Freelance and side income: tax and GST basics

Meera, a freelance architect, received ₹18,00,000 from her clients this year and spent ₹2,40,000 doing the work. Taxed on her actual profit, her tax would be ₹1,18,560; declared under the presumptive scheme for professions, her income is ₹9,00,000, her tax is nil, and the ₹1,20,000 her clients deducted comes back to her as a refund.

Below you will see how fees are taxed and how a client’s TDS reaches your PAN, when presumptive taxation fits and when it does not, how presumptive income pays its advance tax, when GST registration becomes compulsory, and the records that make a freelance year provable. It is education only: Meera, Rohan and their clients are invented, each rule is cited from the Income-tax Act, 2025, the Income-tax Rules, 2026 and the CGST Act, 2017, and nothing here is advice on your own return or registration.

Fees from clients are income from a profession, and many clients deduct TDS

Money a client pays you for work is taxed under the head “Profits and gains of business or profession” (section 26), not as salary, however regular the client. Some professions are named: section 62(4) lists legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary work as specified professionsspecified profession: One of the professions section 62(4) of the Income-tax Act, 2025 names: legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology and company secretary work, and any others the Board notifies., with any others the Board notifies. On the regular basis, income is the gross receiptsgross receipts: Everything a profession receives from its clients for its work in a year, before any cost or TDS is taken off. Presumptive income is half of it, and the scheme's limits of ₹50 lakh and ₹75 lakh are measured on it. less the costs the Act allows: spending laid out wholly and exclusively for the profession that is neither capital nor personal (section 34), and depreciation on equipment such as a laptop (section 33).

Clients pay less than the fee. A company, a firm or any other payer that is not an individual or a Hindu undivided family deducts 10 % as TDS once its payments to you for professional services pass ₹50,000 in the year (section 393(1), Table: Sl. No. 6(iii)), and so does an individual whose own business passed ₹1 crore, or profession ₹50 lakh, the year before (section 402(37)). An individual paying you for personal purposes, such as a family planning its own house, deducts nothing (section 393(4)). Follow one of Meera’s invoices:

What reaches the bank is the fee less TDS; what the return reports is the whole fee, with the TDS claimed as tax already paid and credited as the client reported it (rule 203(1)). The TDS lesson shows how to match that credit with your Annual Information Statement before you file.

Presumptive taxation counts half of a professional’s receipts as income

Section 58(2) (Table: Sl. No. 3) offers a simpler rule to a resident individual, or a firm other than an LLP, in a specified profession: if the year’s gross receipts are ₹50 lakh or less, or ₹75 lakh or less when cash is at most 5 % of them, 50 % of the receipts may be declared as the income, or more if more was earned. That is presumptive taxationpresumptive taxation: Taxing a small business or profession on a fixed share of its receipts instead of its actual profit. For a specified profession with receipts up to ₹50 lakh, or ₹75 lakh with at most 5 % in cash, half the receipts is the income.. Nothing further is deducted from it (section 58(4)); the equipment is treated as if its depreciation had been claimed every year (section 58(6)); and a cheque that is not account payee counts as cash (section 58(9)). The program works out Meera’s year both ways:

"""Meera's year as a freelance architect, Tax Year 2026-27: presumptive or regular profit, in both regimes.

Meera (invented) is a resident architect, a specified profession of section 62(4) of the Income-tax Act, 2025.
Her gross receipts are Rs 18,00,000, all by bank transfer, and her own records show Rs 2,40,000 of costs. Section 58(2) (Table: Sl. No. 3) lets her declare 50 % of the receipts as her income from the
profession; otherwise her income is the receipts less the costs the Act allows. Two Indian companies paid her
Rs 12,00,000 and deducted 10 % TDS (section 393(1), Table: Sl. No. 6(iii)); a client abroad and a private client
deducted none. New regime: slabs of section 202(1), rebate of section 156(2); old regime: slabs of the First Schedule
of the Finance Act, 2026 and the Rs 12,500 rebate up to Rs 5 lakh. 4 % cess, rounding of section 516, no surcharge.
"""

from decimal import ROUND_HALF_UP, Decimal

D = Decimal
NEW = [(400000, "0"), (800000, "0.05"), (1200000, "0.10"), (1600000, "0.15"), (2000000, "0.20"), (2400000, "0.25"), (None, "0.30")]
OLD = [(250000, "0"), (500000, "0.05"), (1000000, "0.20"), (None, "0.30")]
RECEIPTS, COSTS, TDS = D(1800000), D(240000), D(120000)


def inr(amount):
    """Whole rupees with Indian digit grouping: 118560 -> "₹1,18,560"."""
    whole = str(D(amount).quantize(D(1), rounding=ROUND_HALF_UP))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + ",".join(groups + [tail]) if groups else "₹" + tail


def round_516(amount):
    """Section 516: drop the paise, then round to the nearest ₹10 (a last digit of 5 or more rounds up)."""
    rupees = int(amount)
    return D(rupees - rupees % 10 + (10 if rupees % 10 >= 5 else 0))


def slab_tax(income, slabs):
    tax, lower = D(0), D(0)
    for upper, rate in slabs:
        top = income if upper is None else min(income, D(upper))
        if top > lower:
            tax += (top - lower) * D(rate)
        if upper is None or income <= upper:
            break
        lower = D(upper)
    return tax


def tax_new(income):
    income = round_516(income)
    tax = slab_tax(income, NEW)
    if income <= 1200000:
        tax -= min(tax, D(60000))
    elif tax > income - 1200000:
        tax = income - 1200000
    return round_516(tax * D("1.04"))


def tax_old(income):
    income = round_516(income)
    tax = slab_tax(income, OLD)
    if income <= 500000:
        tax -= min(tax, D(12500))
    return round_516(tax * D("1.04"))


presumptive = RECEIPTS * D("0.50")
regular = RECEIPTS - COSTS
print(f"Receipts {inr(RECEIPTS)}, costs {inr(COSTS)}, TDS by two clients {inr(TDS)}")
print(f"{'Basis':<26}{'Income':>11}{'New regime':>12}{'Old regime':>12}")
for name, income in (("Presumptive, 50 %", presumptive), ("Regular, receipts - costs", regular)):
    print(f"{name:<26}{inr(income):>11}{inr(tax_new(income)):>12}{inr(tax_old(income)):>12}")
print()
for name, income in (("Presumptive", presumptive), ("Regular", regular)):
    balance = tax_new(income) - TDS
    word = "to pay" if balance > 0 else "refund"
    print(f"{name}, new regime: tax {inr(tax_new(income))} less TDS {inr(TDS)} = {inr(abs(balance))} {word}")

Receipts ₹18,00,000, costs ₹2,40,000, TDS by two clients ₹1,20,000
Basis                          Income  New regime  Old regime
Presumptive, 50 %           ₹9,00,000          ₹0     ₹96,200
Regular, receipts - costs  ₹15,60,000   ₹1,18,560   ₹2,91,720

Presumptive, new regime: tax ₹0 less TDS ₹1,20,000 = ₹1,20,000 refund
Regular, new regime: tax ₹1,18,560 less TDS ₹1,20,000 = ₹1,440 refund

Her costs are 13 % of her receipts, so half of them is far below her real profit: ₹9,00,000 against ₹15,60,000. In the new regime the presumptive figure pays nothing, because ₹9,00,000 of total income is inside the rebate’s ₹12 lakh, and all ₹1,20,000 of TDS comes back as a refund once she files. On the regular basis she pays ₹1,18,560, and in the old regime even the presumptive figure costs ₹96,200, so the new regime, which applies unless she opts out by the due date, is the one to keep.

The scheme has three limits. Declaring less than 50 % when total income passes the slab-free amount needs books of account under section 62 and an audit under section 63 (section 58(3)). No cost and no loss can be set against the presumptive figure, so a year with heavy costs or a loss is worked out on the regular basis. And work outside the list of section 62(4), such as writing or translation, is not a specified profession unless the Board notifies it: ask a qualified professional how such work is taxed. Answer three questions about your own year:

In short: the presumptive basis fits a listed profession with costs below half of its receipts and receipts within the limits, as Meera’s do; the regular basis takes over for high costs, a loss, work outside the list or receipts above the limits.

Presumptive income pays all its advance tax by the March instalment

Nobody deducts tax from a foreign client’s fee or from small Indian clients, so the tax left over after TDS is paid as advance taxadvance tax: Income tax paid during the tax year itself, in instalments by set dates, when the year's tax less TDS and TCS comes to ₹10,000 or more. Late or short instalments cost interest. More in “TDS, AIS and advance tax” whenever it is ₹10,000 or more (sections 404 and 405). Someone who declares presumptive income under section 58 does not pay it in four parts: the whole of it is due by the March instalment (section 408(2)). Walk through the year:

The program works out two invented cases, Meera’s second year and a salaried colleague’s side work:

"""Advance tax on presumptive income from a profession, Tax Year 2026-27, new regime: two invented cases.

Meera's second year: Rs 40,00,000 of receipts, Rs 16,00,000 of them from Indian companies that deduct 10 % TDS. Rohan
draws a salary of Rs 12,00,000 and earns Rs 4,00,000 on the side as a freelance web developer, from small clients
below the Rs 50,000 threshold of TDS. Both declare 50 % of their receipts under section 58(2) (Table: Sl. No. 3) of the
Income-tax Act, 2025. Advance tax is due when the year's tax less TDS is Rs 10,000 or more (sections 404 and 405),
and a presumptive profession pays all of it by the March instalment (section 408(2)). Paid only with the return, it
costs 1 % under section 425(3) and 1 % a month or part of a month from April under section 424, on amounts rounded
down to Rs 100 (rule 269). Slabs of section 202(1), rebate of section 156(2), 4 % cess, rounding of section 516.
"""

from decimal import ROUND_HALF_UP, Decimal

D = Decimal
NEW = [(400000, "0"), (800000, "0.05"), (1200000, "0.10"), (1600000, "0.15"), (2000000, "0.20"), (2400000, "0.25"), (None, "0.30")]


def inr(amount):
    """Whole rupees with Indian digit grouping: 208000 -> "₹2,08,000"."""
    whole = str(D(amount).quantize(D(1), rounding=ROUND_HALF_UP))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + ",".join(groups + [tail]) if groups else "₹" + tail


def round_516(amount):
    """Section 516: drop the paise, then round to the nearest ₹10 (a last digit of 5 or more rounds up)."""
    rupees = int(amount)
    return D(rupees - rupees % 10 + (10 if rupees % 10 >= 5 else 0))


def slab_tax(income):
    tax, lower = D(0), D(0)
    for upper, rate in NEW:
        top = income if upper is None else min(income, D(upper))
        if top > lower:
            tax += (top - lower) * D(rate)
        if upper is None or income <= upper:
            break
        lower = D(upper)
    return tax


def tax_new(income):
    income = round_516(income)
    tax = slab_tax(income)
    if income <= 1200000:
        tax -= min(tax, D(60000))
    elif tax > income - 1200000:
        tax = income - 1200000
    return round_516(tax * D("1.04"))


def hundreds(amount):
    """Rule 269: an amount on which interest is charged is rounded down to a multiple of ₹100."""
    return D(int(amount) // 100 * 100)


print("Meera, second year: receipts ₹40,00,000, TDS 10 % on ₹16,00,000")
income = D(4000000) * D("0.50")
tax, tds = tax_new(income), D(160000)
advance = tax - tds
print(f"  presumptive income {inr(income)}, tax {inr(tax)}, less TDS {inr(tds)} = advance tax {inr(advance)}")
print(f"  due: all of it by the March instalment (section 408(2))")
late_425 = hundreds(advance) * D("0.01")
months = 5  # April to August: paid with the return in August, part of a month counts as a month
late_424 = hundreds(advance) * D("0.01") * months
print(f"  paid only with the return in August: {inr(late_425)} under section 425(3) and {inr(late_424)} under section 424 ({months} months)")
print()
print("Rohan: salary ₹12,00,000, side receipts ₹4,00,000, no TDS on them")
salary = D(1200000) - 75000
side = D(400000) * D("0.50")
alone, together = tax_new(salary), tax_new(salary + side)
print(f"  salary alone: total income {inr(salary)}, tax {inr(alone)}")
print(f"  with {inr(side)} of presumptive income: total income {inr(salary + side)}, tax {inr(together)}")
print(f"  the side work adds {inr(together - alone)}: advance tax by the March instalment, or Form 122 to payroll")

Meera, second year: receipts ₹40,00,000, TDS 10 % on ₹16,00,000
  presumptive income ₹20,00,000, tax ₹2,08,000, less TDS ₹1,60,000 = advance tax ₹48,000
  due: all of it by the March instalment (section 408(2))
  paid only with the return in August: ₹480 under section 425(3) and ₹2,400 under section 424 (5 months)

Rohan: salary ₹12,00,000, side receipts ₹4,00,000, no TDS on them
  salary alone: total income ₹11,25,000, tax ₹0
  with ₹2,00,000 of presumptive income: total income ₹13,25,000, tax ₹81,900
  the side work adds ₹81,900: advance tax by the March instalment, or Form 122 to payroll

In her second year Meera’s receipts reach ₹40,00,000, so her presumptive income is ₹20,00,000 and her tax ₹2,08,000. Indian clients deducted ₹1,60,000, which leaves ₹48,000 due by the March instalment. Paid only with her return in August, it would cost ₹480 under section 425(3) and ₹2,400 under section 424, five months at 1 %.

Rohan runs into the same ₹12 lakh line that investors meet. His salary of ₹12,00,000 leaves ₹11,25,000 of total income and no tax. ₹4,00,000 of side receipts adds ₹2,00,000 of presumptive income, carries total income to ₹13,25,000 and adds ₹81,900 of tax, just over a fifth of everything the side work brought in. He can pay it as advance tax by the March instalment, or declare the side income to payroll on Form 122, so that the extra tax is deducted from his remaining salary as TDS (section 392(4)).

GST registration starts once aggregate turnover passes ₹20 lakh

GST has its own threshold, measured on its own figure. Section 22(1) of the CGST Act makes registration compulsory once a supplier’s aggregate turnoveraggregate turnover (GST): The value of all taxable and exempt supplies, exports and inter-State supplies of everyone with the same PAN across India in a financial year, without the GST itself. Above ₹20 lakh, or ₹10 lakh in four special category States, GST registration is compulsory. in a financial year exceeds ₹20 lakh, or ₹10 lakh in the special category States, which after the Act’s own exclusions are Manipur, Mizoram, Nagaland and Tripura. Aggregate turnover is the value of all taxable and exempt supplies, exports and inter-State supplies of everyone with the same PAN across India, without the GST itself (section 2(6)), and the application is due within 30 days of becoming liable (section 25(1)). The program adds up Meera’s second-year invoices month by month:

"""When Meera's aggregate turnover passes the GST registration threshold in her second year.

Central Goods and Services Tax Act, 2017: a supplier must register once aggregate turnover in a financial year exceeds
Rs 20 lakh (Rs 10 lakh in the special category States), section 22(1), and apply within 30 days of becoming liable,
section 25(1). Aggregate turnover is the value of all taxable and exempt supplies, exports and inter-State supplies of
everyone with the same PAN across India, without the GST itself, section 2(6). Meera (invented) invoices 40 % of her
work to clients in India and 60 % to a client abroad; the amounts are her invoices month by month, in rupees.
"""

from decimal import ROUND_HALF_UP, Decimal

D = Decimal
MONTHS = ["April", "May", "June", "July", "August", "September", "October", "November", "December", "January", "February", "March"]
INVOICED = [280000, 310000, 330000, 340000, 360000, 350000, 340000, 320000, 330000, 340000, 350000, 350000]
THRESHOLD = D(2000000)
INDIA_SHARE = D("0.40")


def inr(amount):
    """Whole rupees with Indian digit grouping: 2310000 -> "₹23,10,000"."""
    whole = str(D(amount).quantize(D(1), rounding=ROUND_HALF_UP))
    head, tail = whole[:-3], whole[-3:]
    groups = []
    while len(head) > 2:
        groups.insert(0, head[-2:])
        head = head[:-2]
    if head:
        groups.insert(0, head)
    return "₹" + ",".join(groups + [tail]) if groups else "₹" + tail


print(f"{'Month':<10}{'Invoiced':>10}{'All supplies':>14}{'India only':>12}")
total = india = D(0)
crossed = None
for month, amount in zip(MONTHS, INVOICED):
    total += amount
    india += D(amount) * INDIA_SHARE
    mark = ""
    if crossed is None and total > THRESHOLD:
        crossed = month
        mark = "  <- past ₹20 lakh"
    print(f"{month:<10}{inr(amount):>10}{inr(total):>14}{inr(india):>12}{mark}")
print()
print(f"Aggregate turnover passes ₹20,00,000 with the {crossed} invoices: apply within 30 days of that day.")
print(f"Counting clients in India alone, the year ends at {inr(india)}, below ₹20 lakh, and the exports would be missed.")

Month       Invoiced  All supplies  India only
April      ₹2,80,000     ₹2,80,000   ₹1,12,000
May        ₹3,10,000     ₹5,90,000   ₹2,36,000
June       ₹3,30,000     ₹9,20,000   ₹3,68,000
July       ₹3,40,000    ₹12,60,000   ₹5,04,000
August     ₹3,60,000    ₹16,20,000   ₹6,48,000
September  ₹3,50,000    ₹19,70,000   ₹7,88,000
October    ₹3,40,000    ₹23,10,000   ₹9,24,000  <- past ₹20 lakh
November   ₹3,20,000    ₹26,30,000  ₹10,52,000
December   ₹3,30,000    ₹29,60,000  ₹11,84,000
January    ₹3,40,000    ₹33,00,000  ₹13,20,000
February   ₹3,50,000    ₹36,50,000  ₹14,60,000
March      ₹3,50,000    ₹40,00,000  ₹16,00,000

Aggregate turnover passes ₹20,00,000 with the October invoices: apply within 30 days of that day.
Counting clients in India alone, the year ends at ₹16,00,000, below ₹20 lakh, and the exports would be missed.

Her October invoices take the year past ₹20 lakh, so her application is due within 30 days of the invoice that did it. Counting only her clients in India would have shown ₹16,00,000 for the whole year and no registration at all, because 60 % of her work is an export, and exports count in aggregate turnover.

A person below the threshold may still register voluntarily, and then every provision for registered persons applies (section 25(3)). Once registered, a supplier of taxable services issues a tax invoice showing the description, the value and the tax charged, with the other particulars the rules prescribe (section 31(2)).

Invoices, records and a separate account keep the year provable

Every number above rests on records: the receipts behind the presumptive figure, the costs behind a regular one, the TDS behind the refund and the invoices behind aggregate turnover. Section 62(1)(a) requires anyone in a specified profession to keep books of account from which income can be worked out, and rule 46 of the Income-tax Rules, 2026 lists the books for several professions, architecture among them, once receipts have passed ₹1,50,000 in each of the three years before: a cash book, a ledger, copies of bills issued for ₹250 or more, and the bills for costs, kept for seven tax years. Step through the routine Meera keeps at the end of each month:

The routine answers every question her return asks. The numbered invoices are her receipts and her turnover; the one account shows that every fee arrived; the log with its bills is the regular basis if she ever needs it; and the quarterly check finds a client’s missing TDS while the client can still correct it.

Price the work for all of this. A rate that covers only the hours spent leaves nothing for the unpaid days, the costs and the tax, so work out what a fee must carry before you quote it.

Practise: freelance income, advance tax and GST

Sixteen questions cover client fees, the presumptive figure, advance tax, the GST line and the monthly records. It starts where your answers so far are weakest and asks each missed question once more at the close:

Interview questions

Warm-up (fresher): What is presumptive taxation for a professional, and who may use it?

Under section 58(2) of the Income-tax Act, 2025 (Table: Sl. No. 3), a resident individual, or a firm other than an LLP, in one of the specified professions of section 62(4), such as information technology, engineering or architecture, may declare 50 % of the year’s gross receipts as income from the profession, or more if more was earned. The receipts must be ₹50 lakh or less, or ₹75 lakh or less when cash is at most 5 % of them. Nothing more is deducted, no audit is needed, and the whole advance tax falls due by the March instalment. Meera’s ₹18,00,000 of receipts become ₹9,00,000 of income and nil tax in the new regime. Declaring less than half needs books and an audit once total income passes the slab-free amount.

Warm-up (fresher): When must a freelancer register for GST?

Once aggregate turnover in a financial year exceeds ₹20 lakh, or ₹10 lakh in Manipur, Mizoram, Nagaland and Tripura (section 22(1) of the CGST Act, 2017), with the application due within 30 days. Aggregate turnover counts every supply of everyone with the same PAN across India, exports and exempt supplies included, without the GST (section 2(6)), so Meera’s ₹24 lakh of work for a client abroad counts, and her invoices pass ₹20 lakh in October although her Indian clients bring only ₹16 lakh in the year. Section 24 adds cases that need registration whatever the turnover, some relaxed by notification for small suppliers of services, so sales across State lines, exports and sales through platforms deserve a check of their own.

Key takeaways

• Client fees are income from a profession: the return reports the whole fee, and a client’s 10 % TDS is your own tax paid early, credited as the client reported it.
• In a specified profession with receipts up to ₹50 lakh, or ₹75 lakh with little cash, half the receipts may be declared as income, with no costs claimed and no audit.
• Presumptive taxation suits low costs and fails high ones: Meera’s tax is nil at half her receipts and ₹1,18,560 on her real profit.
• Presumptive income pays all its advance tax by the March instalment, and side income can cross the rebate’s line, as Rohan’s ₹4 lakh adds ₹81,900.
• GST registration is compulsory above ₹20 lakh of aggregate turnover, exports included, within 30 days, and some supplies need it at any turnover.
• Numbered invoices, one account for the work, a log of costs with bills and a quarterly TDS check keep every figure of the year provable.