Comprehensive guide for Freelancers - 44ADA, GST & everything you need to know
- 12 hours ago
- 7 min read
If you earn a living as a freelancer, consultant or independent professional, your tax life is governed by two completely separate laws: - Income Tax, and - Goods and Services Tax (GST). Getting them confused is the single most common mistake we see.
This guide explains both, with a deep dive into the section every freelancer eventually hears about (Section 44ADA) and what your options are once your receipts approach the ₹75 lakh mark.
Contents 1. Income Tax vs GST — two different worlds 2. Income tax for freelancers 3. What to do when you cross ₹75 lakh 4. Case studies 5. Advance tax — pay as you earn 6. GST for freelancers
Need help with planning around Section 44ADA? Contact us at Reyman Wealth. Our team of experts is always happy to help.
1. Income Tax vs GST — two different worlds
Suppose you bill ₹1 crore for professional services to Indian clients. GST applies at 18% on most services. Income tax applies on your income at slab rates. T hese are added on top of each other and behave very differently.
GST | Income Tax | |
Type | Indirect tax | Direct tax |
Who bears it | Your client | You |
On ₹1 crore | ₹18,00,000 collected & paid to govt. | Tax on income at slab rates |
Out of pocket? | Usually no — client pays | Yes |
Note: in some arrangements you may end up absorbing GST yourself. We cover that scenario in the GST section below.
2. Income tax for freelancers
Your freelancing income is taxable under the head “Profits and gains of business or profession”. In principle you should maintain full books, deduct every legitimate expense, and pay tax on the net profit. Most professionals don’t need to — because of Section 44ADA.
2.1 The legendary Section 44ADA
Section 44ADA is a presumptive taxation scheme. Instead of tracking actual expenses, the law presumes your taxable profit is 50% of your gross receipts. You pay tax on that half at your normal slab rates, and the other half is treated as your costs. No questions asked, no bills to produce.
New name, same scheme - Section 44ADA is now Section 58
Section 44ADA belongs to the Income-tax Act, 1961.
Under the new Income-tax Act, 2025 (in force from 1 April 2026), all the presumptive schemes — the old 44AD, 44ADA and 44AE — have been consolidated into a single provision, Section 58.
The substance is unchanged: 50% presumptive profit and the ₹50 lakh / ₹75 lakh limits all carry over. So when you see Section 44ADA in older guides, read it as Section 58 (professionals) from FY 2026-27 onwards. |
Who can use it?
Resident individuals and resident partnership firms (but NOT an LLP).
Who carry on a notified profession (see list below).
Whose gross receipts are within the turnover limit for the year.
Eligible professions
Legal
Medical
Engineering
Architecture
Accountancy
Technical consultancy
Interior decoration
Film artists (actor, director, music director, art director, dance director, cameraman, singer, lyricist, story/screenplay/dialogue writer, editor, producer, costume designer) and authorised representatives.
Software developers and many other knowledge professionals typically qualify under “technical consultancy”. If you’re unsure whether your work fits, this is worth confirming. This changes which section you fall under.
2.2 The turnover limit — ₹75 lakh (with a catch)
The headline limit for Section 44ADA is ₹75 lakh of gross receipts in a financial year. But this higher limit is conditional:
Reyman Tips: You get the ₹75 lakh limit only if cash receipts during the year do not exceed 5% of total gross receipts. If more than 5% of your receipts are in cash, the limit drops back to ₹50 lakh. (For this purpose, payments received by cheque or bank draft that are not account payee are treated as cash) |
In practice, freelancers who collect via bank transfer, UPI, cards or remittances from overseas clients comfortably meet the 95%-digital condition and enjoy the full ₹75 lakh ceiling.
2.3 How it works — an example
Tony, an Indian resident, provides software development services to a US company. He earns ₹40,00,000 and incurs only ₹2,00,000 of actual expenses in India. Compare the two routes:
Under Section 44ADA | Under normal provisions | |
Gross receipts | ₹40,00,000 | ₹40,00,000 |
Deemed / actual expenses | ₹20,00,000 (50%) | ₹2,00,000 (actual) |
Taxable income | ₹20,00,000 | ₹38,00,000 |
Tony is taxed on just ₹20,00,000 under 44ADA versus ₹38,00,000 otherwise
2.4 My real expenses are well under 50%. Can I still use it?
Yes. The whole point of presumptive taxation is that your actual expenses are not examined. You may declare 50% as income and keep the rest tax-free in the eyes of this section.
2.5 Benefits
Key benefits:
No need to maintain books of account under Section 44AA.
No requirement to get accounts audited under Section 44AB.
Simpler return filing (ITR-4) and easier advance-tax compliance. (The full presumptive tax can be paid in a single instalment by 15 March - more on this below)
3. What to do when you cross ₹75 lakh
You’ve relied on Section 44ADA for years. Now your receipts are about to cross ₹75 lakh. The worry is real: cross the line by even ₹1 and you lose presumptive treatment. Suddenly you'll have to maintain books, may need a tax audit, and your effective tax outgo can jump sharply because you can no longer presume away half your income.
Unfortunately, There is no one size fits all answer. This depends entirely on the facts of your case. These are the levers we commonly explore:
Restructuring how revenue is earned and recognised across the right mix of individual and entity (Partnership Firm, LLP, Company)
Setting up a separate entity (eg. a company or partnership firm) where the economics and compliance genuinely justify it.
Evaluating Section 44AD and other presumptive routes where the nature of work permits.
Timing and planning of receipts so a single bumper year doesn’t push you over the edge unnecessarily.
How Reyman Wealth can help
Crossing ₹75 lakh is exactly the point where good advice pays for itself. We work with freelancers and independent professionals to map their numbers, model the tax under each structure, and put a compliant, scalable plan in place. And it's important to do this before the year end, not after. Talk to us before you cross the threshold — reach out at help@reymanwealth.com and our team of experts will always be happy to help. |
4. Case studies
4.1 Freelance income alongside a full-time salary
Maya works a day job and earns ₹50,00,000 salary (after deductions). On the side she earns ₹45,00,000 from freelance work via platforms like Upwork. She also invests ₹1,50,000 in PPF.
Her salary is taxed under the salary head. Her ₹45,00,000 freelance receipts are professional income — eligible for Section 44ADA, so only ₹22,50,000 (50%) is added as taxable professional income. Salary plus presumptive professional income, less Chapter VI-A deductions, is then taxed at slab rates. (Note: the new tax regime restricts many deductions — the right regime should be chosen on the numbers.)
4.2 Services rendered only to an overseas company
Ravi provides services full-time to a single US company that has no presence in India. He is paid ₹2,00,000 per month — ₹24,00,000 a year.
Even though this feels like salary, with no Indian employer it is professional income, taxed under business/profession. He can use Section 44ADA and offer ₹12,00,000 (50%) to tax at slab rates. GST also enters the picture — see below.
5. Advance tax — pay as you earn
If your total tax for the year (after TDS) is ₹10,000 or more, you can’t wait until the ITR to pay it.
The law expects you to pay tax in instalments during the year itself. This is advance tax.
Freelancers are squarely in its scope, because clients rarely deduct enough TDS to cover the full liability.
5.1 The big concession for presumptive taxpayers
This is one of the best kept perks of Section 44ADA / Section 58.
If you opt for presumptive taxation, you are exempt from the usual four instalment schedule and may pay your entire advance tax in a single instalment by 15 March of the financial year. One payment, once a year.
5.2 The standard schedule (if you’re NOT presumptive)
Freelancers who maintain books and pay on actual profits (for example, after crossing ₹75 lakh) follow the regular four instalment calendar:
Due date | Cumulative advance tax payable | Instalment |
15 June | 15% of total tax | 15% |
15 September | 45% of total tax | 30% |
15 December | 75% of total tax | 30% |
15 March | 100% of total tax | 25% |
5.4 Miss it and interest kicks in
Shortfalls aren’t free. Interest applies. Broadly 1% per month on the shortfall. More on this in a different article soon.
6. GST for freelancers
GST is an indirect tax normally borne by your client. For services, the common rate is 18%. But two things catch freelancers out: - when you must register, and - when GST quietly comes out of your own pocket.
6.1 When you must register
A service provider must register for GST once aggregate turnover exceeds ₹20 lakh in a financial year (₹10 lakh in some special category states).
Turnover includes both domestic and export services.
6.2 Exports are zero-rated — file an LUT
If you serve overseas clients, your exports of services are zero rated ie the effective GST is nil. There are two ways to achieve this:
Pay IGST and claim a refund, or
File a Letter of Undertaking (LUT), which lets you export without paying GST at all.
For most exporters the LUT route is preferable because it avoids blocking cash flow in refund cycles.
6.3 When GST comes out of your pocket
Suppose Tony serves an Indian company for ₹40,00,000 and the client insists the fee is all inclusive. They won’t pay GST on top.
The 18% then has to be carved out of what Tony receives, reducing his real income.
This is why your contracts should always state clearly whether fees are inclusive or exclusive of GST.
6.4 Crossing the ₹20 lakh GST threshold
For most people, simply registering for GST and staying compliant is the easiest path.
In a few unusual cases (like the all-inclusive domestic contract above) GST can be a genuine burden, and the structure of how revenue is earned needs a closer look. This is another area where Reyman Wealth can step in. We can assist with handling your registration and returns to working out a cleaner arrangement for your specific situation.
Need help? Our team is always happy to assist. Contact us today: