Your Friendly Guide to Understanding Tax Deductions for Indian Freelancers

What Really Counts as a Deductible Expense

Software like design suites, coding tools, editing apps, password managers, domains, hosting, notebooks, pens, and even data storage are typically deductible when used for client work. Keep invoices, note the business purpose, and segregate any personal usage so your claim stays clean and defensible.

What Really Counts as a Deductible Expense

If you work from home, claim a reasonable portion of rent, electricity, broadband, and maintenance aligned to your workspace area and usage. A simple floor-area calculation, screenshots of utility bills, and photos of your setup help. Many readers save thousands yearly by documenting diligently.

What Really Counts as a Deductible Expense

Cab fares to client sites, metro tickets, coworking day passes, courier charges, and packaging for deliverables add up and are generally deductible. Keep dates, destinations, and client references on bills. Be conservative with meals and entertainment; claim only when the business purpose is clear and recorded.

Chapter VI-A Deductions You Should Actually Use

Up to ₹1.5 lakh across options like PPF, ELSS, and life insurance premiums. ELSS suits freelancers seeking market growth with a three-year lock-in, while PPF offers stability. Match choices to your income volatility so you never over-lock funds needed for quarterly advance taxes.

Chapter VI-A Deductions You Should Actually Use

Deduct health insurance premiums for yourself and family, plus additional deduction for parents, with higher limits for senior citizens. Pay through banking channels and retain policy, receipt, and payment proof. Preventive health check-ups also qualify within limits, encouraging proactive wellness and practical tax savings.

Who qualifies and turnover limits

Section 44ADA is available to specified professions such as legal, medical, engineering, architecture, accountancy, technical consultancy, and a few others. If your gross receipts are within prescribed limits, you can declare 50% as income. Recent changes allow a higher cap where cash receipts are minimal and digital is predominant.

Pros and cons in real life

Ankita, a UX consultant in Mumbai, tried 44ADA for simplicity. But her genuine expenses were high due to research tools and expert contractors. Declaring only 50% as income led to a higher tax than itemizing. She switched back to regular books, saving tax and reflecting her true cost structure.

Switching and audit implications

Under 44ADA you skip detailed bookkeeping, but if you want to report profit below 50%, keep books and be prepared for audit where required. Evaluate annually. If you outgrow limits or your expense ratio increases, consider moving to regular provisions and discuss timing with your tax advisor.

TDS, Form 26AS, and Claiming Your Credits

Clients often deduct 10% TDS on professional fees once the yearly threshold per client is crossed. Collect Form 16A certificates, verify TAN details, and check timing of deposits. If a client forgets to deposit TDS, follow up early so credits land in your account before return filing season.

TDS, Form 26AS, and Claiming Your Credits

Log into the income tax portal, compare Form 26AS and AIS with your invoices and bank credits. If entries are missing or duplicated, raise corrections with clients. Flag foreign remittances that AIS misreads, and add clear notes in your return to prevent mismatches and unnecessary notices later.

Depreciation, Capital vs Revenue, and Big Purchases

Laptops, cameras, phones, and more

Significant equipment is generally capitalized and depreciated as per the rates notified by law. If an item is minor and short-lived, a consistent accounting policy to expense can be reasonable. Keep serial numbers, invoices, and warranty papers to support claims during scrutiny or future resale.

Personal use adjustments matter

Use your gear for both life and work? Claim only the business-use proportion. Maintain a simple usage log or calendar notes. This habit protects your position if questioned and signals good faith. Many freelancers use 60–80% business apportionment for devices, backed by project timelines.