on professional income up to ₹24 lakh under Section 44ADA, thanks to the presumptive taxation scheme and rebate under Section 87A. However, GST registration & compliance become mandatory once turnover exceeds ₹20 lakh.
In case of a person adopting the provisions of sections 44ADA, income will be computed on presumptive basis, i.e. @ 50% of the total gross receipts of the profession. However such person can declare income higher than 50%.
Who is Eligible for Section 44ADA?
Assessee: being an individual or a partnership firm other than a limited liability partnership, who is a resident in India, and is engaged in a profession referred to in sub-section (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax under the head “Profits and gains of business or profession”
(Specified Professions List)
Section 44ADA applies to “specified professionals” engaged in:
- Legal
- Medical
- Engineering or architectural
- Accountancy
- Technical consultancy
- Interior decoration
- Any other profession as notified by CBDT: Authorized Representative, Film Artist.
Who are the Professionals eligible to opt Sec. 44ADA ?
List of ‘Specified Professionals’ who are specified in Sec. 44AA(1), are eligible to opt Sec. 44ADA.
‘Unspecified Professionals’ [those covered u/s 44AA(2)] cannot opt Sec. 44ADA.
Freelancers in these professions can opt for presumptive taxation under Section 44ADA if their total turnover does not exceed ₹75 lakh (for digital transactions) or ₹50 lakh (for cash transactions).
How Does Section 44ADA Help Reduce Tax?
Freelancers & professionals (from the specified list above) can declare only 50% of their total income as taxable profit.
The remaining 50% is treated as expenses, even if no actual expenses exist.
No need to maintain books of accounts or get a tax audit (if income is within the limit).
How Can You Pay Zero Tax on ₹24 Lakh?
Example Calculation: ₹24 Lakh Income Under 44ADA
Particulars Amount (₹)
Total Professional Income ₹24,00,000
Presumed Expenses (50%) ₹12,00,000
Taxable Income ₹12,00,000
Tax Calculation as per New Slabs
Income up to ₹12,00,000 – No Tax (Under 87A Rebate) ₹0
Final Tax Payable ₹0
Since the taxable income is ₹12L, it qualifies for the rebate under Section 87A, making the final tax liability ₹0.
GST Registration & Compliance for Freelancers (When Turnover > ₹20 Lakh)
GST registration is mandatory if total turnover exceeds ₹20 lakh in a financial year for service providers.
If registered under GST, freelancers must:
Collect 18% GST on services from clients.
File GST returns (GSTR-1 & GSTR-3B) monthly/quarterly.
Maintain proper invoicing & compliance records.
Claim GST input credit on business expenses (like software, ads, etc.).
If turnover is below ₹20 lakh, GST registration is optional.
Even if freelancers don’t pay income tax due to 44ADA, they may still need to comply with GST regulations once turnover crosses ₹20 lakh.
Key Benefits of Using Section 44ADA for Freelancers
Zero Tax on Income up to ₹24 Lakh (With 87A Rebate)
No Need for Detailed Expense Proofs – 50% expenses allowed by default.
No Books of Accounts or Audit Required (if within limit).
Simple Tax Filing – Use ITR-4 and declare 50% profit.
Important Conditions to Pay Zero Tax
All payments must be received digitally (Bank Transfer, UPI, Credit/Debit Card) for the higher ₹75 lakh limit.
If payments are in cash, the old ₹50 lakh limit applies.
File ITR-4 before the due date to claim the presumptive benefit.
Ensure actual expenses are lower than 50% to benefit from 44ADA.
Final Answer: Can You Pay Zero Tax on ₹24L as a Freelancer?
Yes! Under Section 44ADA, you can declare 50% profit and pay zero tax due to the 87A rebate (if taxable income is ₹12L or less).(Assume: Not Any Special Rate Income )
However, if your turnover exceeds ₹20 lakh, GST registration & compliance become mandatory.
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can this formula be used by a full time stock market trader ?
is there any saving door for full time stock trader ?
@HIREiN
Yes, Business releted expenses you can claim if any.
If a person having professional and freelance income of 24L, can he is eligible for this. Lets say i am working in a pvt firm with annual income of 12LPA and doing freelance as a MFD(distributor) who earns 50-60K/M on an average through commission. Can i avail this?
@Gokul_Kalyanaraman
Not allowed. Only specified professional in section can avail.
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