Key Tax Rules for Freelancers with Global Income

Understanding how freelance income is taxed is crucial to staying compliant

- Hitesh Kumar

Freelancing is a growing pillar of India's digital economy, especially in the cross-border gig space. Many professionals now offer services—design, tech, consultancy, writing—to clients overseas. But as the work goes global, so does tax compliance. Understanding how foreign remittances and freelance income are taxed is crucial to staying compliant and avoiding penalties.

For Indian residents, all income—whether earned in India or abroad—is taxable in India. This includes payments received from foreign clients for freelance work. Such earnings are treated as 'profits and gains of business or profession', and tax is computed after deducting allowable expenses like laptops, internet costs, software subscriptions, salaries, etc.

To reduce paperwork, many freelancers opt for the presumptive taxation scheme under Section 44ADA. This section applies to professionals in fields like legal, medical, engineering, interior design, and other notified services. If annual gross receipts are up to ₹50 lakh (or ₹75 lakh, provided cash receipts stay under 5%), only 50% of the gross amount is deemed taxable income. If actual income is higher, the taxpayer must declare the actual figure.