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Tax for individual freelancing service providers

09 May 2025

Hi,

I started working as a freelancer providing chip design services to a semiconductor company. My first phase of work got over and I received the payment and the company said it is inclusive of GST. Soon I am going to start next phase and I expect my gross annual income from freelancing to be above 40L for FY26. I am working from home residing in TamilNadu and my company is located in Bangalore, Karnataka. Can someone please help me understand the tax structure (GST and Income tax) applicable to me and ways to minimise the tax outgoing.

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Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (7640 Points)
Replied 09 May 2025

As a freelancer providing chip design services, you'll need to understand the tax implications of your work.

Here's a breakdown of the tax structure and ways to minimize tax outgoings: GST Implications -

*GST Registration*: Since your annual turnover is expected to exceed ₹40 lakhs, you'll need to register for GST. -

*GST Rate*: The GST rate for services is typically 18%. However, you can claim input tax credit (ITC) on GST paid on inputs and services used for your business. -

*Place of Supply*: As you're working from home in Tamil Nadu and providing services to a company in Karnataka, the place of supply would be the location of the recipient (Karnataka). Income Tax Implications -

*Income Tax Slab*: As a freelancer, your income will be taxed according to the individual income tax slab rates.

- *Business Expenses*: You can claim deductions for business expenses related to your freelance work, such as software, hardware, and other necessary tools. -

*Home Office Expenses*: You may also be able to claim a portion of your home expenses as business expenses, but this would require proper documentation and calculation. Ways to Minimize Tax Outgoings -

*Claim Business Expenses*: Ensure you claim all eligible business expenses to reduce your taxable income. -

*Take Advantage of ITC*: Claim ITC on GST paid on inputs and services used for your business to reduce your GST liability. -

*Invest in Tax-Saving Instruments*: Consider investing in tax-saving instruments like PPF, NPS, or ELSS to reduce your taxable income. -

*Maintain Proper Records*: Keep accurate records of your income, expenses, and GST payments to ensure compliance and minimize tax outgoings. Additional Considerations -

*GST Returns*: Ensure you file your GST returns accurately and on time to avoid penalties. -

*Income Tax Returns*: File your income tax returns accurately and claim all eligible deductions. -

*Consult a Tax Professional*: Consider consulting a tax professional or chartered accountant to ensure you're meeting all tax compliance requirements and taking advantage of available tax savings [1].

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Manigandan (45 Points)
Replied 09 May 2025

Thank you sir for your reply. While searching in google, I came across income tax section 44AD, 44ADA . Am I not eligible for these to reduce tax?

Manigandan (45 Points)
Replied 10 May 2025

Can someone please clarify ? As explained in my initial query, I am an individual freelancer providing work from home enginerring design services. All the payments to me are online through bank transfer. Am I eligible for Sec 44ADA if my gross salary is <75 lakhs. Also Do I need to pay both GST and Income tax ? What are the tax rates for those?

Smart Tax Idea (C.A advisor) (11 Points)
Replied 10 May 2025

Hi Manigandan,

Great question! Freelancers in India are considered self-employed professionals, and their income is taxed under “Profits & Gains from Business or Profession.”

🔹 Income Tax:

If annual income exceeds ₹2.5 lakh (for individuals under 60), income tax applies as per slab rates.
You can opt for Presumptive Taxation under Sec 44ADA if gross receipts are below ₹50 lakh — pay tax on 50% of income (and no books required).

🔹 GST Applicability:

GST registration is mandatory if income exceeds ₹20 lakh (₹10 lakh in special category states).
If you work for foreign clients, your services may qualify as Export of Services — zero-rated under GST but registration still required.

💡 Pro Tip: Freelancers can claim deductions for expenses like internet, software, laptops, rent, etc. under ITR-4 or ITR-3.

For professional help in GST registration, tax filing, and freelancer advisory:
👉 Freelancer Tax Services – Smart Tax Idea

— CA Advisor | Smart Tax Idea

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