Can a salaried person use presumptive tax for ₹1 lakh freelance income?

I’m a salaried individual but also had some freelance income in FY25-26. Should I opt for presumptive taxation and file ITR-4? My freelance income is small at about ₹1 lakh so I’m eligible for it. I don’t have any expenses to claim except phone, wifi bills etc, but I don’t want the hassle of claiming such small amounts.

Response:

We understand that you are a salaried individual who has also earned freelance professional income of ₹1 lakh during FY 2025-26. Further, we presume that you qualify as a resident under the provisions of Income-tax Act, 1961 (‘the Act’) and do not have any other sources of incomes for the said year.

Whether you can opt for presumptive taxation under section 44ADA of the Act depends on the nature of your freelance income. If your freelance work qualifies as a specified profession (such as technical consultancy, interior design, accountancy, legal, medical, architectural or any other notified professions), you may opt for the presumptive taxation scheme, as your gross receipts of ₹1 lakh are within the prescribed thresholds.

Kindly note that under this scheme, 50% of the gross receipts or, as the case may be, a sum higher than the aforesaid sum, will be deemed as your taxable income. Further, any deduction allowable, will be deemed to have already been given full effect. Accordingly, expenses such as phone bills, wifi bills, etc. cannot be claimed separately as deductions while offering income to tax on presumptive basis. It may be noted that there is a school of thought that where actual expenses are very low and thereby profits are much higher than considered under presumptive, this may be challenged.

From an ITR filing perspective, a salaried individual earning freelance professional income and opting for presumptive taxation may file ITR-4, provided there are no other disqualifying conditions/income sources such as, total income exceeding ₹50 lakh, short-term capital gains, long-term capital gain u/s 112A exceeding ₹1.25 lakh, agricultural income exceeding ₹5,000, is a director in a company, has income from more than two house properties, has unlisted equity shares, foreign income and assets etc. If the other conditions for filing ITR-4 are not met, you may need to file ITR-3, wherein you can still report presumptive income under Section 44ADA.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.