As a salaried employee venturing into freelance work, understanding the complexities of tax filing for AY 2026-27 is crucial. Many individuals mistakenly believe that their primary salary income dictates their ITR form, but freelance income introduces complexities that can lead to filing mistakes and potential notices from the tax department.

For instance, let’s consider a scenario where a salaried professional, Rajesh, also freelances as a graphic designer. He initially filed ITR-1, assuming it sufficed because of his salary. However, his freelance income crossed the threshold of ₹50,000, which necessitated a switch to ITR-3. This oversight led to a notice from the Income Tax Department for underreporting income.

To avoid such pitfalls, here are key points to consider for AY 2026-27:

• Freelance income is treated as business income, thus requiring ITR-3 instead of ITR-1.
• If your freelance earnings are substantial, keep track of your expenses to claim deductions appropriately.
• Be mindful of the Annual Information Statement (AIS) and Form 26AS. Ensure your reported income matches these documents to avoid discrepancies.

Common Filing Mistakes

Here are some mistakes that can lead to notices:

• Mismatching Income: Ensure your freelance income is correctly reported. Discrepancies against AIS can trigger scrutiny.
• Failure to Disclose All Income: Even if freelance work is part-time, it must be reported to avoid penalties.
• Not Claiming Deductions: Many overlook eligible deductions related to their freelance work, like software subscriptions or equipment costs.

Understanding ITR Forms

Choosing the right ITR form isn’t just about employment status. Here’s a breakdown:

For mixed-income profiles, an expert review is often worth the investment. As a general guideline, if your income sources are not straightforward, it's advisable to seek professional assistance.

In conclusion, as you prepare your ITR for AY 2026-27, carefully assess your entire income profile, including any freelance work. This proactive approach will help you remain compliant and minimise the risk of future notices.

For tailored advice and assistance in filing your ITR correctly, consult our team today.