You billed ₹18 lakh last year, your CA says "go 44ADA", and a friend says "file ITR-3, you spend a lot, you will pay less". This post puts one freelancer at ₹18 lakh of receipts and compares 44ADA with ITR-3 side by side, at several expense levels, for assessment year 2026-27.
The short version: a ₹18 lakh freelancer pays nil tax under 44ADA, so ITR-3 can only match that or cost more. The rest of the post shows the arithmetic, where the two routes start to differ, and the audit catch that comes with declaring a low profit. Every figure is an illustration that assumes no other income and no TDS, so treat it as general information, not tax advice.
At ₹18 lakh receipts, tax under 44ADA is nil
Under the presumptive scheme in Section 44ADA, 50 percent of your receipts is treated as profit, so ₹18 lakh of receipts becomes ₹9 lakh of taxable income. On the new regime slabs for AY 2026-27, the tax on ₹9 lakh is ₹30,000, and the Section 87A rebate of up to ₹60,000 (available when taxable income is ₹12 lakh or less) wipes it out. Your tax is nil, and so is the 4 percent cess, since cess applies to tax. You claim no expenses under the scheme, which is the trade-off for filing without books. The wider rebate story, with a table at other receipt levels, is in the guide to the income tax free limit, 87A rebate and 44ADA.
The ceiling matters too. 44ADA is open to eligible professionals with receipts up to ₹50 lakh, or ₹75 lakh when cash receipts are 5 percent or less. At ₹18 lakh you are well inside it, provided your work counts as an eligible profession. The post on which freelance skills qualify for 44ADA covers that check.
The slab and rebate arithmetic, step by step
The new regime for AY 2026-27 charges nothing up to ₹4 lakh, then 5 percent to ₹8 lakh, 10 percent to ₹12 lakh, 15 percent to ₹16 lakh, 20 percent to ₹20 lakh, 25 percent to ₹24 lakh and 30 percent above that. These are the rates on the Income Tax Department's individual return page, which also gives the 87A rebate and the 4 percent cess. Returns for FY 2025-26 (AY 2026-27) use the section numbers of the Income-tax Act 1961, which is why this post refers to Section 44ADA and Section 87A.
Here is the ₹9 lakh case. The first ₹4 lakh costs nothing. The next ₹4 lakh, from ₹4 lakh to ₹8 lakh, costs 5 percent, which is ₹20,000. The last ₹1 lakh, from ₹8 lakh to ₹9 lakh, costs 10 percent, which is ₹10,000. Slab tax comes to ₹30,000, the rebate covers all of it, and nothing is left to pay.
ITR-3 with actual profit, at 70, 50, 40 and 30 percent expenses
Under ITR-3 you pay tax on your real profit, which is receipts minus genuine business expenses, backed by books. At ₹18 lakh of receipts, expenses of 70, 50, 40 and 30 percent give profits of ₹5.4 lakh, ₹9 lakh, ₹10.8 lakh and ₹12.6 lakh. The first three all end at nil tax after the rebate. Only the 30 percent case lands above the ₹12 lakh line, which is where the rebate stops working in full.
At 70 percent expenses (₹12.6 lakh spent), profit is ₹5.4 lakh, slab tax is ₹7,000 and the rebate cancels it. At 50 percent (₹9 lakh spent), profit is ₹9 lakh, the same as 44ADA, and tax is nil. At 40 percent (₹7.2 lakh spent), profit is ₹10.8 lakh, slab tax is ₹48,000 and the rebate cancels it. So for a ₹18 lakh freelancer, high expenses do not save any tax compared with 44ADA, because 44ADA already gives nil. The old versus new tax regime calculator lets you run your own profit figure through the slabs.
Tax stays nil until expenses fall below one third of receipts
ITR-3 gives nil tax at ₹18 lakh of receipts as long as your expenses are at least ₹6 lakh, one third of receipts, because profit then stays at ₹12 lakh or less. At exactly 50 percent expenses ITR-3 shows the same ₹9 lakh profit as 44ADA. Spend more than half and your profit falls below the deemed figure, but tax is nil either way at this income, so there is nothing extra to save. Spend less than half and your profit rises above ₹9 lakh, yet tax stays nil until profit crosses ₹12 lakh, which at ₹18 lakh of receipts means expenses below ₹6 lakh, or one third of receipts.
Between 33 and 50 percent expenses, both routes show nil tax, and the difference is paperwork, not rupees. Below one third, 44ADA is the cheaper route on tax alone.
Declaring under 50 percent brings books and audit
If you declare a profit below 50 percent of receipts and your total income is above the basic exemption limit, you must keep books of account and get them audited. That is the hidden cost of the 70 percent case in the table: tax is nil, but the filing is heavier and the audit comes with a CA's fee.
Your CA can confirm the audit rule for your own figures. The guide to the tax audit under 44AB and books of account explains how it works for a freelancer, and the post on ITR-3 versus ITR-4 covers which form goes with which route.
Marginal relief just above ₹12 lakh of profit
Cross ₹12 lakh of taxable income by a small margin and you do not lose the whole rebate at once. Marginal relief caps your tax at the amount by which income exceeds ₹12 lakh. At a profit of ₹12.6 lakh (30 percent expenses), slab tax is ₹69,000, but your income is only ₹60,000 above ₹12 lakh, so tax is capped at ₹60,000. Add 4 percent cess of ₹2,400 and the bill is ₹62,400.
Push the profit to ₹14 lakh, which is about 22 percent expenses (₹4 lakh spent), and the relief no longer applies. Slab tax is ₹90,000 and with cess the tax is ₹93,600. Compare that with nil under 44ADA, and you can see why a freelancer with low expenses usually gains from the presumptive route. If your tax does land at ₹62,400 or ₹93,600, advance tax applies; the post on paying advance tax online covers the dates.
What to check before you pick a form
Check three things: your realistic expenses as a share of receipts, whether your work is eligible for 44ADA, and whether you have any other income that adds to the figures above. The numbers in this post assume the freelancer has no other income and no TDS, so a salary, interest or rental income changes the answer. The older guide to ITR-4 for freelancers covers the simpler presumptive filing in detail.
You can sanity-check a number with the freelance tax estimator or the tax free income calculator, and then ask a CA to confirm before you file. Rinto lets you log expenses with a receipt, a category and a project or client tag, and shows monthly and yearly totals for tax time. Expense tracking is on the paid plans. Rinto does not file returns, give tax advice or compute your final tax. This post is general information, not tax advice.
Frequently Asked Questions
Is a freelancer earning ₹18 lakh a year taxable in India?
Receipts of ₹18 lakh do not by themselves mean tax is due. Under 44ADA, half of receipts is treated as profit, which is ₹9 lakh, and on the new regime for AY 2026-27 the slab tax of ₹30,000 on that amount is cancelled by the Section 87A rebate. Tax comes to nil. If you have other income, such as interest or rent, it adds to the ₹9 lakh and can change the result. The example assumes no other income and no TDS, so check your own figures with a CA before you file.
Should I file ITR-3 instead of ITR-4 if my expenses are high?
At ₹18 lakh of receipts, high expenses do not lower your tax below nil, because 44ADA already gives nil. If you declare a profit under 50 percent of receipts and your income is above the basic exemption limit, books and an audit generally follow, which adds cost for no tax saving. ITR-3 is the form you need when you are not eligible for the presumptive scheme or when you keep regular books. The right route depends on more than the expense ratio, so discuss your own facts with a CA.
How much tax do I pay on ₹18 lakh under 44ADA?
In the illustration for AY 2026-27, you pay nil. Deemed profit is ₹9 lakh, slab tax under the new regime is ₹30,000 (₹20,000 for ₹4 to ₹8 lakh plus ₹10,000 for ₹8 to ₹9 lakh), and the 87A rebate of up to ₹60,000 covers it when taxable income is ₹12 lakh or less. Cess applies to tax, so it is nil too. This assumes no other income and no TDS, and you claim no expenses under the scheme. Receipts must stay within the ₹50 lakh limit, or ₹75 lakh when cash receipts are 5 percent or less.
Is ITR-3 better than 44ADA for a freelancer earning ₹18 lakh?
No, not on tax. 44ADA already produces nil tax at ₹18 lakh, so ITR-3 can only match it or cost more. ITR-3 matches it whenever your actual profit stays at or below ₹12 lakh, which means expenses of at least one third of receipts. Below that, tax appears: ₹62,400 at a profit of ₹12.6 lakh and ₹93,600 at ₹14 lakh, with cess. The difference between the routes is therefore mostly paperwork, and the audit rule if you declare under 50 percent. Other income could change the picture, so confirm with a CA.
Do I still file a return if my tax is nil?
Yes, at these incomes you still file. ₹9 lakh of income is above the basic exemption limit, and the 87A rebate cancels tax, not the return. Even when tax is nil, a return is how you claim back any TDS that clients deducted, and a filed return is the usual proof of income for a visa, a loan or a rental application. The guide to income proof for visas, cards and rentals explains how filed returns are used. If your income is much lower, confirm the filing limit with a CA.