A 24-year-old earning ₹8 lakh annually from salary may think their tax filing is straightforward, but when they add ₹2 lakh from freelancing, the calculation becomes more complex. According to reports from Business Standard, under the new tax regime, the taxable salary becomes ₹7.25 lakh after standard deduction of ₹75,000. The freelance receipts of ₹2 lakh qualify for Section 44ADA presumptive taxation, with only ₹1 lakh treated as taxable income rather than the full amount. The total taxable income reaches ₹8.25 lakh, but with applicable rebates, the final tax liability drops to zero subject to meeting all conditions.
The share of taxpayers under 25 years reporting multiple income sources has surged dramatically from 14% in AY 2022-23 to 76% currently, as reported by ClearTax. Archit Gupta, Founder and CEO of ClearTax, explains that today's under-25s are not waiting for corporate paychecks to begin their financial lives. Young people are increasingly investing, trading, freelancing, or building small ventures while studying or during their first jobs. The first income-tax return of a 24-year-old may now include salary, freelance income, capital gains, dividends, and interest, fundamentally changing how tax returns are structured.
According to Business Standard, one of the biggest mistakes young earners make is assuming all money in their bank account can be clubbed together. Salary is reported under 'Income from Salary' while eligible freelance and professional earnings are reported under 'Profits and Gains of Business or Profession'. Investment gains have separate tax treatments, and much of the tax calculation for freelancers is handled without employer TDS convenience. If earning ₹2 lakh from freelance work, there may be little or no tax deduction at source, requiring the freelancer to calculate tax liability themselves and pay advance tax where applicable.
The Annual Information Statement (AIS) has become crucial for taxpayers with multiple income sources, as reported by Business Standard. The AIS contains financial information reported by various entities and tracks small dividend credits, mutual fund sales, and freelance payments. Gupta advises young earners to download and check their AIS before filing returns, as the tax department already knows about every small income stream. The practical approach involves reconciling AIS information with personal records and resolving discrepancies before filing to avoid tax notices for forgotten income.
For young earners with multiple income streams, advance tax becomes another area of complexity, as reported by Business Standard. When earning ₹2 lakh from freelance work, advance tax payments may be required if liability exceeds applicable thresholds. Ignoring advance tax until the end of the financial year can result in interest costs. Investors must understand how eligible losses can be set off against gains and whether losses can be carried forward under applicable rules. Tax-loss harvesting should not be used purely for tax reasons, with investment decisions coming first.
