ITR 2025 Filing: How Tax Rules Vary for Freelancers and Salaried Individuals
With the ITR 2025 filing season in progress, many freelancers remain unsure about how their income is taxed differently compared to salaried employees. Understanding these differences will help you select the appropriate ITR form, claim valid deductions, and avoid any tax-related penalties.
ITR 2025 Filing for Freelancers:
As the ITR 2025 filing window opens, numerous freelancers and consultants wonder how their earnings are taxed differently from salaried workers. Knowing these distinctions assists in choosing the correct ITR form, claiming eligible deductions, and staying compliant with tax laws.
Income Classification:
Salaried income is taxed under the head “Salaries,” while income from freelancing or consultancy is taxed under “Profits and Gains of Business or Profession.” This classification affects the kind of deductions you can claim and the nature of your record-keeping.
Tax Deduction at Source (TDS) Norms:
For salaried employees, the employer deducts TDS before disbursing salary. In contrast, freelancers must handle their own tax payments. When clients pay freelancers, they usually deduct 10% TDS and deposit it against the freelancer’s PAN. Freelancers should collect Form 16A from clients and reconcile it with Form 26AS to ensure correct credit of the deducted tax.
Deductions for Salaried Employees vs Freelancers:
- Salaried: Eligible for a standard deduction of up to ₹50,000 under the old tax regime or ₹75,000 under the new regime without furnishing any proof.
- Freelancers: Not eligible for the standard deduction but can claim actual business expenses such as:
- Internet and mobile bills
- Stationery and printing charges
- Travel and conveyance expenses
- Proportionate rent and electricity (if working from a rented place)
- Depreciation on computers, printers, and other office equipment
Personal expenses cannot be claimed.
Additional Expense Claims for Freelancers:
If you use part of your home as your workspace, you can claim a proportionate share of rent and utility bills as business expenses. Repairs, maintenance, and depreciation on work-related assets are also deductible. Ensure that all claimed expenses are genuine, reasonable, and justifiable.
Calculating Net Taxable Income:
Your net taxable income as a freelancer is arrived at by deducting allowable business expenses from your total consultancy earnings. Other sources of income—like rental income, interest, dividends, or capital gains—are taxed separately and added to your total income.
Deductions Available Under the Old Tax Regime:
Freelancers can claim deductions under various sections, similar to salaried taxpayers, including:
- Section 80C – Investments in PPF, ELSS, life insurance policies, etc.
- Section 80CCD – Contributions to NPS
- Section 80D – Health insurance premiums
- Section 80TTA – Interest from savings bank accounts
- Section 80GG – Rent paid (up to ₹5,000 per month) if no HRA is received
Choosing the Correct ITR Form:
Freelancers not eligible for presumptive taxation must file ITR-3. For instance, content writers generally do not qualify for presumptive taxation, so detailed reporting of income and expenses is required.
Summary:
Tax rates for freelancers and salaried employees are identical. The primary differences lie in how income is categorised, deductions available, and compliance requirements. Maintaining organised records such as invoices, receipts, and expense logs is crucial for hassle-free and accurate ITR filing.
