For the fiscal year 2024-25, freelancers and gig workers in India need to be aware of the appropriate Income Tax Return (ITR) forms to file. According to Amarpal Chadha from EY India, individuals earning income through freelance or gig work should consider using either the ITR-3 or ITR-4 forms. This guidance is crucial as income from such independent work is categorized under “Profits and Gains from Business or Profession.”

The ITR-3 form is typically used by individuals and Hindu Undivided Families (HUFs) who have income from a proprietary business or profession. This form is suitable for freelancers who have a more complex financial situation, including income from multiple sources or those who may have incurred business expenses.

On the other hand, the ITR-4 form, also known as Sugam, is designed for taxpayers who opt for the presumptive income scheme under Section 44AD, Section 44ADA, and Section 44AE of the Income Tax Act. This form simplifies the filing process for small taxpayers with a turnover of up to ₹2 crore in case of businesses and ₹50 lakh in case of professions.

Filing the correct ITR form is essential not only for compliance but also for optimizing tax liabilities. Freelancers must assess their financial activities over the fiscal year to determine which form aligns best with their earnings and expenses. Proper filing ensures that they can take advantage of any applicable deductions and avoid potential penalties.

As the gig economy continues to grow, understanding tax obligations becomes increasingly important for freelancers. The choice between ITR-3 and ITR-4 depends on individual circumstances, including the complexity of income sources and eligibility for presumptive taxation. Consulting with tax professionals can provide further clarity and ensure accurate filing.