Having a full-time job and earning additional income through Instagram, YouTube or freelancing is becoming increasingly common. According to reports from Business Standard, salary income and side-hustle income do not necessarily fall into the same tax category. Salary is taxed under applicable slab rates after standard deduction and eligible exemptions, while income from freelancing or content creation is generally treated as business or professional income, depending on the nature of the work. For example, a person earning ₹15 lakh as salary and another ₹5 lakh through digital content or freelancing may not be taxed on the entire ₹20 lakh in the same manner. The tax treatment varies significantly based on whether the activity qualifies as a business or profession under relevant provisions. As reported by Business Standard, salary income is calculated after deducting the applicable standard deduction—₹50,000 under the old tax regime and ₹75,000 under the new regime, along with eligible exemptions and deductions.
CA Chandni Anandan, Tax Expert at ClearTax explains that freelance receipts are treated as business income if the activity qualifies under relevant provisions. Under presumptive taxation, eligible taxpayers can declare 6% of digital receipts or 8% of cash receipts as taxable profit under Section 44AD, subject to prescribed conditions. As reported by Business Standard, this means that if a freelancer earns ₹5 lakh entirely through digital payments, taxable business profit may be calculated at ₹30,000 under the presumptive scheme, rather than taxing the entire ₹5 lakh as profit. However, if the activity is treated as a profession under Section 44ADA, the deemed profit rate may be 50%, which can materially change the tax payable. The scheme offers simplicity because taxpayers don't have to separately claim each business expense, making it particularly useful when actual profit equals or exceeds the deemed rate and turnover remains within prescribed limits.
Under regular taxation, expenses can generally be claimed when incurred wholly or partly for earning business income, according to Business Standard reports. A laptop, phone or camera is treated as a capital asset, with full purchase price generally not deductible in one year - only depreciation can be claimed over the prescribed period. For mixed-use expenses, only the business-use portion can be claimed. CA Chandni Anandan explains that "You can claim what you spend to earn the income, in proportion to how much it's used for work. The test is a clear nexus with your work: the cost must be incurred, directly or indirectly, to carry on the business, and you should be able to explain that connection." This makes it crucial for creators to maintain proper documentation and ensure expenses are directly related to their content creation or freelancing activities. For example, if a camera is used 70% for paid content creation and 30% for personal photography, only the business-use share should be considered for tax purposes.
Presumptive taxation may be useful when actual profit equals or exceeds the deemed rate of 6% or 8%, turnover remains within prescribed limits, most receipts are digital, and the taxpayer wants simpler compliance. As reported by Business Standard, the scheme offers simplicity because taxpayers don't have to separately claim each business expense. However, it may not be suitable when actual business expenses are significantly higher than the deemed profit. A creator spending heavily on equipment, employees, studio rent, travel and production may find regular taxation more beneficial if actual expenses substantially exceed the presumptive profit. The choice ultimately depends on the nature of the business activity, the scale of operations, and the taxpayer's preference for simpler compliance versus detailed expense tracking. CA Anandan notes that "Presumptive taxation keeps it simple and light, while regular books make sense only once your real expenses are high enough to beat the 6% deemed profit."
The Income Tax Act does not create a separate category for a 'side hustle'. According to Business Standard reports, what matters is turnover level, activity nature and profit earned. A person earning small amounts from occasional freelance work may have limited compliance obligations, while someone with substantial receipts, multiple clients and high expenses may effectively be running a full-fledged business for tax purposes. The biggest decision is whether to use presumptive taxation or calculate actual profit after claiming eligible business expenses, with presumptive taxation keeping the process simple when expenses are low and profit margins are high. The key is maintaining proper documentation and ensuring business activities are clearly distinguishable from personal income to avoid potential tax complications. One of the most common mistakes made by creators and freelancers is failing to reconcile figures reported under GST, income tax and the Annual Information Statement, as reported by Business Standard.