1. Start with how you are paid
The first question is not how much you earn, but how you earn it. If a foreign company pays you under a contractor or consulting agreement, your income is professional or business income, not salary, even if you work full time for one client. That changes almost everything that follows: no one deducts tax for you, you can claim business expenses or use a presumptive scheme, and you pay tax through advance tax during the year.
If you are on an Indian employer's payroll, or an employer of record such as Deel or Remote employs you in India, you are usually an employee and your employer deducts TDS from salary. If you are unsure which applies, the contract decides it, not the job title.
2. Residential status decides what India taxes
If you are resident in India for the year, India taxes your worldwide income, including everything you earn from clients abroad. Most people living and working from India are resident. Residents who hold bank accounts or other assets outside India also have to report them in their return, so mention any foreign account when you file.
3. Presumptive taxation: tax on 50% of receipts
Specified professionals can choose to be taxed on a presumed income of 50% of their gross receipts, or more if they declare more, instead of working out actual profit. This is section 44ADA of the Income-tax Act, 1961, and section 58 of the Income-tax Act, 2025, which applies from tax year 2026-27.
- Who it is for: professions such as legal, medical, engineering, architecture, accountancy, technical consultancy, interior decoration and other notified professions, which include information technology. Many software developers and technical consultants qualify.
- The limit: gross receipts up to ₹50 lakh, or ₹75 lakh if cash receipts are no more than 5% of the total. Payments received from abroad by bank transfer count as non-cash.
- What it saves: you do not need to keep full books of account or claim expenses item by item, and you pay advance tax in a single instalment by 15 March.
Content creators, marketers and some other freelancers may not fall within the notified professions. A separate presumptive scheme for small businesses can apply instead, at 8% of turnover, or 6% for receipts by bank or digital means. Which one fits depends on what you actually do, so check before you file.
4. If you don't use presumptive taxation
You pay tax on actual profit: receipts less genuine business expenses. Typical expenses include a share of internet and phone bills, software subscriptions, co-working rent, professional fees and depreciation on laptops and equipment. Keep invoices for every claim.
You may need to keep books of account once your receipts cross the prescribed limits, and a tax audit is generally required if your gross professional receipts exceed ₹50 lakh and you are not using the presumptive scheme. Choosing between the two is often the single biggest tax decision for a freelancer, so compare both before the year ends.
5. Old or new tax regime
The new regime is the default. It has lower slab rates and nil tax for resident individuals with taxable income up to ₹12 lakh, but few deductions. The old regime keeps deductions such as section 80C and health insurance but has higher rates. For FY 2025-26 and FY 2026-27 the rates are the same, because Budget 2026 did not change them.
If you have business or professional income, you cannot switch freely between regimes every year: once you opt out of the new regime, you can come back to it only once. Run both through our Income Tax Calculator before deciding.
6. Advance tax: pay as you earn
If your tax for the year, after any TDS, is ₹10,000 or more, you must pay advance tax. Under the regular schedule you pay 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. If you use presumptive taxation, you can pay it all by 15 March. Shortfalls attract interest at 1% a month.
A simple habit helps: set aside a fixed share of every payment you receive in a separate account. Our Advance Tax Calculator shows each instalment and the days left.
7. TDS from Indian clients
Indian clients usually deduct TDS from professional fees before paying you. That tax is credited against your liability, so check it appears in your Form 26AS and Annual Information Statement (AIS), and chase any client whose deduction is missing. Foreign clients generally do not deduct Indian TDS.
8. Tax withheld abroad
Some foreign payers withhold tax in their own country, for example US tax on YouTube earnings from US viewers. Where India has a tax treaty with that country, you can usually claim credit for that tax in India, so you are not taxed twice. You claim it by filing Form 67 with proof of the tax withheld; file it before or along with your return so the credit is not missed. Many US clients also ask Indian contractors to complete Form W-8BEN, which certifies that you are not a US person.
9. Filing your return
Professionals using presumptive taxation generally file ITR-4 if their total income is within its limits; others file ITR-3. Since Budget 2026, ITR-3 and ITR-4 filers who do not need a tax audit have until 31 August to file, a permanent change. Salaried people filing ITR-1 or ITR-2 still file by 31 July, and tax audit cases by 31 October.
Before filing, reconcile three things: your own record of receipts, your bank statements and e-FIRAs, and your AIS. Differences are the most common reason for notices.
10. Records to keep
- Every invoice you issue, numbered in sequence
- Your contracts or statements of work
- e-FIRA or FIRC for each foreign payment, and the exchange rate used
- Bills for expenses you claim
- Advance tax challans and TDS certificates
- Proof of any tax withheld abroad