Self-employed income is taxed under "Profits & Gains of Business or Profession" (PGBP) at individual slab rates. Professionals can use Section 44ADA to declare just 50% of receipts as profit (receipts up to Rs75 lakh), and small businesses can use Section 44AD at 6-8% of turnover (up to Rs3 crore) — both with no audit and no books. Under the default new regime, tax is nil up to Rs12 lakh taxable income after the Section 87A rebate.
Tax Slabs That Apply to Self-Employed Income
There is no separate rate for self-employed people — your net profit is added to total income and taxed at the individual slabs. The new regime is the default from AY 2026-27; the old regime is optional if you want Chapter VI-A deductions like 80C.
| Taxable income (new regime) | Rate | Old regime | Rate |
|---|---|---|---|
| Up to Rs4,00,000 | Nil | Up to Rs2,50,000 | Nil |
| Rs4L – Rs8L | 5% | Rs2.5L – Rs5L | 5% |
| Rs8L – Rs12L | 10% | Rs5L – Rs10L | 20% |
| Rs12L – Rs16L | 15% | Above Rs10L | 30% |
| Rs16L – Rs20L | 20% | — | — |
| Rs20L – Rs24L | 25% | — | — |
| Above Rs24L | 30% | — | — |
Plus 4% health & education cess. Section 87A rebate makes tax nil up to Rs12,00,000 taxable income in the new regime (Rs5,00,000 in old). The Rs75,000 standard deduction is for salary/pension only — not for self-employed profits.
The Rs75,000 (new) / Rs50,000 (old) standard deduction is available only against salary or pension. As a self-employed person your relief comes instead from claiming actual business expenses or the presumptive 50% / 92-94% deemed-expense route — which is usually far larger than a flat deduction.
Presumptive Taxation — 44ADA vs 44AD
Presumptive schemes let you declare a fixed percentage of receipts as profit and skip books of account and tax audit. Professionals use Section 44ADA; small businesses use Section 44AD.
44ADA — specified professionals
- CA, doctor, lawyer, engineer, architect, CS, IT & technical consultants
- Gross receipts up to Rs75 lakh
- 50% of receipts deemed as profit
- No books, no tax audit · file ITR-4
- Advance tax in one shot by 15 March
44AD — small business
- Traders, manufacturers, service providers (non-professionals)
- Turnover up to Rs3 crore
- 6% (digital) / 8% (cash) deemed profit
- No books, no tax audit · file ITR-4
- 5-year lock-in once you opt out
The higher presumptive caps — Rs75 lakh for 44ADA and Rs3 crore for 44AD — apply only when cash receipts are 5% or less of total receipts. If cash exceeds 5%, the old limits (Rs50 lakh / Rs2 crore) apply. Keeping receipts digital preserves the higher threshold.
44ADA professional · Rs50L receipts
44AD business · Rs80L digital turnover
You always keep whatever you actually earn above the deemed figure. But if your real profit margin is lower than the deemed rate and your income is above the basic exemption, you must maintain books and get a tax audit to declare the lower profit.
Not sure if 44ADA or 44AD fits you better?
Ask a TaxClue Expert →Expenses a Self-Employed Person Can Deduct
If you keep regular books instead of going presumptive, you deduct actual business expenses under Section 37 and claim depreciation on assets — bringing your taxable profit down to real net income.
- Office / co-working rent & municipal tax
- Electricity, internet & mobile (business share)
- Staff salaries and contractor payments
- Depreciation on laptop, equipment, vehicle
- Professional membership & licence fees
- Software subscriptions & cloud tools
- Marketing, advertising & website costs
- Business travel and conveyance
- Professional indemnity insurance
- Bank charges & interest on business loan
Cash payments above Rs10,000 to one person in a day are disallowed under Section 40A(3). Payments on which TDS was required but not deducted are disallowed 30% under Section 40(a)(ia). Personal and mixed-use costs are only deductible to the business proportion.
Go presumptive (44ADA/44AD) if
- Your margins are healthy and expenses are modest
- You want zero books and no audit
- Receipts are within Rs75L / Rs3Cr
Keep books & claim actuals if
- Real expenses exceed the deemed 50% / 6-8%
- You are loss-making or margins are thin
- You need to carry forward losses or depreciation
Want your expenses and depreciation optimised before filing?
Get Filing Help →Advance Tax & GST for the Self-Employed
Advance tax is due if your total tax liability for the year is Rs10,000 or more. Regular taxpayers pay in four instalments; presumptive (44ADA/44AD) taxpayers pay the whole amount in one shot by 15 March.
GST registration for self-employed
- Registration is mandatory once turnover crosses Rs20 lakh for services (Rs10 lakh in special-category states); Rs40 lakh for a goods business.
- Most professional and consulting services are taxed at 18% GST — see the GST calculator.
- The composition scheme is not available to general service providers (only restaurants); export of services is zero-rated under LUT.
- Income tax and GST are independent — using 44ADA for income tax does not affect your GST obligations.
Freelancers billing foreign clients often forget that presumptive 44ADA covers income tax only. If your export receipts cross Rs20 lakh you still need GST registration and an LUT to bill without tax — a mismatch we fix routinely for consultants and developers.
Frequently Asked Questions
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