The rise of freelancing, consulting, and gig work has made self-employment more popular than ever in India. But with independence comes the responsibility of managing your own taxes. The calculation of taxes are different from a salaried employee to self employed.
Who is Considered Self-Employed?
Self-employed individuals include:
- Freelancers (writers, designers, developers)
- Consultants and professionals (doctors, CAs, lawyers)
- Sole proprietors and gig economy workers (Uber drivers, Swiggy partners)
Head of Income
A self employed individual is taxed under the head “Profits and Gains from Business or Profession”.
Deductions to claim
Business Expenses [Sec 30–37]
You can deduct costs directly related to your business:
- Rent of office space
- Electricity, internet, and phone bills
- Software subscriptions
- Travel and conveyance for work
- Repairs and maintenance
Depreciation [Sec 32]
Depreciation can be claimed for assets that is used for business or profession.
Home Office Expenses
A self-employed who is working from home, a portion of rent, electricity, and maintenance can be claimed, proportionate to the area used for business.
Salary to Employees
Paid salaries or fees to staff or freelancers? It’s deductible—just ensure TDS is deducted where applicable.
Professional Fees & Legal Charges
Fees paid to chartered accountants, lawyers, or digital marketing consultants for your business are allowed as deductions.
Interest on Business Loan
Interest on capital borrowed for business purposes (loan, overdraft, or credit card used for work) is deductible.
Presumptive Tax Scheme [Sec 44ADA]
Professionals with gross receipts ≤ ₹75 lakh can opt for presumptive taxation. You declare 50% of gross income as profit—no need to maintain books or get audit.
Taxation Rates
Old Tax Regime (with deductions like 80C, 80D, home loan, etc.)
| Income Slab (₹) | Tax Rate |
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Rebate under Sec 87A available if income ≤ ₹5,00,000 (no tax payable).
New Tax Regime (with limited deductions)
| Income Slab (₹) | Tax Rate |
| Up to ₹4,00,000 | Nil |
| ₹4,00,001 – ₹8,00,000 | 5% |
| ₹8,00,001 – ₹12,00,000 | 10% |
| ₹12,00,001 – ₹16,00,000 | 15% |
| ₹16,00,001 – ₹20,00,000 | 20% |
| ₹20,00,000 - ₹24,00,000 | 25% |
| Above ₹24,00,000 | 30% |
Which ITR Should a Self-Employed File?
| Form | Who Should Use It | Key Conditions |
| ITR-3 | Self-employed individuals with business/professional income who maintain books of accounts | For those not under presumptive taxation |
| ITR-4 (Sugam) | Self-employed opting for presumptive taxation (Sec 44ADA) | Gross receipts up to ₹75 lakh, no books/audit required |
Example:
- A freelance graphic designer earning ₹50 lakh annually, and opting for 44ADA → File ITR-4
- A self-employed consultant earning ₹90 lakh with detailed expense claims → File ITR-3
FAQs
What is the income tax relief for 2025?
As per the latest budget the income upto Rs 12,00,00 is tax free.
How to pay self-assessment tax for AY 2025-26?
Step 1: Navigating to 'e-Pay Tax' Section.
Step 2: Enter PAN/TAN and Mobile Number.
Step 3: Select the correct Assessment Year and Payment Type.
Step 4: Enter Tax Payment Details.
Step 5: Select the Payment Method.
Step 6: Verify Payment Information.
Step 7: Submit the Payment.
Is GST registration mandatory for self-employed?
Only if your turnover exceeds ₹20 lakh (₹10 lakh in special states).
Do I need to get my accounts audited?
Only if you opt out of presumptive scheme and turnover exceeds ₹1 crore, or if your declared profit is below 50%.
Which regime is Better for the Self-Employed?
Choose Old Regime if you have high deductions (Section 80C, HRA, home loan, etc.)
Opt for New Regime if you want simpler compliance and don’t claim many deductions
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