How to split freelance project income with a friend and pay tax only on my share?

ITR 434 views 3 replies

Tejas Vaij

3 Points Joined February 2026

Hi,

I received payment from a client for a freelance project. I want to send 50% of that amount to my friend who worked with me on this project.

I want to be liable to pay tax only on my 50%, and he should pay tax on the amount he receives (plus his total annual income).

What is the correct process to do this smoothly?

Should we make an agreement?
Should I give him a contract and he sends me an invoice?
Can I show the amount I send him as a business expense?

What is the exact process I should follow to stay compliant?

Replies (3)

Aashok F C Advisory

Finance & Compliance Consultant | FP

281 Points Joined January 2026

To pay tax only on your share, treat your friend as a consultant. Have him issue you an invoice for 50%, pay him via bank transfer, and claim that payment as a business expense in your ITR. This reduces your "Net Taxable Income" to just your 50% share.

Sandhya Garg

Finance Consultancy Services

139 Points Joined September 2012

You enter into a written agreement with your friend stating:
- He is an independent contractor
- Scope of work
- Revenue-sharing or fixed consideration terms
He raises an invoice to you for his share (₹5 lakhs).
You pay him against that invoice.
You record:
- ₹10 lakhs as gross receipts
- ₹5 lakhs as professional expense (subcontract charges)
He declares ₹5 lakhs as his professional income.