ITR 2025 Filing: How Tax Rules Differ For Freelancers and Salaried Individuals

Last Updated:August 09, 2025, 13:44 IST

With ITR 2025 filing season underway, many freelancers are uncertain about how their income is taxed differently from salaried employees

The ITR Filing date has been extended to September 15. (Representative Image)

ITR 2025 Filing For Freelancers: With the ITR 2025 filing season underway, many freelancers and consultants are uncertain about how their income is taxed differently from salaried employees. Knowing the distinctions will help you choose the right ITR form, claim eligible deductions, and avoid tax-related penalties.

Salaried income is taxed under the head “Salaries”, whereas freelance or consultancy income is taxed under “Profits and Gains of Business or Profession.” This classification determines what deductions you can claim and how you maintain records.

Tax Deduction at Source (TDS) Rules

For salaried employees, employers deduct taxes at source before paying salaries. In contrast, freelancers must manage and pay their own taxes.

When clients pay freelancers, they often deduct 10% TDS and deposit it with the government under the freelancer’s PAN. Freelancers should collect Form 16A from clients and match it with Form 26AS to ensure proper credit of the deducted tax.

Deductions for Salaried vs Freelancers

• Salaried: Eligible for a standard deduction of up to Rs 50,000 (old tax regime) or Rs 75,000 (new regime) without needing proof.
• Freelancers: Cannot claim a standard deduction but can claim actual business-related expenses, such as:
  • Internet and mobile bills
  • Stationery and printing
  • Conveyance costs
  • Proportionate rent and electricity (if working from a rented space)
  • Depreciation on computers, printers, and other office equipment

Personal expenses cannot be claimed.

Additional Expense Claims for Freelancers

If part of your home is used for work, you can claim a proportion of rent and utility costs as a business expense. Repair, maintenance, and depreciation costs on work-related assets are also deductible. Any expense you claim must be genuine, proportionate, and justifiable.

Calculating Net Taxable Income

Your net taxable income as a freelancer is calculated by deducting eligible business expenses from total consultancy earnings. Other income—like rent, interest, dividends, or capital gains—is taxed under their respective heads and added to your total income.

Deduction Options Under the Old Tax Regime

Freelancers, like salaried taxpayers, can claim deductions under sections such as:

• 80C – Investments in PPF, ELSS, life insurance, etc.
• 80CCD – NPS contributions
• 80D – Health insurance premiums
• 80TTA – Interest on savings accounts
• 80GG – Rent deduction (up to ₹5,000/month) if not receiving HRA

Choosing the Right ITR Form

Freelancers who do not qualify for presumptive taxation must file ITR-3. For example, as a content writer, presumptive taxation rules don’t apply, so detailed income and expense reporting is mandatory.

Tax rates are the same for freelancers and salaried individuals—the key differences lie in income classification, deduction eligibility, and compliance responsibilities. Staying organised with invoices, receipts, and expense logs is essential for smooth and accurate ITR filing.

Aparna Deb

Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More

Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More

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