Income Tax implications for a Freelancer in India

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With more and more growth of internet in India, the number of freelancers or independent contractors is on a steep rise. People prefer to work for themselves on their own terms than an employer and are capable of earning far more than what they would in their day to day job. So the question comes “Do I need to pay taxes for my earnings as a freelancer”? The answer is YES and you need to pay taxes and file your income tax returns even if you are an individual consultant or a freelancer.

Within Indian Law any individual running a business where he/she is the sole owner is termed as a Sole Proprietor, the same applies with a Freelancer. A person earning on his own is considered a Sole Proprietor and needs to file income tax returns using the ITR-4 return form . If you have any other income source (maybe your full time job) you need to include that as well while filing your income tax return.

For the financial year 2012-13 (Assessment year 2013-14)  , the income tax slabs have been defined by the government of India as follows. The numbers are revised every year at the time when the finance minister announces the budget so do keep an eye for next year.

Income Tax Slab 2012-13 Work N Hire






















The tax slabs are self explanatory, if you are a general tax payer or female tax payer for the first 2 lakh of your income for the year you don’t need to pay any tax after which 10% slab is applicable till 5 lakhs and beyond that 20% and 30%.

Do I really need to pay taxes? 

Yes, absolutely. Not paying tax is a crime as per government rule and you might have to face severe penalty if the IT department raises a scrutiny against your Income Tax Filing. So file your Income Tax on time. Moreover nowadays with all payments being tracked against the PAN number issued, there is no escaping.

What is TDS and is it applicable in case of Freelance Work?

TDS is Tax Deducted at Source, Government of India has made regulations by which a company paying an individual or another company for services offered needs to deduct tax at source. But in case someone deducts tax at source they have to provide a Form 16 to the person whose tax has been deducted. You can then use this TDS amount while filing your Income Tax Return and seek refund in case your earning for the year doesn’t exceed 2 lakhs.

Find more information shared by a lawyer for the benefits of the Freelancers.

Have you filed your income tax returns?

Share your problems while filing IT returns and also if some tax implication has been missed here.

Note: This is not a legal advise and should only be considered as information provided from personal experience, for more information please consult a practising Lawyer or a Chartered Accountant.
  • Ramsy Pinto

    Thanks for this. Can you mention if there is any registration to be done in the Govt ? Do we need to include KST ? Do we need a TIN number as a freelancer ?

    • worknhire

      Don’t know what you mean by KST here but TIN number is not required. Also you don’t need to have any sort of registration to be done through the government, just your PAN card would be sufficient.

    • malkeet singh

      Hello Ramsy..
      If you need any sort of help in filing your ITR and maintaining you account i can provide this service to you.
      You can mail me at
      ca.malkeetpadam at gmail dot com
      Ca Malkeet Singh

  • ssoi

    Hi, I am a freelancer at tata elxsi. I joined over their in Aug 2012. My annual salary is 2.76 lac (23000 Per month). Company is deducting 10% as TDS every month from my salary. they are not giving any Form 16 to fill up.

    So if we check the slap rates then i am under second slab. but for this year i just joined in Aug 2012 so from aug 2012 to march 2013 its only 8 months and my annual salary will be 1,84,000. which is under first slab.

    Can you please suggest me, Do i have to pay TDS? if yes then can only company pay the TDS not me.

    • worknhire

      For this financial year, you won’t need to pay tax to the government because you will fall under the no tax slab (which is till 2 lakh) ,but the company still has to deduct Tax Deducted at source (TDS) of 10% and submit it to the Income Tax department. What you will have to do is while filing your income tax for this financial year (last date of which would be 31st July 2013), claim all the money deposited as TDS as a refund. The refund will be processed within a few months and returned to your bank account by Income Tax Department.The company has to provide you a Form 16 in May next year in case they have deducted TDS from your income.

  • Ravi Chavali

    Hi, i am an individual contractor, my base salary is 749$ PM and
    incentives are 250$ PM. I wanted to know how much tax is payable. And
    how i can frame this while paying the Income Tax.

    • worknhire

      While calculating your income tax you need to use the amount credited (in Rs) to your bank account on a monthly basis as your income. You will need to calculate total income (Sum of all monthly incomes) and then apply the various deductions (80/c etc) to come to a figure of a taxable income which will then be charged as per the slab mentioned in the article.

  • PC

    Hi ! I’m an freelancer software developer. I work with foreign clients only.
    I understand that I’ll need to pay IT as per the slabs described above.
    My question is:
    1. Do I need to pay TDS (My foreign clients do not fill any kind of Indian TDS) ?
    If your answer is ‘yes’, please guide me how to do it.
    2. Do I need to pay any kind of ‘Professional Tax’ ?

    Thanks for this valuable article.

  • Artist23

    I am a freelance designer. Can i take my payments in saving account?? And how should i take my payments from foreign clients??

    • worknhire

      Hi! Yes you can take payments in your Savings Account. The type of account doesn’t matter in case like these. For receiving payments directly from Foreign Clients you can go for Paypal (total charges including conversion to INR in the range of 7%) or a Wire Transfer (any standard bank account supports this, charges in the range of 2%). For payment safety though you should always use escrow while taking payments from foreign clients. There are other options for receiving payments like Moneybooker or cheque but all of them have a very complicated and lengthy process. You can also use ‘s payment methods to receive funds from your foreign client.

  • Loknath Char

    Since this financial year, I’ve been a freelance consultant working in the Software Engineering industry.

    I have questions about my tax liabilities and will be glad to have them answered.

    * I don’t have any company registered

    * My annual income will be roughly 20 lakh.

    * Majority of my income has been by billing overseas clients in exchange for software consultancy services

    * Other portion has been by billing local clients for the same services. These local clients have deducted tax at source for each invoice I sent them. The deduction was 10 per cent service tax according to them. They have provided me Form-16 certificates for the same.

    * This year I also became a published author and started receiving royalty payments. The publisher is U.K. based and I don’t believe any tax deductions have been made.

    * Some other minor miscellaneous incomes.

    I’ve also had personal and professional expenses for which I’ve maintained the necessary documentation.

    Can you please assert the following:

    * I believe I don’t owe GoI any service tax on overseas invoices, yes?

    * Despite paying some service tax (in the form of TDS) I still owe GoI personal income tax, yes?

    Am I missing any critical aspect? What would you advise for this year and going forward? Should I set up an organization to better manage things?



    • worknhire

      Hi Loknath,

      Let me first clarify that SERVICE TAX and TDS are entirely different. In the points you have mentioned the two seem to have been understood as the same thing.

      TDS is an amount deducted by the client (applicable only for Indian clients) before paying your invoice. Its an amount deducted at source.

      Service Tax is something that you should charge your client (again Indian Client only) and should be charged over and above the Invoice amount and this needs to be deposited to the Govt of India. This is only applicable after you have got your service tax registration which is only required after 10 lakh of income from Indian source.

      To answer your queries.

      1. You don’t owe Govt of India any service tax on overseas invoices but you owe the taxes as per slab mentioned in the article even on the earnings from export. (Overseas consultancy is treated as Export of Services)

      2. With the total earning amount you have mentioned you will fall under the slab of 30% which means there will still be some amount that you owe as personal income tax to the IT department.

      3. You have covered most of the things. If you are working alone you don’t necessarily need to go for setting up an organization. I would personally recommend you to consult a CA regarding the service tax registration (to confirm if its required or not at this point).

    • malkeet
  • wonder

    I’m a freelancer and I get projects through online marketplace. I want to open a sole proprietorship company. After opening do I need to pay income tax and service tax? Do I need get IEC number after opening sole proprietorship company? its quite confusiog. It would be very helpful if you guide me

    • worknhire

      Most of your queries regarding income tax and service tax can be answered by our reply to Mr Loknath in the discussions on this page. Regarding IEC if you are into Export of services you have to get that done as well.

  • soby

    Hello. I read somewhere (I don’t remember the source now, unfortunately) that if the payment is credited to my bank account in USD (not sure about other currencies) then it won’t be taxable. So, if I earn, say. $5000 (roughly 250000 INR) in a particular year, then I won’t have to pay the 10% tax. Is this information correct?

    • worknhire

      All earnings even from export of services is taxable as per Income Tax Law (If you are Indian Resident and not an NRI) . So even if you receive payment in other currencies directly in your bank account it is still an earning for you as per Indian Govt and hence needs to be taxed. If by any chance you come across the source of this article would really appreciate you sharing this with us.

      • Malkeet Singh

        you are a taxable assesse.

  • Karan

    I am a part time employee drawing about 2 lakhs per year (including providend fund etc) and a freelance designer (working as independent contractor) . Whether I will be assessed as an employee or as an independent contractor or both as an employee as well as independent contractor.

  • rudraksh

    Hi, I am an employee with a private firm and I draw a consolidated pay with no TDS, and hence no Form 16 from the employer. The company doesn’t provide a salary component break up. How do I file my IT?

    • worknhire

      Rudraksh, I couldn’t get if you are working as a part time or your question is only related to filing return as a full time employee. In case you are under a tax bracket, your company should deduct your TDS. In case they don’t, you need to pay tax as a self assessment tax to the Govt of India and then file your return. So based on the tax slab whatever amount you calculate will need to be paid as self assessment tax, this will take care of your tax obligation.

  • Irish N

    I am a full time salaried worker and also a part time online worker.From your replies I understand that I have to club my online income with the salary for assessing tax.My Question is whether I can deduct any charges/expenses incurred during the online work from my online income? Expenses I meant (Telephone/Internet charges,Electricity,etc related to online work)

  • Ranjeet

    Hi, I am providing hydraulic machine repairing services to my clients in Delhi & NCR. My Income is nearby 5 Lakh PA. Every month I am depositing 35 k in my saving A/C. Also I have Rs. 1,15,000 life insurance policy ( LIC & SBI) & medical policy amounting Rs. 3,600 ( Max Bupa). Kindly let me know how can i save my Tax thru rent, other expenses?? For this type of work which return form i have to file. Please Advice. Awaiting for your prompt reply.Thanks in Advance

  • Guest


    Soon, I’ll start working for an Indian company as a consultant (Working from home) and will be providing services for which they’ll pay 20L as annual salary.
    That company wants me to submit an invoice every month to get the salary and they say -’applicable taxes will be deducted from the payment (10%
    on consultancy services)’

    1.Do I still have to pay income tax of 30%? If so, how?

    2.If I’ve to pay 30% tax on my 20L income, what about the 10% consultancy services tax deducted from my salary by my employer? That comes to 40% tax on my earnings!

    Please clarify.

    Many thanks

    • worknhire

      To answer your queries,
      Although you will fall in the 30% bracket, you don’t need to pay 30% on the entire amount. The tax bracket is arranged in a way that only income above 10 lakh is taxed at 30%. Moreover there are other ways to save on taxes by doing savings (you should read more about that)
      Now coming to the point of the employer deducting TDS (10% amount), that is the correct way to for a consultant. The employer will provide you with a Form 16 which basically says that someone has deposited some part of your tax obligation on your behalf to IT Department. So lets say after calculations your total tax obligation comes to X (based on the tax slabs) and lets consider the amount already deducted and deposited by the company as Y. The total tax that you will need to pay from your pocket would be X – Y. The total Income tax return you will file for is X itself. As you can see you are not paying more when TDS is being deducted, its just that someone is depositing tax on your behalf.

  • enviro anjali

    Hi I am environmental specialist in govt. deptt. on contract, initially for one year. My monthly emolument is Rs. 24,000. Is it taxable?

    • worknhire

      Your gross income amounts to 2.88 lakh which comes under tax bracket. But there are ways by which you can save taxes through saving (80/C) and other methods. You should read more about savings and how you can save the additional amount of tax.

    • MALKEET singh

      The rent paid if any can be claimed as deduction, also there are other allowances which are part of salary and are exempt like conveyance allowance. So please contact a professional.
      CA Malkeet Singh

  • Rahul Makhija


    When paying freelancers in bangladesh or any other country, do Indian companies need to deduct TDS? How would it work in case if we are interacting with them on

    Similarly, if we are hiring indian freelancer from and paying them directly through, do we need to deduct TDS?

    • worknhire

      Rahul, When you are paying a person outside of India you don’t need to deduct taxes since the person is not eligible to pay any tax to the Indian Government.

  • kalpana

    Hello Sir, I’m an freelancer, I earn money from ads publishers, they transfer money to my paypal account and further the money goes to my indian saving bank accounts. but this FY I got income less than 2 lacs.

    Now my doubts is “Do I have to show my income”? If Yes, How? Which form has to be filled up?

  • Nishant

    I am a freelance photographer based in Bangalore,India. I work with a range of clients providing photography services. Some of my clients are from the media (newspapers and magazines), some of my clients are couples (wedding clients), and other set of clients are from Non-profits and corporate. Also, I am earning money from publishing advertisements (google adsense) on my photography blog. My other source of income is through short-term capital gains in online trading of equities. Apart from this I am planning to start teaching photography soon.

    I read that you have mentioned in of the discussions below that service tax is applicable once your gross income reaches 10 lakhs. Am I right? But, would it mean that if 10 lakhs from a particular source of income/business is reached only then you have to sollect service tax? or would it mean that if your personal incomes reaches 10 lakhs from all sources of income then you have start collecting service taxes?

    And since I work with a range of clients including newspapers, magazines and NGOs. In case I reach the 10 lakh barrier, then would it mean that i have to collect service taxes from all my clients including newspapers, NGOs, advertisers(example google adsense)?

  • communicationinfo

    Hello Sir,
    I am working with local company, get around X amount . From my freelancing, my earning around Y amount, transaction mainly on Paypal.

    Now, I query is that, I pay 80K for my college fees, 30K for Hosting Invoice and 15K for internet bill.

    1. Do I get benefit of pay my college fees?
    2. Do the Hosting Invoice and Internet Bill will consider as expense?
    3. I also hire, some freelancer and pay their invoice too. Do it consider as expense?

    Thank you

    • worknhire

      Hi, To answer your queries
      1. No you don’t get benefit directly for your college fees. But if you have a taken a student loan and are repaying the interest for the same you can get tax benefit on the same.
      2. Yes the hosting invoice and the internet bill will be considered as an expense. Just ensure that the bill are on your personal name.
      3. Yes you can consider the salary to the freelancers as an expense as well.

    • Malkeet Singh

      your tution fee can be claimed by your parents in their ITR. The other expenses you have mentioned can be claimed in the income and expenditure account and for that you need to get help from a professional at a meager cost of about thousand rupee.

  • Raghu

    I am a freelancer and I earn money from foreign clients. There is nothing called Basic and HRA in the pay. But can I deduct the eligible amount as HRA from my income ?
    PS: Great to see quick responses from you

  • Raj

    Hi, I am a sole proprieter doing freelance design for overseas clients only. When I file the ITR-4 return form, how will the govt deduct income tax from my net profits – will they deduct the amount directly from my bank account or do I need to deposit the amount at the IT office?

    Another query regarding service tax – I understand that service tax is exempt for export services. But since I have registered a service tax number, do I still need to file service tax returns showing as NIL tax? Is there a provision in the service tax return form to declare zero tax ?

    • worknhire

      Raj, The govt cannot deduct income tax directly from your net profits. You will need to submit the amount to the IT department by using the following link

      You will need to use Challan No. 280 and select type of payment as self assessment tax. Since you will be quoting your PAN number the rest is automatically taken care of.

      Regarding service tax if you have registered a service tax number you will have to file service tax returns as NIL. Yes there is a provision in the service tax return form to declare zero tax.

    • Malkeet Singh




    • MALKEET singh

      Worknhire has provided the clear solution

  • Vishant Garg

    Hi Malkeet, how are you doing? i got your reference from one of the portal while searching possible ways to pay tax and file ITR in legal terms.

    From April 2012 to Jul 2012, i was working with one company and my TDS got deducted. They have issued F16 for these 4 months. thereafter, i started working with US client directly and no F16 will be provided by them as am Independent consultant with them. How can i calculate tax for these months being Independent Consultant. please suggest

    • MALKEET singh

      You need to prepare an income and expenditure a/c and file ITR 4. You will be claimimg expenses incurred to earn income like interent, mobile phone etc.
      CA Malkeet Singh

  • Guru

    Hello. Similar to below, I also working over the internet and my income is about 15 lacs per year. As per the slabs, my tax rate is 30 %. How can i save the maximum tax. Any tips please?

    • MALKEET singh

      Hello Guru..
      For saving maximum tax u can prepare income and expenditure account of yours and file the ITR 4. You can claim all the expenses incurred in earning the income. Also certain personal expenses can also be termed as those incurred while earning the said 15 lacs.
      CA Malkeet Singh

  • Ajay


    I was a salaried employee of an Indian corporate till january(mid), for which TDS on my salary was deducted till my separation from the company. After separation I have been working as an individual consultant for a foriegn company (Software), which doesn’t deduct TDS on the invoices i send them.
    Do I have to pay advance tax on the income that hasn’t been covered under TDS or do I have to pay self-assessment tax on filing the return and show this income as income from other sources?

  • Ajay


    I was a salaried employee of an Indian corporate till january(mid), for which TDS on my salary was deducted till my separation from the company. After separation I have been working as an individual consultant for a foriegn company (Software), which doesn’t deduct TDS on the invoices i send them.
    Do I have to pay advance tax on the income that hasn’t been covered under TDS or do I have to pay self-assessment tax on filing the return and show this income as income from other sources?

  • mat

    Hello sir,

    I am freelancer and I earned 7 lakhs last year from my foreign clients through wired transfer. Do I need to pay tax. Please advice.

    • MALKEET singh

      Hello mat,
      You need to pay tax as you have crossed the slab of 2 lacs. Also u need to file ITR 4 as u are a professional and from this income you need to deduct the expenses that u incur in earning this income. Also an income and expenditure account is prepared in cases like u. Also there are certain other deductions for rent paid.
      CA Malkeet Singh

      • mat

        Thanks Malkeet,

        While reading many posts below I found this link:

        Do I need to use Challan 280 and select Self assessment tax radio button to pay online? Also while paying tax online using the above link do I need to show evidence of deductions like rent, insurance and other section 80 c elements?

        Also is there any deadline for tax payment of the year 2012 – 2013 period?

        • MALKEET singh

          Dear mat

          yes u need to use challan 280 to pay tax
          please select self assessment if paying after end of march 31 of the year and advance tax if paying before end of the financial year

          also there is no need for any evidence for tax payment as well as for filing the return

          deadlines are for advance tax only applicable to those whoose tax liability is more than 10000 in a year
          there is no such deadline but u will have to pay self assessment tax before filing the return of income

  • Abbi

    Hi Sir, I am a full time employee in India and I am going to work as a software developer on part-time basis from home for my client outside India. I have tried talking to some 3 tax consultants and have got different answers from each.

    My query is,

    1. Which category of Taxation do I fall into? Meaning, do I need to file returns using ITR-2 or ITR-4?

    2. What sort of taxes will I need to pay in India or charge to the client for the income that I receive from my client?

    3. Is the payment currency type an important factor to consider? Because, I have heared that if I receive payment in forex in my account then I need not pay service tax but if I receive payment in Indian rupees then I need to pay service tax if my income exceeds 9 Lakh rupees.

    4. What will be the best mode of payment to use so that minimum taxes are to be paid?

    4. Do I need to apply for service tax registration or any other kind of registration if my income exceeds 10 Lakhs/Year?

    5. Do I need to maintain books of accounts and get my accounts audited?

    6. Is there any ceiling on the income that can be received from the client (outside India) to be considered while considering taxation and filing the returns?

    Your prompt reply is highly appreciated.


  • Sambit

    I was looking for this information from a long time. I am very lucky to find this website. I fully appreciate your work. Please help me as well on my queries.
    I am working as a individual consultant and I made roughly 20Lac in this financial year. I mainly work for US clients and they pay me through wire transfer.
    1>I heard I have to pay advance tax every quarter, is it true? if it is true than i have not paid any advance tax till now what should I do now.
    2>Any tax saving ideas for me as I am falling under high tax bracket. I am already having around 2Lacs of insurance premiums. How can I save more tax?

    Waiting for your response. Keep the nice job. Cheers!!

    • MALKEET singh
    • Axe

      Any one will please answer this ?
      I am in same situation

      • malkeet singh

        Hello Axe..

        I am a practicing chartered accountnat and Mr Sambit is availing my services for ITR filing and consultancy.

        If you are in the similar situation then you need to file ITR 4 showing your income under head INCOME FROM BUSINESS/PROFESSION.

        An income and expenditure expenditure account will be prepared and against the receipts from your foreign clients expenses such as internet, mobile exp, electricity, rent of ofiice, salary if any paid or if work sub contracted to other freelancers in India then payment to them can also be claimes, Depreciation of assets used in profession to render the services to your clients like Laptop, Office furniture, desktop, Testing devices like android phones, iphome, Router, Travelling expenses.

        A balance sheet will also be prepared and a capital account of yours.

        Then final computation of Income and tax thereon will be prepared.
        After that once the things are settled to your satisfaction ITR .xml file will be uploaded at income tax efiling web portal.

        If you want to discuss any queries or avail of my services then you can mail me at

        ca.malkeetpadam at gmail dot com


        CA Malkeet Singh


      • jagmohan singh


      • jagmohan singh

        Hello Axe,
        I can help you with perfect tax planning and e filing your ITR 4.
        Please contact me at ca.jagmohansingh at gmail dot com

      • worknhire

        Hi Sambit,

        To answer your questions.

        1. Yes advance tax is essential and should be paid in case you are liable to pay taxes (which is true in your case). On or before 15th September- 30% of the advance tax liabilityOn or before 15th December- 60% of the advance tax liability. On or before 15th March – 100% of the advance tax liability . You should consult a practising CA to get more details about what to do in case you have not paid Advance Tax.

        2. Tax saving ideas would include savings under 80C (upto 1 Lakh) . Professional Expenses which you might have incurred including office rent, etc can also be used for saving taxes. This is not a legal advice and you should talk to a CA regarding this.

  • subramanian

    How to contact

    MALKEET singh – phone no and email address

  • Meghalee Das

    Thanks for the info on ITR4. As a freelance writer, i earn less than 2 lakh annually, so I don’t fall in the tax bracket and do not have to pay taxes. But my interest from savings account income may be above Rs 10,000 and the bank will deduct an amount as TDS. I think I will have to file returns so that I get that refund.

    I am confused about a few things: What is the last date for filling up ITR 4? March 31 or July 31? And after filing returns, do I need to file anything else? That is, for a refund, do I need to file another form and by when?

  • Shiva

    Hi Malkeet,
    I am going to file my income tax return for the AY 2012-2013 (Ya I am going to file my IT return late due to some unforeseen circumstances and it seems I will have to incur a good amount of interest too). I actually earn money from blogging (advertising, adsense and stuffs) and Affiliate marketing and the amount sums up to around 4-5 lakhs in the fiscal year so I suppose i will have to fill the ITR4 form but I have a few minor confusions since this is the first time I am filling my return as self employed professional. Previously I was employed in a MNC so just had to fill the ITR1 which was easy.

    Anyways here are my questions:

    1) In the form, you have to fill the business or profession type and code. Since I am an online freelancer/blogger which option would be the most suitable. Should I choose and fill the Others options under Professions head or the IT Enabled Services under the Services Sector head. I am a little confused in the sense that I just work as an individual and would not want to choose something wrong which would categorize me as a firm rather than just an individual.

    2)Did I need to have maintained a book of account since I have not done the same.

    3) Did I needed to have my income audited? I mean my earnings are not to much for a need of an audit or is it? What kind of income/profession comes under the purview of an audit?

  • Rrambo

    Hello sir, I work as an freelancer in india, for an US individual (he has an database where he earn money through membership), my Monthly salary is 30000 and every quarter i get 15000 incentives.. I dont get any pay slips and form 16.

    I was aware that my transactions will be track through PAN number, so i need to pay income tax..

    But my question is how ?

    i dont have form 16, company is not registered in india… even i dont have my payslips… only i have my bank account statements….

  • Sambit

    Hi Sir, Please reply me…

  • Varun

    Hi currently working as full time employee with my current company from september 2012, I have some 2.4 Lac CTC. Before that from feb’12 I worked as freelancer developing mobile applications. i have received a payment of around 90K from this freelancer job till March.’13

    1) Do i need to pay tax? As my full time income + Money I have received for my freelancer work is exceeding 2 lac.

    2) I am expecting to receive some 1.5 lac from my freelancer work this year + my full time employment Pay. Our taxes are usually filed by our company. We have to submit our claims premiums,etc.What would be right approach for this year?

  • Suchitra


    I am earning around $2000 per month, this depends on hours worked every month so it might go up or down month to month. Is it ok if I pay the taxes at the end of the year instead of quarterly, while filing my IT returns? Can I treat this as Income from other sources – Consultancy? This is because I have a full time job as well where I am getting a fixed salary. In my full time job my employer deducts TDS. But in my part time job, my employer is based out of Canada, so he does not deduct any TDS. I have accumulated a lot of money in my escrow account, but did not transfer these to my bank account as I am a bit worried about the tax implications. I was wondering, if the above approach which I have thought is correct.


    • Suchitra

      I am earning around $2000 i.e. around Rs. 100000 from my part time job and around Rs. 60000 from my full time job.

      • malkeet singh

        Hello Suchitra,
        You need to file your ITR as you must have mentioned your PAN in your paypal account.
        Also if you wouldnot file ITR then you might gat a notice undersection 142(1) served to your address given for getting your PAN, asking for your ITR and other documents.
        So you must file ITR as you are getting higher income and can make your own start up in near future having a handsome capital account balance.
        The expenses incurred will be claimed and profits will come down.
        There is nothing which will relates the income tax and company rules so don’t worry as to filing ITR 4. Even ITR’s are filed for illegal income
        For hiring my services please mail to me
        ca.malkeetpadam@gmail .com
        CA Malkeet Singh

    • Abbi

      Hi Suchitra, I am also looking for similar information. Please let me know if you have already received answers to your queries. It would be helpful.

      • malkeet singh

        Hello Abbi,
        You need to file your ITR as you must have mentioned your PAN in your paypal account.
        Also if you wouldnot file ITR then you might gat a notice undersection 142(1) served to your address give for getting your PAN asking for your ITR and other documents.
        So you must file ITR as you are getting higher income and can make your own start up in near future having a handsome capital account balance.
        The expenses incurred will be claimed and profits will come down.
        For hiring my services please mail to me
        ca.malkeetpadam@gmail .com
        CA Malkeet Singh

      • jagmohan singh

        Hello Abbi,

        I have already replied to your query but i am not finding the same in this thread. I can help you out with pefect tax planning and e filing your ITR 4. Please contact me at my mail id

        ca.malkeetpadam at gmail dot com


        CA Malkeet Singh

    • jagmohan singh

      Hello Suchitra,

      I have already replied to your query but i am not finding the same in this thread. I can help you out with perfect tax planning and e filing your ITR 4. Please contact me at my mail id

      ca.malkeetpadam at gmail dot com


      CA Malkeet Singh

  • George

    I’m doing some software for a Ltd company and the total amount i have to get is RS. 75000 and now they are telling they will deduct 10% of the total amount. Is there any limit for not deducting the TDS, Like below RS 75000. This will be the total amount for the financial year from the company and I dont have any other income from India anymore.

    • malkeet singh

      Hello George,

      There are two
      sections in the Indian income tax act, one of them will be applicable in your

      either 194c
      (contractor, jobworker )

      limit for non
      deduction of TDs is 30000per transaction and not exceeding 75000 in a
      particular year

      or 194j
      (professional receipts)

      limit for non
      deduction of tds is receipts not to be greater than 30000 in a year.

      For any other
      queries please

      mail to me at
      ca.malkeetpadam at


      Ca Malkeet Singh

  • Arthee

    I have some more queries regarding how to fill the form ITR 4 form ?

    I work as a freelancer in India for a US individual(company is registered so no TAN id) and my monthly salary varies from Rs. 12 K to 25 K. The salary is wired to my bank account and so I dont get payslips or form 16. I have only bank account statements.

    Can you pls guide me ?

  • Patel Amit

    I am working as a individual freelancer and I made roughly 20Lac in this
    financial year. I mainly work for US clients and they pay me through paypal and from this amount i will pay other freelancer person who works for me through NEFT. so can i show these amount as a part of expense?
    1>I heard I have to pay advance tax every quarter,
    is it true? if it is true than i have not paid any advance tax till now
    what should I do now.
    2>Any tax saving ideas for me as I am
    falling under high tax bracket. I am already having around 2Lacs of
    insurance premiums. How can I save more tax?

    • jagmohan singh

      Hello Amit,

      I am a practicing chartered acocuntant and can help you with perfect tax planning and payment of taxes online and e filing your ITR.

      You being a professional freelancer need to file ITR 4 and having income in excess of 5 lacs so you need to e file your ITR.

      We will prepare income and expenditure account and claim the payments to freelancers as expense, other expenses like Rent of office, internet expenses, electricity expenses, mobile expenses, travelling, legal expenses and other misc expenses attributable to your profession. Also we need to claim depreciation on assets like laptop, office furniture, router, mobile phone(all those things which are having useful life in excess of one year and are being used in your profession by you for rendering services to your clients abroad and in India.)

      The balance receipts net of these expenses will be your taxable income.
      Also as far as advance tax is concerned, if you have not paid that then you need to pay tax + interest thereon which will be a nominal amount.

      Then preparing your capital account, balance sheet and computation of income then generating the XML e return and uploading the same on income tax e filing web portal.

      Also deduction for LIP can be claimed for one lac only and saving account interest is exempt to the extent of ten thousand rupees in a year.

      Please contact me at my mail id

      ca.malkeetpadam at gmail dot com for any more queries and hiring my services.


      Ca Malkeet Singh


  • Varsha


    In 2011, I worked for an inter-government organisation based in Rome. They paid me to do a consultancy in India for them. Since the organisation is an inter-government body, money paid by them is tax-free, like UN organisations, so, they haven’t issued me a TDS or Form 16A. Should I file a return for this amount and how? My CA was confused and hence did not file a return for this period

    • Malkeet Singh

      Hello Varsha,

      I think so that the CA you contacted got it wrong. As per section 5 of the Income tax Act all the income whether accrue or arise or received in India is taxable in India. And you while being residing in India rendered the services and the organisation being a foreign organisation and not having any registered Company or any of its joint ventures in India did not deduct the tax. So it is you who is required to pay the tax and file the ITR. You will be filing ITR 4 as a professional rendering services abroad.

      If you have any other queries and need my services then please feel free to contact me at ca.malkeetpadam@ gmail .com


      CA malkeet Singh

  • Sakshi

    I am working as a free lancer and need to file my return. Can anyone tell me what will be the nature of business i need to file my return. I’m working as a freelancer and working from home. All of my work involves working on computer.

    Thanks in advance.

  • Its me


    Apart from my secular work, I’m working part time for a US based company and I earn somewhere between 10-15K. To be precise, I recently started working from April’13 and the first pay was around 60 USD (3K) last month, this month would be around 10K. Could you please let me know if I should show this while filing my tax this year and also, how should I indicate and how much should I pay?


  • sree4sree

    Hello Sir,

    I am an Indian citizen, started working as a freelancer when I was in France in 2011 OCT.My salary was directly credited to my savings account in India via Paypal. I came back to India in 2012 OCT, and still continue my earnings to SB account. Could you please tell me whether I need to Pay tax during period from Mar- 2012 to Sep-2012 ? as by records , I was staying outside India.

    My total earnings for 2012-13 financial year is about 8 lakhs.

    I didn’t pay TAX during 2011 as my earnings were below 1.8L limits.

    My living status : I went to France with my husband who was on deputation from Indian company on 2011 APRIL.We returned back to India on 2012 OCT.

    Thanks a lot,

  • Sujit

    I am an Indian. Currently I may earn in dollars as professional fees by working abroad. How the tax is calculated?
    Secondly can I receive Dollars in my indian saving account? How?

  • Nidhi


    I’m a freelance writer in India and use Elance to get money. I’ve heard that after 9 lakh rupees per year, you need to get a service tax id and use it to invoice your customers.

    How do I invoice my customers over Elance? I’m ok with paying the taxes but I dont know where to add the service tax number.

    Please help.

  • sanoop

    Dear Malkeet,,

    I am Sanoop, and I am in a bit of a fix regarding my income tax. I worked for my current company as a freelancer for 6 months, and there they deducted a tax of 10% towards TDS. My doubt is while filling the ITR 4 return form where do i file this under, I mean which category.

  • Raj

    I have income from elance and I will file ITR-4 and show the income as Income from profession. ITR-4 has a section named FSI – Income arising outside India. Do I need to fill-in this section? It asks for TAN of the employer. In elance, we work for multiple employers across multiple countries and it will be difficult to get the TAN from the client. Could you pls clarify this doubt?

  • Chandra


    I am chandra, I am working as a individual freelancer. i have earned from the and after that I am getting the money from the western union. I made roughly 20Lac from last year.I got this message in the Below
    “” Since you are working for your clients abroad, Service tax is not applicable in your case as this amounts to export of services and export of service is not chargeable to service tax “”

    Yes Even I am working for my abroad client .

    Please help for the IT returns.


  • durgadevi


    I was working as a part time faculty with a employer, and i earned 2,16,000.from April 2012 to November 2012. then I joined full time with the same employer, and till March 2013, i got salary income.
    What is the return form i should file. and also is there any expenses i can show for my part time income?

    Please help.

  • Siddharth

    Hello, your post is very helpful. I used to work at Odesk and some other sites last year. My income is not very huge. Still I think I should add it to my income. Do I have to pay tax for individual projects I completed in odesk or just the money withdrawal through PayPal?

  • [email protected]

    Hi ,
    I am Divyaa,, Working with a company , package is 15Lac+
    Also i own agricultural land.

    Can I Show Agricultural loss of 2 lacks in my taxable income, to bring my tax eligibly down?

    many thanks

    • Malkeet Siingh

      Hello Divyaa,

      Regarding your query as to treatment of Agricultural loss.

      As per the provisions of Income tax Agricultural income is exempt from Income tax and therefore the loss cannot be claimed for exempt income.

      But the special provision applicable to Agricultural loss is that the loss can be carried forward for the next eight years but can be set off against the agricultural income that may arise in the coming years.

      If you are having agricultural income then you must disclose the same as it will only be added for computing taxabilty at higher slab and then subsequently deducted.
      And since you are already having income of 15 lacs from you regular job then you are already in the tax bracket of 30% and so you can show the agricultural income without paying any tax on the same. As you are already in highest tax bracket.

      Hope you understand my point.

      Please feel free to contact me for any further queries or hiring my services for ITR filing or any other legal services.

      Looking forward to hear from you.

      CA Malkeet

      • [email protected]

        Thanks a lot.. Mr. Singh :)

  • SP

    Hi ! I’m an freelancer software developer and I work for a foreign client. I had just payed the advance tax Online by choosing form 280. But I can not see in Traces under Form 26as. I think its not linked for some reason. Where Can I View the amount that I have deducted through Ner Banking.

  • Amit R. Sharma

    Goodevening everyone.

    Hi I’am a legal contractor of civil construction.. and i would like to ask about some questions that is :-
    1) I want to explore my contractor ship so what would be better for me regarding tax saving ?
    between a firm , limited company or anything else?
    as now im getting my payment through cheques so what can i alternatively do for the tax saving ?
    thank you

  • Shreya

    Just started a freelance design company with 5 designers in 2011, and we got paid around 9 lac in 2011, and around 20 lac in 2012, and our earning has reached around 20 lac so far in 2013. We were never aware of the Tax rules as we started the firm only as a pocket money source during college days. As we want to develop and register as a company, could you please explain what are the tax liabilities at the moment, and how to settle all the pending taxes?

    We got all the payments via Paypal and 60-70% of our total earnings are spent for expenses like Salary, room, power, internet other stuff etc

    We are ready to consult a CA now, but we would like to know your advice first

    PS: All the payments are for exported services [Design] to clients abroad

    Thank you

    Shreya Agraval

  • Rucha

    Sir . I am working as buying agent for a US company , sourcing products for them for which US company wants to pay me commission in US Dollars . I am a freelancer housewife . What sort of taxes will be applicable on this commission and since I have buy basic infrastructure from this commission , spend on travelling , telephones , couriers etc , whether i can deduct this from my commission amount . pl advise

  • Anna

    i have a query. i’ve recently been made a consultant for 6 months, after having worked at an indian company for about 9 months. the hr person told me that i would not have to pay service tax as i was a consultant for only 6 months. is this true? thank you.

  • Pawan

    Dear Sir and Mr. Malkeet,

    Good morning! Please if you can answer what is applicable to me?

    1. I have mainly selling “Software” and “Software Services” to international clients, billed in USD
    2. The payment is received via “PayPal”, they do a NEFT in INR to my bank account
    3. The total revenue exceeds 25 Lakhs annually

    My questions:

    1. Do I need to pay service tax or VAT?
    2. Do I need an IE Code?
    3. What documents like invoices / bill I need to maintain?
    4. The actual clients “the service recipients” are “non-Indian” but they pay via PayPal as the payment processor is “PayPal”. Will then “PayPal” be considered as my client, as the final INR transfer to bank comes from “PayPal”?
    5. Is “PayPal” treated as “foreign” / “non Indian” by RBI?

    I really appreciate if you could take some time and reply me.


    • Nitin Surana

      I’m also in the same situation. Can anyone please reply!

    • malkeet singh

      Hello Pawan see the reply below. This is basically meant for you.


    • malkeet singh

      Hello Nitin and pawan,

      Here are the detailed answers to your queries

      You don’t need any IEC as of now. Since you are only rendering consultancy services and not selling any packaged software. when you will open a current account then the bank authorities will ask for a purpose code for the receipt of foreign currency. Also they might ask for getting an IEC. In case you receive money through saving account than there is no requirement to mention the purpose code. There is mandatory requirement of a certificate from bank, the Bank for getting an IEC issued, bank will certify that this person is in receipt of foreign income and so an IEC code should be issued to this person.

      Since gross receipts are more than 25 Lac, So tax audit is applicable under section 44AB in case of a person having income from profession. Also TAN (Tax deduction and collection account number) is also required for persons eligible for Tax audit. You need not get the TAN in the first year. But in the next financial year i.e. from 01.04.2014, you will have to get TAN and make proper tax deductions and file TDS returns on quarterly basis

      Service Tax
      Service tax is also not applicable in case of export of services and since your client is based out in US, the provisions of service tax act are not applicable

      VAT is also not applicable since you are not selling any product. This is just a consultancy or a small software application. These are not products. Packaged software sold by putting it on a storage device are products and so those are liable for VAT.

  • Kishor


    I am running a professional IT course online. I get fees from the international students. At the end of each batch I transfer the 50% of total amount to course instructor after deducting the expenses. The instructor is currently in US (but Indian resident) and his bank account where I transfer amount is in India. The amount per month is 50k+ to the instructor.

    Want to know:
    1) Do I need to deduct the income tax from the amount I transfer to the instructor?
    2) What all taxes applicable to my account as I’m a individual (sole proprietorship) tax payer?


    • Malkeet Signh

      Hello Kishor,

      I need more detailed information to guide you about the taxability for both of you.
      Please share your query at ca.malkeetpadam at gmail dot com

      CA Malkeet Singh

  • Virsa

    I am taking projects from US and got payment by Paypal as well as i am working in an IT firm. My questions is

    1. Should i have to pay tax for US Projects?
    2. I have asked to Paypal customer care they told that there is no need to pay tax I am still worrying about it. Please suggest
    3. Which ITR i have to file?
    4. Should i have to pay advance tax? if i don’t pay advance tax and pay while filing ITR then what would happen?

    Awaiting for your reply?

    • Malkeet Singh

      Hello Virsa,

      As regards your queries, find below the relevant answers

      1. Yes you need to pay income tax on the income from your US projects. You can claim the expenses like depreciation on laptop and other testing devices, Expenses like internet charges, mobile expenses, electricity, and other related expenses. The net income will be liable for income tax.

      2. Paypal personnel will be considering other indirect taxes. The income tax is to be paid in the country of residence. You are earning and receiving income in India and therefore liable to income tax. The income is accruing outside India but is received in India. You have not paid any taxes in US and would have filled up non residency tax form for non deduction of tax at source so therefore liable to pay income tax in India

      3. ITR 4 is applicable in your case.

      4. If the tax liability is greater than Rs. 10,000/- in a financial year then you should pay advance tax. Non payment of advance instalments results in payment of income tax together with interest at 1% per month (means 12% annual interest rate).

      For other queries of hiring my services please contact at 99159-73593

      or mail me at ca dot malkeetpadam at gmail dot com


      CA Malkeet Singh

  • Thinker

    I worked in the FY 2013-2014 in a company for 3 months and earned 39000 Rs and I earned Rs 140000 by freelancing doing data entry jobs for a US company online so my total income for the year is Rs 179000 , do i need to file income tax return for Ass yr 2014-2015 ?

    • Malkeet Singh

      Hello Thinker,

      Since your Income is below Rs. 2 lacs. On this basis you are not required to file Income tax return but still income tax return filing is recommended as you might opt for a loan in near future. You can either file ITR 1 or 4. Usually professional freelancers file ITR 4 and prepare proper Income and Expenditure account, balance sheet, Capital account and computation of income statement. If you file ITR 1 and take your freelancing Income as income from other sources rather than taking it as professional income then you need not prepare the above accounts. Simply present your gross income for taxation. Since total income is below Rs. 2 lacs so not taxes payable.
      CA malkeet singh

  • Guest

    Hi, I am working as full time employee with a company from feb-2013, I have some 4.2 Lac CTC.
    i also do some part time work for an indian client, i have received a total payment of around 1.5Lac from part time work directly in my account in 2013-14.
    I have also borrowed some money from friends (20 k approx) in my account.

    1) Do i need to pay tax for full time income + Part time work + borrowed money.

    2) There is no TDS for the part time work, how to mention the part time income while filling ITR?

  • Nishant

    Hi, I am working as full time employee with a company from feb-2013, I have some 4.2 Lac CTC.
    i also do some part time work for an indian client, i have received a total payment of around 1.5Lac from part time work directly in my account in 2013-14.
    I have also borrowed some money from friends (20 k approx) in my account.

    1) Do i need to pay tax for full time income + Part time work + borrowed money.

    2) There is no TDS for the part time work, how to mention the part time income while filling ITR? do i need to provide proof for the other income (part time work) as i dont have any.

    • Malkeet

      Hello Nishant,
      On the basis of the facts provided by you, I would recommend you to file your tax return. You need to file ITR 4. The borrowed money is not taxable. It will appear as current liability in your balance sheet. Your employer would have deducted TDS from your Salary, but you need to declare your part time consultancy receipts and claim the relevant expenses incurred if any against that income.
      I can help you with preparing necessary statements and file ITR 4.
      Please contact me at ca dot malkeetpadam at gmail dot com
      CA malkeet singh

      • Nishant

        how will mention the borrowed money while filing ITR. As i stated previously, i don’t have any receipt for the part time work. I just get the pay directly in my bank account.
        Infact borrowed money and part time income both are bank transfer from individuals.

      • Nishant

        also since my total taxable income is below 5 Lac, is it necessary to file ITR, what are possible disadvantage/harm if i do not fill ITR.

        • malkeet singh

          Hello Nishant,
          There is no exemption from filing tax return if income is below Rs. 5 lac. For declaring that you have borrowed some money then you will have to prepare a balance sheet and show the borrowed money as current liability on the liability side of balance sheet.
          CA malkeet singh

  • DM

    Hi, i am a freelance designer and work for clients abroad, the money is send via PAYPAL and i get the amount transferred to my bank account in india. i would like to know about how to file my tax returns. I had sent a mail to Malkeet. Please reply

  • mony

    Hi i am Mony , i am working as consultant for a German company and my earnings are around 90000 per yr as fees and rest whatever my expenses are also born by the company including any labeling or branding accessories, office rent etc … i want to know are there any rebates related to foreign earnings and how much is exempted in this case …

  • Jeetu

    I’m getting monthly royalties income from my images in USD and paypal is the mediator to convert the money in Rs and transfer it to my Indian bank account. I have few more questions about Tax.

    1) What is the Tax slab for royalty free income?
    2) What is the amount for “NO Tax”?
    3) Which ITR I have to fill?
    4) Do have I to pay any service tax?

    • Malkeet Singh

      Hello Jeetu,

      A couple of questions needs to be discussed. Please call me at 09915973593.

      CA Malkeet Singh

  • Freelancer

    I am working full time and earn around 4 lac. I earned this year through freelance work around 1 lac. Tax for full time is deducted through TDS. How to pay for 1 lac? But involved acquiring system and other expenses for freelance work upto 50k. please advise on how and when to pay?

    • Malkeet Singh

      ITR 1 will be applicable if you take freelancing income as income from other souces.

      • Malkeet Singh

        You can show your freelancing income net of expenses under head income from other sources. You can’t take the benefit of depreciation on your system as you are not a full time freelancer. You will club both the incomes(salary + freelancing net of expenses) ad then calculate tax as per applicable tax slab for Assessment year 2014-15 and then from gross tax liability deduct the TDS figure as appearing in your form 16. The balance is your income tax liability. You can deposit at tin-nsdl website the tax.
        Contact me for any further help.


        Malkeet Singh

    • Malkeet Singh

      You can show your freelancing income net of expenses under head income from other sources. You can’t take the benefit of depreciation on your system as you are not a full time freelancer. You will club both the incomes(salary + freelancing net of expenses) ad then calculate tax as per applicable tax slab for Assessment year 2014-15 and then from gross tax liability deduct the TDS figure. The balance is your income tax liability. You can deposit at tin-nsdl website the tax.
      Malkeet Singh

  • Ajit

    Dear all,

    I am a salaried employee and I file my tax. I have a query which has been bothering me and there has not been a satisfactory answer that I have received which fulfills all the dimensions of my question. Before answering my question, kindly read all aspects of my question and then after proper evaluation of each part, then kindly answer.

    1. I work here in India and receive a salary as an earning.

    2. I have a paypal account with verified credentials which I use for my online international/ domestic shopping via my linked savings bank or credit card account.

    3. I am not any kind of seller of services or products in India or Abroad.

    4. I do not have an IE code (IEC).

    I am supposed to receive some funds from my relatives and friends as gifts in cash. The number of contributors can be somewhere near 50- 60 and the amount can be equivalent to somewhere US$ 40,000 or more. This amount is for my charity and drama stage shows. I do not have any registered charity or organisation in India since our contributions were never that big. The amount may not be a single amount of sum but in smaller portions consolidating to the given value. All my contributors will pay me thru’ paypal.

    As I have heard that paypal cannot receive personal contributions or donations or be used to remit amount or lumpsum amount exceeding US$ 3000 in one single transaction or exceed US$ 75000 as consolidated value for a single financial year. I am ready to pay the tax associated with the transaction, but how can I receive my money thru’ paypal?

    Will I require an IE code and a current account? Since I am not selling any services or products online. Is there a way to save on the tax, through investments in govt. funds?

    Let me tell you that I am a novice and hence cannot make a proper judgement hence I am seeking your expert advice. Kindly show me a legal process by which my payments may come thru’ paypal without any hassle and that the maount be transferred to my bank account and that there are no problems for me in terms of the Income Tax. Kindly list all my liabilities and solutions. Will there be an advance tax and requirement of TAN for me? I hope Mr. Malkeet will be able to answer my queries as he has helped others. Thank you in advance.

    • Malkeet Singh

      Hello Ajit,

      Thanks for showing trust in me.
      After going through your situation,
      The very first thing I would like to add is that Paypal has banned personal payments to India. Any person can send you money via paypal either for Goods or Services.
      Now the next thing is if you receive the payments for goods and services then the remittances will be taxable in your hands in India. You will have to pay Income tax. But the thing you are not supplying any goods or rendering any services. Since these funds are meant for charity. These should not be liable to any tax on the money received but the correct payment is required to be identified.
      The basic is that you won’t be able to get the funds via Paypal for charity purposes.

      Also legally you should opt to get your society registered in India first. Then get a bank account opened in the name of the society and then receive the payments directly into the society’s bank account and incurr those for the objects of the society. You will be receiving close to INR 25 lac. However I am looking for the most simple yet legal way of receiving the funds in your particular case.
      Hope i could find one and help you.

      CA Malkeet Singh

      • Ajit

        Dear Malkeet Sir, thank you for your reply.

        1. I am a salaried employee and hence I would like to work as I have been doing till date. I am not a professional NGO and have no plans as to run a registered NGO. It is out of passion to do something for the society, that my friends and I raise some money to help the needy and the poor. We use some of the money collected to stage some nukkad nataks and dramas on stage. Hence we have no intention to have a NGO of our own or have it registered as of now.

        2. I had spoken with paypal and indeed paypal has stopped any personal payments. All the payments are supposed to be collected by my friends company which runs a website for fund raising and will be transferred to my paypal account. Is it possible to show this amount as amount received in consultation given to that company? In case yes, then can I receive this amount into my paypal account and then further into my savings account. Will I need an IE code and a current account then? I am not getting any way out. Kindly show me the way out. Hope with your earnest replies I will be able to solve out this problem easily. Thank you and warm regards

        • Malkeet Singh

          Hello Ajit,

          This is a good option to get the money through one of fund raising society, but then you can expend the money directly for the charitable purposes if those objectives are there in the objects of your friend’s fund raising society. Why would you take that money and pay taxes? Directly expend that money for charitable purposes from your friends fund raising society and keep yourself away. The charitable societies are exempt from Income tax to the extent they expend the receipts for objectives of the society. So if whole of the money is expended for the purposes of the society then no income tax is payable.
          You don’t need an IEC or current account.
          Moreover the fund raising concern can amend its objectives as well.

  • Mithun Divakaran

    First of all, thanks to worknhire for this article. I searched for information online after calling up the customer assistance line of the IT department — and they were super useless! Reading the many comments here, I understood as a freelancer I need to download ITR 4 form, but I would like some clarifications from either worknhire or Malkeet Singh who has been very helpful so far:

    1) Do I need to download ITR 4 or ITR4S form? I see two of them on the Income Tax website ITR 4 is “For Individuals & HUFs having income from a proprietary business or profession” whereas ITR 4S is “For Individuals/HUF having income from presumptive business”.

    2) I freelance and most of my clients are in the West and I get paid through the freelance company itself. They wire transfer funds to my Citibank account and I have records of each transaction coming through to my account. Won’t my bank statement be needed to be submitted as proof?

    3) I earned a net total of Rs. 2,77,375 in 2013 (January – December) and I paid an LIC insurance premium if Rs. 22040. I have no other investments. Using this tax calculator:, I get that I have to pay income tax of Rs. 7970. Can this amount be paid online?

    • Malkeet Singh

      Hello Mithun Ji,

      As regards payment of tax is concerned, you can pay the same online but I don’t hink that you need to pay any tax. Have you deducted the expenses that you would have incurred in rendering the services to your clients like internet charges, electricity, mobile expenses, depreciation on laptop/desktop, office furniture. I mean you need to claim these expenses against your total receipts in bank account. Then from balance make deductions for LIC then calculate the tax.
      Please send me a mail i will send you the step you step procedure to pay taxes

      ca.malkeetpadam at gmail dot com

      CA malkeet Singh

  • sandeep2811

    Hello Sir ,

    I am a government employee and have just submitted my income tax deduction details on my salary to my employer so as to deduct taxes while giving salary for this month (Feb
    2014) .

    1. My total taxable salary income after applying my insurance premium is 277,905.00.
    2. I am a freelance developer too and earned around 1,80,000 this year ( 2013-14) .

    Now my question is , Since I have submitted my tax assessment details to
    my government employer but I was confused whether to show my freelance
    income or not so I didn’t show it.

    Now I want to pay taxes for freelance income as well. Please guide me
    if that’s wrong.How can I do this ? Is there any risks involved in
    future ?


    • Malkeet Singh

      Hello Sandeep,

      As regards paying tax on freelance income is concerned, you being a government employee can take as Income from other sources. Then you can show the net income of freelancing work as Income from other sources and pay tax accordingly.
      A government employee can’t indulge in any sort of business/professional activity so better to take Income from other sources.
      Please contact me if you need any help with filing and preparing your tax return or paying taxes.
      ca.malkeetpadam at gmail dot com

      CA Malkeet Singh

  • Amit


    I own a small web design company. I read about section 44AD of income tax according to which, if a small business owner has turn over near about 60lac per annum, then he can show approx 8% of profit and pay the tax according to that. He dont need to keep books of accounts.

    Does it mean that if for example my turnover is 60 lac and my profit is 30lac, I can pay tax showing 8% profit?


    • Malkeet Singh

      Section 44AD is applicable in case of person having income from business except those covered under 44AE ie plying and running trucks. Now you coming to you question, creating website design is professional services, software development and design work need professional expertise. Software design is not a business, so 44AD is not applicable in this case. In case of professionals ITR 4 is applicable and a proper income and expenditure, balance sheet and capital account is prepared. Since you would have small number of entries, books creation is not a difficult task. You can even ues an excel file to keep the records. Books are prepared only for record purposes. I can share an excel file for you. You should not adopt section 44AD as it is not applicable in your case. Section 44AD is also not applicable in case of Doctors, chartered accountants, software professionals. So they all file ITR 4 and not ITR 4S.

      Please contact me for any further queries at ca.malkeetpada at gmail dot com

      CA malkeet Singh

  • amit


    I own a small web design company. I read about section 44AD of income tax according to which, if a small business owner has turn over near about 60lac per annum, then he can show approx 8% of profit and pay the tax according to that. He dont need to keep books of accounts.

    Does it mean that if for example my turnover is 60 lac and my profit is 30lac, I can pay tax showing 8% profit?


  • KayJay

    This is a very interesting and informative page for all freelancers and consultants. Am sure lot of people have gained from it.
    I want some input on a situation. If I am an agent for a company in USA/Europe and. I get paid my commission/fees as agent/coordinator for the company here in India.

    I have been paying my taxes but I don’t know if am liable to pay service tax?

    Please throw some light on this. Thanks!

    • Malkeet Singh

      Hello Kayjay,

      As regards your queries, As an agent of foreign company, you are rendering services to foreign company, this amounts to export of services. So based on the export of services rule, service tax is not applicable to your case. I am assuming that the company whom you are rendering services does not have any permanent establishment/office in India.

      Hope this helps you in resolving your queries.

      CA Malkeet Singh

  • Monica


    I am a female working as a freelancer since Feb 2013, and as such I didn’t show anything for FY 2012-13 as there was only around 135 rupees of transfer to my bank account via PayPal. For this financial year, however I have earned more than 2 lakhs as income. I have not done any investments as I want to keep the cash in hand, and paying Income Tax is more viable option for me. All the money I receive is in a single account, and is transferred via PayPal. So I have few questions here:

    1. Am I considered as an individual salaried employee, or running my business in terms of taxation laws, and hence will I fall into individual’s tax slab, or some other tax slab? For example, if I earned 2.3 lakhs in FY 2013-14, with 0 investment, how much tax will I pay – 10% of 30000, i.e. 3000, or more?
    2. Related to above question, do I need to pay income tax, or some kind of service tax?
    3. I have heard about freelancers paying advance tax every three months. I have not paid any advance tax till now and I am sitting at March. Would it be fine if I pay advance tax in one go in March? Would there be any penalty that I have to give for not paying partial advance tax in earlier months? How does the advance tax model work?
    4. While filing ITR, which ITR form I need to file – ITR 4 or ITR 5? Would I be able to fill the form myself, or would I need some consultancy from a CA? FYI – I have used money from my savings for my use, as I need to use this money for my personal use. And I don’t have the receipts for expenses, as these are my personal expenses and not any office expenses. So am I doing something wrong here?

    If you can answer these questions at the earliest, that would be a great, as I have to decide about paying the advance tax ASAP.

    • Malkeet Singh

      Hello Monica,

      As regards your concern for payment of Income tax

      For Financial year 2012-13, there is no need to worry about income since you had nominal income.

      Now for financial year 2013-14, As you have mentioned that you earned something close to Rs. 2.3 lacs. For your information I would like to share here that for financial year 2013-14, the exempt income is Rs 2.2 lacs. Income tax works on the principle of progressive taxation. So there is different tax slab for the persons having income below Rs. 5 lac and persons having income above Rs. 5 lac.
      For persons having income below Rs. 5 lac in financial year 2013-14, the exempt income is Rs. 2.20 lacs
      For persons having income more than Rs. 5 lacs in financial year 2013-14, the exempt income is Rs. 2 lacs.

      Service tax is not applicable in case of export of services, Income tax is payable by every person who is resident of India and have income more than exempt income.

      As regards Advance tax, Advance tax is not applicable in your case. Income tax has to be paid in advance by those persons whose tax liability is more than Rs. 10,000/- in a financial year. So it would have been applicable if you had earned more than Rs. 3.20 lac.
      you need to file ITR 4, since you are having Income under head business/profession. You are a professional. As regards expenses, Internet charges, wear and tear of desktop and laptop, mobile expenses. All these are professional expenses for you. You can claim those.

      I can help you with filing your tax return.
      Please contact me at ca.malkeetpadam at g mail dot com.

      CA Malkeet Singh

      • Monica

        Hello sir,
        Thank you so much for giving such a detailed response. I have got a number of things clear now. Just one thing that remains little hazy for me is, that considering the 2.3 lakh earning, I still owe around Rs 1000 as tax (10% of 10000). So will that tax amount be submitted to GoI at the time of filing the return? If yes, then what would be the mode of submitting the amount?

        And before Mar 31st, do I need to pay something in form of Income tax, or is it fine if I don’t pay any tax till the time I file the return?

        • Malkeet Singh

          Hello Monica,

          Here is how you can pay income tax online
          Go to tin-nsdl dot com
          Then click on the services tab
          then click on e payment: pay taxes online link
          challan No./ITNS 280

          Then Select 0021 Income tax other than companies
          A.Y. 2014-15 (Please check this you need to select 2014-15 as assessment year) Assessment year runs behind financial year.
          The relevant assessment year for financial year 2013-14 is 2014-15.
          Type of payment Advance tax/Self Assessment tax.(If you pay the tax before 31st march then it will be advance tax, if you pay after 31st march then it will be self assessment tax)

          You can pay at time of filing your tax return.


          CA Malkeet Singh

          • Monica

            Hello Sir,

            Once again a big Thank You for detailing out the Tax payment process. I tried to pay the tax today and as per your instructions filled all the necessary details. Then on submitting the form, I had two options to go into the bank’s website – as a “Retail User” or as a “Corporate User”. I chose “Retail User” (as I don’t think I can come under a Corporate user, but I may be wrong). I was then routed to my bank’s login page. Once I logged in, I saw a number of fields for filling amount.”Basic Tax” is the amount of tax to be paid (I calculated it to be INR 3094 – the 10% slot – based on the year long credits that happened to my account, and I did not invest a single rupee anywhere). Then there were some additional fields which I am not sure about. These are:

            Edu Cess

            Kindly guide me which are the ones that I need to fill to pay the tax without missing anything? And what amount should be filled in those fields (considering 3094 to be the basic tax amount)? Sorry for asking so many questions, but I am really confused here. Thanks in advance sir.


  • Atul

    Hello Sir,
    I am working online as a freelance writer and as an android game developer. I earned around Rs 3 lacs from my writing job and I earned Rs 20,000 as ad revenue from the android apps. I received payment for writing jobs as well as ad income through paypal . Not many details are attached regarding the nature of transaction in the paypal account. My question is , Do I have to get myself registered and get a service tax number, am I currently working as a proprietor, Do I have to get a firm registered or what do I have to do avoid any kind of legal problems in the future? In short, how to do my taxes? Thank you.

    • Malkeet Singh

      Hello Atul,

      As regards your queries,
      There is no need to get registered for service tax, since there is an exemption for small service providers. You need to get registered for service tax as soon as gross amount of services rendered are more than Rs. 10 lac in a financial year. So for this reason service tax is not applicable in your case. Also export of service is exempt from service tax.
      You need not to get registered as a proprietor. Proprietor and individual status are one and same thing. You can file your tax return in your individual name. You need to file ITR 4.

      Do let me know if you need any help.

      CA Malkeet Singh

  • Tanuj


    I have a few questions regarding filing of IT returns.

    1) Like many others, I do receive payments from my abroad clients, in PayPal; then, it gets transferred to my bank a/c. Now every time such a payment comes in, PayPal deducts a certain % on each receipt, as fees!

    My question is: shall I include this ‘deducted fees’ by PayPal while calculating gross or net income?

    2) What or who is the source of income for money received in my bank a/c? Usually, as you know, it is PayPal who transfers money to local bank accounts.

    3) While mentioning income details as per bank a/c statement, do I have to mention each transactions individually?

    I mean payments do not come as ‘lump sum’ in a month, but in smaller amounts, several times, each month! So, do I have to mention it the same manner, or as a monthly aggregate?

    • Malkeet Singh

      Hello Tanuj,

      As regards your queries, you need not consider the paypal fee. The total income for you is the amount that you received in your bank account during the financial year. The sum total of credits from paypal is your total income. Like you can be a software consultant.
      You can claim the expenses against these receipts, like internet charges, mobile expenses, office rent, subcontracting expenses, electricity, wear and tear of laptop, mobile phone, other testing devices(in tax terms known as depreciation).
      The net receipts after claiming these expenses is income for you.
      The source of income for you is freelance software consultancy.
      You will take the gross figure. You need to file ITR 4 and also if your income is more than Rs. 5 lacs then you need to file the ITR 4 electronically. You will have to prepare Income and Expenditure account, balance sheet, capital account.
      I can help you with this.

      CA Malkeet Singh

  • sunny


    I have been earning money from freelancing and I get money through Paypal and direct to my bank account.

    April 2013 to till date (Mar 2014): I got around 4lak income (both paypal and direct bank account transfer) and expenses around Rs.40000

    April 2012 to Mar 2013 : 1 lakh from Paypal and 3.5 lakhs from Google Ads and around Rs.10,000 expenses.

    I have the following queries:

    How should I file returns?
    Which ITR Form to use?
    Can I show expenses? ( It’s not a registered firm..only individual status)

    Also, I get rents of around 2.5 to 3.5 lakhs p.a. ( this property I got registered and it is from my grand father which I got in a partition, so I believe I can show this in HUF status)

    So Can I show freelance income in individual status (as there is no firm) and income from my property in HUF?

    Please guide me how shall I proceed with.

  • Anant bir Singh

    Hi !
    My daughter is working as a consultant for an NGO based in US and which is not registered in India and has no Office in India. She is working in development sector for this NGO, in the field of female healthcare, infant education and nutrition and receiving her payments through bank in dollars for the services rendered by her. She is registered with them as a woman consultant with more than 51% stake in the consultancy company. But she is working solo and is paid for her services and expenses as per the norms of the contract. Her receipts in INR is about 30 lac for the financial period 1st April 2013 to 31st March 2014, including reimbursement of the contractual payment of working at the rate of 18.75$ per hour plus reimbursement of permitted expenses. No TDS or Service tax has been deducted by this US based NGO. Considering the above facts please intimate her tax obligations as per the Indian Income Tax rules.
    Anant Bir Singh