Introduction
Freelancers and consultants are important contributors to the modern economy, providing services in sectors like IT, marketing, consulting, education, and more. However, when it comes to filing income tax returns, many freelancers are unsure which form to use.
This blog explains whether freelancers and consultants should file ITR-4 for the Assessment Year 2025–26 (Financial Year 2024–25), based on income types, turnover, and tax options.
Legal Reference and Tax Code Explanation
- Income Tax Act, 1961:
- Section 44ADA: Presumptive taxation scheme for professionals.
- Section 44AD: Presumptive taxation for small businesses.
- Rule 12, Income Tax Rules, 1962:
Specifies the applicability of ITR forms for various taxpayers. - Section 139(1): Mandates filing of returns if total income exceeds the basic exemption limit.
Who is Considered a Freelancer or Consultant under Indian Tax Laws?
Freelancers or consultants are individuals offering independent services without being employed under a formal employer-employee relationship. Examples include:
- Software developers
- Management consultants
- Designers
- Digital marketers
- Content writers
- Tutors and trainers
- Legal consultants
- Doctors and architects practicing independently
Their income is treated as professional income under the head “Profits and Gains from Business or Profession”.
What is ITR-4 and Its Applicability?
ITR-4 (Sugam) is meant for taxpayers who:
- Have opted for presumptive taxation under Section 44AD, 44ADA, or 44AE.
- Are individuals, Hindu Undivided Families (HUFs), or firms (other than LLPs).
Key eligibility for freelancers and consultants:
- Gross receipts should not exceed ₹50 lakh for professional services.
- They agree to declare income at 50% or more of gross receipts under Section 44ADA.
When Should Freelancers and Consultants File ITR-4?
You should file ITR-4 if:
- You are a freelancer or consultant with gross receipts up to ₹50 lakh.
- You are willing to declare 50% or more of your gross receipts as income.
- You do not want to maintain detailed books of accounts under Section 44AA.
- You want a simplified tax filing process without audits (if turnover within limits).
You should not file ITR-4 if:
- Your receipts exceed ₹50 lakh.
- You have foreign income or hold foreign assets.
- You are a partner in a firm.
- You are earning speculative income like intraday share trading.
In these cases, you should file ITR-3.
Detailed Examples: When ITR-4 is Suitable and When It Is Not
Example 1 (Suitable for ITR-4):
Ms. Ananya, a freelance graphic designer, earned ₹30 lakh in FY 2024-25. She opts for presumptive taxation and declares ₹15 lakh as taxable income (50%). No audit or detailed books needed.
She can file ITR-4.
Example 2 (Not Suitable for ITR-4):
Mr. Siddharth, a freelance software developer, earned ₹65 lakh during FY 2024-25.
Since his receipts exceed ₹50 lakh, he must maintain books of account and file ITR-3, not ITR-4.
Example 3 (Not Suitable for ITR-4):
Ms. Kavya is a freelance consultant and holds foreign stocks.
Due to ownership of foreign assets, she must file ITR-3 even if turnover is within ₹50 lakh.
Step-by-Step Guide for Freelancers Filing ITR-4
Step 1: Determine if your gross receipts are ₹50 lakh or below.
Step 2: Choose the presumptive taxation scheme under Section 44ADA (for professionals).
Step 3: Calculate 50% or more of your gross receipts as taxable income.
Step 4: Collect Form 26AS, AIS report, bank statements, and invoices if needed for reference.
Step 5: Pay advance taxes (if applicable) based on estimated income.
Step 6: File ITR-4 online on the Income Tax Portal using pre-filled data or offline utility.
Step 7: Complete e-verification through Aadhaar OTP, net banking, or by sending a signed copy of ITR-V.
Important Documents Needed for Filing
- PAN Card
- Aadhaar Card (for resident Indians)
- Bank account statements
- Details of professional receipts (invoices raised)
- Form 26AS (TDS deducted on your PAN)
- Advance tax challans (if paid)
- Declaration under presumptive taxation
- Other deductions under Chapter VI-A (if applicable)
Conclusion
Filing ITR-4 under the presumptive taxation scheme is a great option for freelancers and consultants earning up to ₹50 lakh annually who wish to simplify their tax compliance. It helps avoid maintaining detailed books, saves compliance costs, and ensures quicker filing. However, choosing the correct form based on your actual situation is crucial to avoid future notices or penalties.
Reach out Today!
Need help deciding whether you should file ITR-4 or another form based on your freelance or consulting income?
Schedule a meeting with our Chartered Accountant, Anshul Goyal, by visiting:
Disclaimer: I am Anshul Goyal, a Chartered Accountant licensed with ICAI, India. The information provided above is for educational purposes only and should not be considered a substitute for professional advice.
Frequently Asked Questions
1. Is it mandatory for freelancers to file ITR?
Yes, if your total income exceeds ₹2,50,000, you must file an income tax return.
2. Can freelancers claim expenses under ITR-4?
No. If you opt for presumptive taxation under ITR-4, expenses are deemed at 50%, and no further actual expenses can be claimed.
3. Can freelancers earning more than ₹50 lakh file ITR-4?
No. They must maintain books of account and file ITR-3.
4. Do freelancers need to pay advance tax?
Yes, if the total tax liability exceeds ₹10,000 in a financial year, advance tax needs to be paid.
5. Can I switch from regular taxation to presumptive taxation every year?
No. If you opt-out after choosing presumptive taxation, you cannot re-opt it for the next five years.