August 31 ITR deadline 2026: 7 mistakes freelancers and professionals should avoid while filing income tax return

Freelancers and professionals filing income-tax returns for FY 2025-26 need to be careful about choosing the correct ITR form, opting for presumptive taxation and reconciling their income and tax deducted at source (TDS) records before the August 31 deadline.

The biggest mistake is assuming that ITR-4 is simply a simpler version of ITR-3 and can be used by anyone earning freelance or professional income. CA Parag Jain, Tax Head at 1 Finance, said taxpayers should treat ITR-4 eligibility as a set of conditions rather than a matter of preference.

ITR-4 is not available to every freelancer or professional. According to Jain, taxpayers cannot use ITR-4 if they have capital gains, certain foreign assets or foreign income requiring Schedule FSI or Schedule FA, unlisted equity shares, are a company director, have agricultural income above ₹ 5,000, have gross receipts above ₹ 75 lakh, or are non-residents or resident but not ordinarily residents (RNORs).

For example, a freelancer who redeemed mutual fund units during FY 2025-26 and consequently has a capital gain cannot use ITR-4, even if the gain itself is small. Such a taxpayer would need to consider ITR-3, subject to the applicable conditions.

Another mistake is trying to use ITR-4 while simultaneously claiming actual business or professional expenses. The presumptive taxation route and separate deduction of actual expenses are not interchangeable.

Presumptive taxation can simplify compliance, but professionals should first establish whether their activity qualifies.

Jain said the specified professional categories include doctors, lawyers, engineers, architects, chartered accountants, interior designers and technical consultants. Content creators, social media managers and virtual assistants, for example, generally fall outside the specified professional category and may instead be treated under the business provisions, where different presumptive-tax rules apply.

Eligible professionals need to check their gross receipts before opting for the presumptive route.

Jain said the threshold is ₹ 50 lakh, which can rise to ₹ 75 lakh where at least 95% of receipts are through banking or digital channels, meaning cash receipts do not exceed 5%.

Professionals should therefore calculate their total gross receipts for the year and examine the mode through which they were received before selecting the presumptive scheme.

Under presumptive taxation , income is calculated at the prescribed percentage of eligible receipts rather than by deducting actual professional expenses individually.

Jain said a freelancer should compare the presumptive income with the income that would result under the regular method.

"If actual expenses sit below 50% of receipts," the presumptive route may work, he said. But where actual expenses are higher than 50%, regular taxation through ITR-3 can result in lower taxable income and potentially lower tax outgo.

Another important point is the percentage of receipts being declared as income.