Freelancers’ tax filing guide: Choosing the right ITR for AY 2026-27

India’s freelance economy continues to expand as professionals increasingly prefer project-based work across industries.

However, many freelancers still face uncertainty when selecting the correct Income Tax Return (ITR) form.

For Assessment Year (AY) 2026-27, corresponding to Financial Year (FY) 2025-26, most freelancers will need to file either ITR-3 or ITR-4, depending on their taxation method and income structure.

Although the Income Tax Act does not specifically define freelancers or gig workers, it treats their earnings as income from business or profession.

Therefore, the applicable return form depends largely on whether the taxpayer opts for the presumptive taxation scheme under Section 44ADA.

ITR-4, also known as Sugam, suits resident individuals, Hindu Undivided Families (HUFs), and partnership firms, excluding LLPs, that choose Section 44ADA. Under this scheme, eligible professionals can declare 50% of their gross receipts as taxable income.

Consequently, they do not need to maintain detailed books of accounts, which significantly reduces compliance requirements.

The scheme generally applies to professionals such as doctors, lawyers, architects, engineers, accountants, technical consultants, and interior decorators.

Moreover, the eligibility threshold increases when digital transactions dominate receipts. While the standard limit remains ₹50 lakh, it rises to ₹75 lakh if cash receipts do not exceed 5% of total receipts.

On the other hand, freelancers must file ITR-3 when they follow the regular taxation method.

This form becomes necessary when professionals maintain books of accounts, claim actual business expenses, exceed Section 44ADA limits, or report profits below the presumptive rate. In such cases, taxpayers must provide detailed income and expense information.

The key distinction between the two forms lies in compliance and expense reporting. ITR-4 offers a simplified approach with lower paperwork.

In contrast, ITR-3 allows deduction of actual expenses but requires detailed record-keeping.

For instance, if a freelance consultant earns ₹20 lakh during the financial year and opts for Section 44ADA, only ₹10 lakh is treated as taxable professional income. The remaining amount is presumed to cover business expenses.

Freelancers should keep essential documents ready before filing. These include PAN, Aadhaar, Form 26AS, AIS, TIS, bank statements, client invoices, TDS certificates, advance tax details, and investment proofs.

Meanwhile, professionals not subject to audit must file their returns by July 31, 2026. Those requiring an audit will need to follow separate deadlines under tax regulations.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on February 20, 2017

Image Reference: https://pxhere.com/en/photo/764663