ITR for Self-Employed: How to File Income Tax for Self-Employed

If you're self-employed—whether you're a freelancer, consultant, or running your own business—filing your Income Tax Return (ITR) is an important part of managing your finances. Unlike salaried individuals, self-employed taxpayers handle their own income records, expenses, and tax calculations. This might feel overwhelming at first, but with the right guidance, it's a manageable and empowering process. In this guide, we’ll walk you through everything you need to know about income tax return filing for self-employed individuals in India.

What is ITR?

ITR, or Income Tax Return, is a form you file with the Income Tax Department to report your annual income, expenses, deductions, and tax liabilities. For self-employed individuals, this includes income from freelance work, consulting, or a personal business. Filing your ITR helps you stay compliant with the law, claim refunds (if applicable), and maintain financial transparency for future loans or investments.

Who is Considered Self-Employed in India?

• Work as a freelancer – writers, graphic designers, web developers, content creators, photographers, and more who take up project-based assignments.

• Offer consulting services – professionals like marketing consultants, financial advisors, HR consultants, etc.

• Run a sole proprietorship or small business – such as shop owners, boutique operators, online sellers, or service providers.

• Practice independently – including doctors, lawyers, chartered accountants, architects, and therapists with their own clinics or offices.

• Take up contract-based work – where you're paid per assignment but not officially employed.

• Earn through side gigs or platforms – like teaching online, delivering content on YouTube, or selling handmade products on e-commerce sites.

In essence, if you control how you earn, are responsible for your own taxes, and don’t receive a fixed salary from an employer, you fall under the self-employed category.

How Can Self-Employed Individuals Calculate Their Income Tax?

Calculating income tax as a self-employed person is straightforward if you follow a few simple steps:

1. Add all income sources – client payments, sales, commissions, etc.
2. Subtract work-related expenses – rent, travel, internet, supplies, etc.
3. Apply deductions – like investments (Section 80C), health insurance (80D), and more
4. Choose your tax regime – old (with deductions) or new (lower rates, fewer deductions)
5. Calculate your tax liability – using the correct slab based on your final taxable income

Keep proper documentation of all income and expenses throughout the year to avoid issues at the time of filing.

Applicable ITR Forms for Self-Employed Individuals

Choosing the right ITR form depends on your income type:

• ITR-3: For individuals with business or professional income who maintain books of accounts

• ITR-4 (Sugam): For those opting for presumptive taxation under Sections 44ADA, 44AD, or 44AE

Use ITR-4 if your income is straightforward and your turnover is under the specified limits. Choose ITR-3 if your income is higher or you wish to report actual profits and expenses.

Tax Regimes and Slab Rates for Self-Employed

There are two income tax regimes to choose from:

• Old Regime: Allows you to claim multiple deductions and exemptions but comes with higher tax rates
• New Regime: Offers lower tax rates with minimal or no deductions

Select the regime that gives you the best tax outcome based on your financial profile. If you claim a lot of deductions, the old regime may work better.

Deductions and Exemptions Available to Self-Employed Individuals

If you opt for the old tax regime, you can claim several deductions:

• 80C – Investments in life insurance, PPF, ELSS, tax-saving FDs

• 80D – Premiums paid for health insurance

• Business expenses – Office rent, software tools, travel, advertising

• Depreciation – On computers, office furniture, or other capital assets

• Education loans, donations, rent (if not receiving HRA) and other eligible deductions

These can significantly reduce your taxable income and lower your tax liability.

Step-by-Step Guide to File ITR for Self-Employed

Filing your Income Tax Return (ITR) as a self-employed individual might feel daunting at first—but once you break it down into simple steps, it becomes a smooth, annual routine. Here’s a straightforward guide to help you through it:

1. Collect Income Records: Gather all documents that reflect your earnings—this includes invoices, receipts from clients, bank statements, and digital payment records.
2. Track Business Expenses: Make a list of expenses related to your work, such as office rent, phone and internet bills, travel costs, or purchases of work-related items.
3. Calculate Net Income: Subtract your business expenses from your total income. This gives you your net taxable income before deductions.
4. Choose the Correct ITR Form: Depending on your profession and income structure, select either ITR-3 (regular business income) or ITR-4 (presumptive taxation scheme).
5. Select the Applicable Tax Regime: Decide whether you want to go with the old tax regime (which allows deductions) or the new regime (which has lower rates but fewer benefits).
6. Claim All Eligible Deductions: Add up deductions under sections like 80C (investments), 80D (health insurance), and others to reduce your tax burden.
7. Pay Advance Tax (if applicable): If your estimated annual tax exceeds ₹10,000, make sure you’ve paid advance tax on time to avoid interest penalties.
8. Login to the Income Tax E-filing Portal: Go to the official website incometax.gov.in and sign in with your PAN credentials.
9. Fill and Upload the ITR Form: Enter your income details, claim your deductions, and upload the completed form. Double-check all entries before submission.
10. E-Verify Your Return: Complete the filing process by verifying your return using Aadhaar OTP, internet banking, or Electronic Verification Code (EVC).

Once successfully submitted and verified, you’ll receive an ITR-V acknowledgement. Save it for future reference—it acts as proof of filing.

Common Mistakes to Avoid While Filing ITR

• Selecting the wrong ITR form
• Not declaring all income, including from side projects
• Missing out on deductions due to lack of awareness
• Entering incorrect bank details or PAN
• Forgetting to e-verify the return
• Skipping advance tax payments, if applicable
• Mismatched details with Form 26AS
• No records of business expenses, which may lead to disallowed claims

Avoiding these errors ensures smooth processing and quicker refunds.

Frequently Asked Questions

1. Which ITR form should I use if I’m self-employed?

Use ITR-3 if you maintain books of accounts. Use ITR-4 if you opt for presumptive taxation.

2. What documents do I need to file ITR as a self-employed person?

You’ll need PAN, Aadhaar, income and expense records, bank statements, investment proofs, and any advance tax receipts.

3. Can I show business expenses on my tax return?

Yes, you can claim genuine expenses related to your work such as rent, internet, utilities, travel, and more.