Their earnings typically come from multiple sources,brand collaborations, platform payments, consulting assignments and digital content monetisation, making accurate reporting and record-keeping crucial to avoid notices from the tax department.
Which ITR form should you use?
Income earned by freelancers, influencers and other gig workers is generally treated as ‘Profits and Gains from Business or Profession’ under the Income Tax Act.
According to Anita Basrur, Partner, Sudit K. Parekh & Co. LLP, such taxpayers are typically required to file their returns using ITR-3 or ITR-4, depending on whether they are filing under the regular provisions or the presumptive taxation scheme.
Taxpayers should also ensure that the profession code mentioned in the return is correct and consistent with other registrations, such as GST or MSME records, she adds.
Don’t overlook advance tax
Unlike salaried individuals whose taxes are largely deducted by employers, freelancers and gig workers may have to pay advance tax during the financial year.
Deepashree Shetty, Partner, Global Mobility Services, Tax & Regulatory Advisory, BDO India, says timely payment of advance tax is important as delays could result in interest liabilities.
Is presumptive taxation an option?
Eligible professionals and small businesses can opt for the presumptive taxation scheme under Sections 44ADA or 44AD, which allows taxpayers to declare income at a prescribed percentage of receipts without maintaining detailed books of accounts.
However, taxpayers should first evaluate whether they meet the conditions for the scheme.
Basrur cautions that incorrectly claiming the benefit of presumptive taxation despite being ineligible can lead to disputes during assessment.
GST could also come into play
Apart from income tax, some freelancers and influencers may also need to consider their GST obligations.
Shetty says GST registration requirements can arise depending on the turnover and the nature of services provided, particularly in the case of cross-border assignments or platform-based income.
Claim only genuine business expenses
Professional expenses can be claimed as deductions, but documentation is key.
Basrur says taxpayers should carefully identify expenses that are directly connected to their business or profession and maintain supporting records for them. Personal expenses should not be claimed as business deductions unless there is a clear nexus with the profession.
Reconcile Form 26AS and AIS before filing
One of the most important steps before filing an ITR is matching income and tax credits with official records.
Basrur advises taxpayers to verify whether the taxes deducted from payments are correctly reflected in Form 26AS and the Annual Information Statement (AIS). If there are discrepancies, they should be taken up with the deductor for correction before filing the return.
Common mistakes that can trigger scrutinyTax experts say some errors repeatedly crop up among freelancers and gig workers:Missing certain income streams
According to Basrur, receipts that do not appear in Form 26AS or AIS, such as cash payments or digital wallet receipts, are often left out while filing returns.
Ignoring freebies and barter arrangements
Products, gifts and free samples received from brands are also taxable and should be offered to tax at their market value, Basrur says.
Underreporting or inconsistent disclosures
Shetty says underreporting income or making inconsistent declarations year after year can attract scrutiny from the tax department.
Claiming expenses without proof
Inflating expenses without adequate documentation is another common mistake, according to Shetty.
How to stay compliantExperts recommend the following steps for a smoother filing process:
- Report all sources of income, including platform earnings and brand collaborations.
- Verify TDS details and reconcile Form 26AS and AIS.
- Keep invoices, bank statements and expense records.
- Choose the correct ITR form and profession code.
- Assess eligibility carefully before opting for presumptive taxation.
- Maintain consistency in reporting from one year to the next.
Following these steps can significantly reduce the chances of receiving a tax notice and help gig workers navigate the ITR filing season with fewer compliance issues.
