Freelance income with a salary: 44ADA tax and what you keep
₹40,000 a month of freelance work on an ₹18 lakh salary pays about ₹50,000 tax a year under 44ADA, half the tax on actual profit. See what you keep.
6 min read
More salaried Indians now freelance on the side: design, code, content, consulting. The money is good, but it lands on top of your salary, so every rupee is taxed at your highest slab.
Section 44ADA can halve that tax. Here's how it works, and what you actually keep, worked out with our side hustle calculator.
How 44ADA works
Instead of keeping books and proving every expense, you declare 50% of your receipts as profit and pay tax on that. The other half is presumed to be expenses, whatever you actually spent.
- Who can use it: listed professionals, including IT, engineering, design, consulting, law, medicine and accountancy.
- Up to ₹75 L of receipts a year, when no more than 5% comes in cash (the limit was raised in Budget 2023).[1]
- No books of account needed, and you file ITR-4.[2]
It pays off whenever your real costs are below half your receipts, which is true for most laptop-based work.
What you keep from ₹100
Figure 1 from the Side hustle calculator
Every ₹100 of freelance income, on top of an ₹18 L salary, under 44ADA
- ① You keep₹77
- ② Tax₹10
- ③ Costs of the work₹13
How to read it
- 1The teal coins are yours after costs and tax: ₹3,70,080 a year, or ₹30,840 a month.
- 2The orange coins are tax. 44ADA taxes only half your receipts, so tax takes about ₹10 of every ₹100 even though your slab rate is 21%.
- 3The blue coins are the costs of the work: software, a laptop, internet. Here ₹5,000 a month.
44ADA vs actual profit, at different incomes
| Freelance a month | Tax (44ADA) | Tax (actual profit) | You keep a year |
|---|---|---|---|
| ₹20,000 | ₹24,960 | ₹43,680 | ₹1.85 L |
| ₹40,000 | ₹49,920 | ₹94,900 | ₹3.7 L |
| ₹80,000 | ₹1,10,500 | ₹2,12,680 | ₹7.29 L |
| ₹1,50,000 | ₹2,31,400 | ₹4,42,000 | ₹13.44 L |
At every level, 44ADA roughly halves the tax. Declaring actual profit only wins if your real costs are more than half of what you bill.
Try it with your numbersSide Hustle IncomeYour salary and side income are filled in. Switch between 44ADA, 44AD and actual profit, and see your hourly rate.
Is the side hustle worth the hours?
At 10 hours a week, you keep about ₹712 an hour after tax. An hour at the day job pays ₹705 after tax. So each side-hustle hour is worth about as much as a day-job hour.
Three things to get right
- Advance tax. Your employer's TDS doesn't cover side income. Under 44ADA, pay the whole year's advance tax by 15 March, or pay interest on the shortfall.
- GST. Registration is needed once service receipts cross ₹20 L a year in most states.[3]
- Keep records anyway. Invoices and bank statements prove your receipts if the tax department asks.
For your salary side, the take-home salary calculator shows what your payslip keeps.
What this doesn't mean
- Not every job counts as a profession. Selling products or reselling goods falls under 44AD (6–8% deemed profit) instead.
- Tax rules change. These figures follow the current Budget's slabs; check the calculator after each Budget.
- This isn't tax advice. For foreign clients, large incomes or a mix of work, check with a chartered accountant.
Tax includes 4% cess and the 87A rebate where it applies; new regime; a business loss can't be set off against salary. For illustration only.
Sources
- [1]Union Budget 2023-24: Budget speech (higher presumptive limits: ₹75 lakh under 44ADA, ₹3 crore under 44AD) (opens in a new tab)Ministry of Finance, Government of India · 1 Feb 2023
- [2]Individual business and profession: filing help, including presumptive taxation (opens in a new tab)Income Tax Department, Government of India
- [3]GST portal: registration (opens in a new tab)Goods and Services Tax Network