August 31 ITR deadline: Mistakes professionals, freelancers should avoid

Choose the right return form, reconcile tax records and disclose all income and assets

For freelancers and professionals, filing the income-tax return (ITR) is not just about declaring annual earnings and paying the right tax. Choosing the correct ITR form, reconciling receipts with the Annual Information Statement (AIS) and Form 26AS, reporting goods and services tax (GST) correctly and disclosing all sources of income can make the difference between a smooth filing and a tax notice. With the August 31 deadline approaching for taxpayers whose accounts do not require an audit, experts highlight the key mistakes self-employed taxpayers should avoid in their ITR for assessment year (AY) 2026-27.

 

Key ITR mistakes to avoid

 

According to tax experts, individuals earning business or professional income whose accounts do not require an audit can file their ITR for AY 2026-27 by August 31, 2026. “Common mistakes include choosing the wrong ITR form, failing to reconcile receipts with books, bank statements, GST records, tax deducted at source (TDS), Form 26AS and AIS, and missing the deadline when carrying forward business or professional losses,” says Neeraj Agarwala, senior partner, Nangia & Co.

 

Taxpayers should also carefully evaluate presumptive versus regular taxation and choose the tax regime based on both current and future income and deductions. These errors can lead to mismatches, notices and loss of tax benefits.

 

ITR-3 vs ITR-4: Eligibility rules

 

ITR-3 applies to individuals and Hindu Undivided Families (HUFs) with business or professional income, while ITR-4 is a simplified, optional form for eligible resident individuals, HUFs and firms other than limited liability partnerships (LLPs), with total income up to ₹50 lakh and income under presumptive taxation.

 

“Presumptive taxpayers can also use ITR-3 if they do not meet ITR-4 conditions. For instance, long-term capital gains above ₹1.25 lakh require ITR-3. Taxpayers with foreign income or assets also need to use ITR-3, as it contains the required foreign-income and foreign-asset disclosure schedules,” says Agarwala.

 

Section 44AD vs 44ADA

 

The biggest misconception around presumptive taxation is that Section 44AD and Section 44ADA are interchangeable. They are not.

 

Section 44ADA applies to specified professionals and generally deems 50 per cent of gross receipts as taxable income. The receipt limit rises from ₹50 lakh to ₹75 lakh if cash receipts are within 5 per cent.

 

Section 44AD generally applies a presumptive rate of 8 per cent of turnover, or 6 per cent for specified digital receipts. The threshold is ₹3 crore where cash receipts are within 5 per cent; otherwise, it is ₹2 crore.

 

“Taxpayers cannot freely declare income below these prescribed rates under the presumptive scheme. Doing so would require them to follow regular provisions, maintain books and, where applicable, get their accounts audited. Professionals should first check whether their activity qualifies under Section 44ADA and then verify the applicable receipt and payment conditions,” says Agarwala.

 

Expenses and presumptive taxation

 

Eligible freelancers and professionals who opt for presumptive taxation under Section 44ADA cannot claim separate deductions for business or professional expenses. The 50 per cent of gross professional receipts deemed taxable income accounts for such expenses.

 

“Under the regular method of taxation, taxpayers can claim actual expenses incurred wholly and exclusively for their profession. They should maintain invoices, bills, bank statements, payment records, client contracts and records of business assets purchased,” says Richa Sawhney, partner, tax, Grant Thornton Bharat.

 

Income from multiple sources

 

Freelancers should report all professional receipts earned during the year, regardless of the mode of payment. This includes income received through bank transfers, the Unified Payments Interface (UPI), payment gateways, online platforms and marketplaces, as well as income from foreign clients.

 

AIS, Form 26AS and TDS mismatches

 

Taxpayers should reconcile the income reported in AIS and Form 26AS with their own records before they file. If any entry in AIS is incorrect, they should verify its source and provide feedback through the AIS functionality on the income-tax portal, where appropriate.

 

“If the deductor has deducted TDS but Form 26AS does not correctly reflect it, taxpayers should contact the deductor and ask them to file a correction statement or revised TDS return. Resolving such mismatches before filing can help avoid notices, disputes and delays in processing refunds,” says Sawhney.

 

Freelancers and GST

 

Taxpayers often mistakenly treat GST collected on invoices as income, even though it is tax collected on behalf of the government. GST collected separately should generally be excluded from gross receipts. “Including it can inflate turnover and possibly push taxpayers beyond presumptive-taxation limits, create mismatches between GST and income-tax returns, result in double counting of GST as both input tax credit and an expense, and cause errors in reconciling receipts and TDS,” says Deepashree Shetty, partner, global mobility services, tax & regulatory advisory, BDO India.

 

Disclose other incomes and assets

 

Freelancers often fail to disclose interest from savings accounts and fixed deposits (FDs), dividends, capital gains, rental income from a second property, gifts exceeding ₹50,000, and foreign assets or income, wherever applicable.

 

“Non-reporting of Indian income may be flagged through AIS and could lead to notices, with tax, interest and penalties depending on the nature and extent of the omission. Failure to disclose foreign assets may attract significant penalties and, in serious cases, prosecution,” says Shetty.

 

Carry forward losses

 

Taxpayers must file the return by the original due date to carry forward business, capital and speculative losses. House-property losses and unabsorbed depreciation are exceptions.

 

“Taxpayers should also distinguish between set-off and carry-forward of losses and ensure futures and options (F&O) losses are correctly reported, generally under ITR-3 rather than ITR-4,” says Shetty.

 

The writer is a Delhi-based independent journalist

 

Five checks before submitting ITR

 

• Reconcile receipts: Match GST turnover, books, professional receipts and TDS credits

 

• Check AIS, Taxpayer Information Summary (TIS) and Form 26AS: Ensure all income and tax credits match records

 

• Choose the right ITR: Use ITR-4 only if eligible; ITR-3 for regular books, F&O income or foreign assets

 

• Disclose all income and assets: Include interest, capital gains, rental income and foreign holdings

 

• E-verify within 30 days: An unverified return is treated as not filed

 

Source: BDO India