Income Tax Filing refers to the process of declaring your business income, calculating your tax liability, and submitting your tax return to the Income Tax Department. Self-employed individuals, including freelancers and business owners, must file their taxes under the Income Tax Act. Unlike salaried individuals, self-employed people need to calculate their income and pay taxes based on their earnings, which can include business income, freelance income, or professional fees.

Who is Considered a Self-Employed Individual in India?

A self-employed individual in India is someone who does not receive a fixed salary from an employer or organization but instead earns income by working independently. This includes people who:

Sell their services or products directly to clients or businesses without a long-term contract

Run their own business, trade, or profession-such as doctors, lawyers, consultants, freelancers, shopkeepers, or artists

Operate as sole proprietors or independent professionals, generating profits or gains from business or professional activitiesx

What Forms Should I Use for Filing Income Tax as a Self-Employed Individual?

ITR-3 is for those with business/professional income not under the presumptive scheme and who may have more complex income sources

ITR-4 (Sugam) is for self-employed individuals opting for the presumptive taxation scheme and meeting the specified income limits

Documents Needed to File Income Tax Return for Self-Employed Individual

PAN Card: Mandatory for identification and tax filing

Aadhaar Card: Required for verification and e-filing

Bank Statements: To report income, expenses, and reconcile business transactions

TDS Certificates (Form 16A/16): For any tax deducted at source on payments received

Annual Information Statement (AIS) and Taxpayer Information Summary (TIS): For pre-filled data on income, TDS, and other financial transactions

Profit & Loss Account and Balance Sheet: For those maintaining regular books of accounts (mainly for ITR-3 filers)

Business Income Proofs: Invoices, receipts, and supporting documents for income earned from business or profession

Expense Proofs: Bills and vouchers for expenses claimed as deductions (e.g., rent, utilities, office supplies)

Investment Proofs: Documents for deductions under sections like 80C, 80D, etc. (e.g., LIC premium, PPF, health insurance)

Advance Tax/Self-Assessment Tax Payment Receipts: If any advance or self-assessment tax has been paid

Other Income Proofs: Interest certificates, rental agreements, or documents for additional income sources

What Tax Deductions Can I Claim as a Self-Employed Individual?

Section 80C Deductions: Claim up to ₹1.5 lakh for investments in PPF, NSC, NPS, ELSS, life insurance premiums, 5-year tax-saving FDs, principal repayment of home loan, tuition fees for children, and more.

Business-Related Expenses: Deduct expenses incurred exclusively for your business or profession, such as rent, utilities, office supplies, depreciation, salaries, professional fees, travel, and interest on business loans. You must maintain valid proof for these expenses.

Section 80D (Health Insurance): Deduct up to ₹25,000 for health insurance premiums for self, spouse, and dependent children, plus an additional ₹25,000 for parents (₹50,000 if parents are senior citizens). Maximum deduction can go up to ₹1 lakh if both self/family and parents are senior citizens.

Section 80E (Education Loan Interest): Deduct the entire interest paid on an education loan for higher studies for yourself, spouse, or children. There is no upper limit for this deduction.

Interest on Business Loans: The interest component paid on business loans is fully deductible as a business expense with no upper limit.

Section 87A Rebate: If your annual taxable income (after deductions) is less than ₹7 lakh under the new regime, you can claim a rebate of up to ₹12,500, making your tax liability zero.

Other Deductions (Old Regime): If you opt for the old tax regime, you may also claim deductions for home loan interest (Section 24b), donations (Section 80G), and more

Income Tax Return Filing Deadline for Salaried Individuals (FY 2024-25, AY 2025-26)

• The last date to file your Income Tax Return (ITR) is 31st July 2025 for salaried individuals whose accounts do not require audit.
• If you miss this deadline, you can file a belated return by 31st December 2025, but late fees and interest will apply

Penalties for Late Filing or Non-Filing of Income Tax Returns for Salaried Individuals (FY 2024-25, AY 2025-26)

Additional Consequences:

Interest on Tax Due: 1% per month (or part thereof) on any unpaid tax from the due date until the return is filed

Loss of Benefits: You cannot carry forward certain losses (like capital or business losses) if you file after the due date

Refund Delays: Any tax refund will be delayed until you file your return

Legal Action: Persistent non-filing can attract scrutiny and prosecution, with possible imprisonment and fines

Loan Processing Issues: Some banks may not process loans if ITRs are not filed