Indian freelancers working for US-based IT companies need to understand how their income should be classified and reported. According to Isha Sekhri, Founder of Isha Sekhri & Associates LLP, freelance IT/software work is generally taxed under 'Profits and Gains of Business or Profession'. Specified professionals, including technical consultants and certain IT-related professional services notified under Section 44AA(1), can opt for the presumptive scheme under Section 44ADA. Under this scheme, 50% or more of gross receipts is deemed as income, with a gross receipts limit of ₹50 lakh, or ₹75 lakh where at least 95% of receipts are through banking channels. For non-specified professions, income is treated as other service income.
The conversion of US dollar income to Indian Rupees follows specific guidelines. As explained by Sekhri, the SBI TT Buying Rate on the last day of the month immediately preceding the month in which income accrued or was received should be used. For example, if a USD 1,000 invoice is raised in February 2026, the relevant date is 31 January 2026. The tax calculation process involves calculating total gross receipts in INR, computing taxable income under the presumptive scheme or normal provisions, checking the old or new tax regime benefits, adding 4% cess and applicable surcharge, and paying advance tax in instalments where applicable.
Regarding TDS obligations, Sekhri clarified that no Indian TDS applies as Section 195 targets Indian residents paying non-residents, not a foreign payer with no India presence paying an Indian resident. US withholding typically does not apply if Form W-8BEN is on file and services are performed remotely from India. The India-US Double Taxation Avoidance Agreement (DTAA) governs independent-services income, which is generally governed by Article 7 (Business Profits) of the India-US treaty since there is no applicable 'make available' clause and no permanent establishment in India. If US tax is withheld, a foreign tax credit can be claimed in India through Form 67, filed on or before the ITR due date.
Freelancers must file ITR-3 even under the 44ADA presumptive scheme, according to Sekhri's guidance. They should report income in Schedule BP, fill Schedule FSI for foreign income, and Schedule TR for tax relief. Schedule FA must be completed if foreign bank accounts or assets were held during the year. The due date is 31 August where tax audit is not applicable. Where a tax audit applies, the tax-audit deadline is 30 September, followed by the ITR deadline of 31 October. Required documents include signed service agreements with US companies, invoices raised, bank statements showing credits, FIRC for each remittance, Form W-8BEN, Form 1042-S, and proof of business expenses claimed.
GST registration requirements depend on the freelancer's turnover. As explained by Sekhri, GST registration is generally not mandatory if the aggregate turnover from all sources is up to ₹20 lakh. Above this threshold, registration becomes mandatory. Services provided to a US client by an Indian freelancer qualify as export of services, with an individual able to file an LUT for zero-rated treatment. Without an LUT, the technically correct route is to pay IGST and claim a refund. For income-tax purposes, the mode of receiving money makes no difference and is taxable, though the mode matters for compliance, particularly regarding foreign bank accounts and platform-based receipts.
