Income Tax for freelancers & professionals


I’ve freelancing income from usa clients and get in my bank account and resident of India.

I don’t have gst as foreign income is exempt under lut.

And on side I invest in stocks using zerodha, no intraday, just simple but, hold, sell if needed.

So is freelancing a profession income or business and what’s the differentiator as both can have services under them. I read your article on this.

Secondly, I can import my trades from zerodha?

What’s the suitable plan for me to file freelance foreign income, and stcg (no trading) and what proofs would I need.

Third, as we 2.5 L exemption limit but with help of rebate and all, it’s practically no tax till 5L

I’ve income of 3 Lac, and stcg of 20,000

So stcg tax will be 3000 (15%)

Will I need to pay 3000 or willl it also be deducted as I claim rebate?

Total is 303000 then can rebate cover the stcg as well or is that mandatory to pay?

Thanks for reading and appreciate your help

@Laxmi_Navlani @Divya_Singhvi @AkashJhaveri @Kaushal_Soni can you?

Hi @Latesh_Bayad

  1. A person engaged in a profession as prescribed under section 44AA(1) cannot adopt the presumptive taxation scheme of section 44AD. Income Tax Act mentions certain professions if you fall into that category then you are not allowed to take the benefit of Section 44AD (Presumptive Taxation Scheme For Businesses).
  2. Yes you can import your trades from Zerodha. Reach out to us on Quicko | Contact Us so someone from our team can get in touch with you for details, process, pricing, and discounts of Expert Assisted filing
  3. You don’t need to pay 3000 as tax to be paid shall be the net tax liability after claiming Rebate u/s 87A. Yes, the rebate covers STCG as well.

Hope this helps :slightly_smiling_face:

What I meant by the first question is how do I know if my Freelancing (digital marketing) is a business or profession? Since profession is related to having specialized skills.

I don’t have gst but just provide services and receive money via PayPal or bank transfer.

So business vs profession. Which will be applicable here?

And secondly

I see that there are 3 plans to file tax, salary, capital gains, business/profession

As I do freelancing along with stocks having capital gains, which tier should I choose to file my taxes as both are applicable in my situation?

Hi @Latesh_Bayad

In Section 44ADA, there is a reference to the professions referred to in Section 44AA(1) of IT Act, 1961. Digital Marketing is not covered under Section 44AA(1) or the various notifications issued to notify a profession in this regard. So as per our opinion, you can opt for 44AD.

Following professions are included u/s 44AA:
Technical consultancy
Interior decoration
Other notified professionals

  • Authorized representatives
  • Film Artists
  • Certain sports-related persons
  • Company Secretaries and
  • Information technology

ITR for business and profession shall apply to you. That plan will also include capital gains and other income.

I earn from freelancing in usd and receive them via paypal.

While filing itr under business and profession, what should I add in “income”

Does it include some expenses as well or cash deposits?

In short, how should business income be calculated and what should be deducted as we do some expenses as well to outsource some parts, and invest in some softwares so should they be deducted?

Please clarify @Divya_Singhvi

Hey, when filing income from freelancing, I need to add all the incomes and deduct expenses such as rent, etc and mention that amount as business from income?

Is that correct?

@Latesh_Bayad, when filing ITR, you need to add all your incomes, subtract deductions, expenses to get your net taxable income.

For your freelance income, you can add it under the head Income from Business & Profession.

These articles should help you answer your questions. You can also schedule a call with our experts and understand the taxability of your specific situation.

Hi @Nireka

Thanks for answer.

Just one question. What about cash transactions?

Can we deduct expenses in cash from our income? (Like we buy some equipment or anything related to business from local vendors)

And should we consider cash income?

@Divya_Singhvi I have a similar case, where my client transfers money directly to my account and I will have to file taxes by myself. The client is from outside India. Can I opt for presumptive Taxation as I read somewhere that it can not be used in case of foreign source of income.

Would you please provide me some more clarity on this and help?

@Latesh_Bayad you can. However, it is advisable that you have bills for the same and you should be able to prove the expenses are for your business in case there is any scrutiny from the ITD.

Hi @Scalperji

There is no specific exclusion of professional/business income from foreign sources under Section 44AD. Further, a presumptive taxation scheme can be opted only by the resident individuals.

Individuals having foreign income on which DTAA is to be claimed cannot file ITR-4 as there is no schedule for it in ITR-4. So the foreign source of income refers to income that is doubly taxed on which you wish to claim foreign tax credit.

Thank you very much @Divya_Singhvi for Clearing the doubt.

1 Like

So I live in Meghalaya which is a state in northeast India and I belong to a Scheduled Tribe there.
I work as a freelance artist online, mostly by opening a store on Etsy(online shopping platform) selling digital products and that is how I earn my income .
My question is:
Is there is any sort of exemptions for me or any sort of relief in my income tax ?
I’m not sure if it makes a difference but I am currently 19 and still studying. (will be joining college this year)

@Sakshi_Shah1 can you please help?

Hey @kellkei

People classified as Scheduled Tribe as defined in Clause 25 of Article 366 of the Constitution residing in a Sixth Schedule area are exempted from paying income tax under Section 10(26) of the Income Tax Act of 1961.

Sixth Schedule Area includes state of Meghalaya.

The income shall be exempt from tax if:

  • income arises from any source in the sixth schedule area
  • income arises by way of dividend or interest on securities

Since you’re earning income through e-commerce selling, there are two opinions for the tax treatment of such income:

  1. If such income arises in the state of Meghalaya, it shall be exempt from tax under Section 10(26) of the Income Tax Act
  2. Since its an income from e-commerce platform, it could be interpreted as income arising from a source outside the specified area. In such case, the income shall be taxable if it exceeds the basic exemption limit of INR 2.5 lacs

You can read more about it here

2 posts were merged into an existing topic: ITR form selection process