A designer invoices ₹22 lakh in a year, sets aside 30 percent for tax, and spends March worrying about a bill of about ₹6.6 lakh. Under the new tax regime and the presumptive scheme, the bill could be zero. Most freelancers do not know this, because "income tax slab" searches show the rate table and skip the rebate that sits on top of it.
Under the new tax regime for AY 2026-27, a resident individual pays no income tax when taxable income is up to ₹12 lakh, because the Section 87A rebate of up to ₹60,000 cancels the slab tax. A freelancer on Section 44ADA is taxed on 50 percent of gross receipts, so gross receipts of up to ₹24 lakh can mean nil tax. Here is how the numbers work at four income levels, what changes above ₹12 lakh of taxable income, and why you still file a return.
Tax on taxable income up to ₹12 lakh is nil under the new regime
The new-regime slabs for AY 2026-27, from the Income Tax Department's return applicability page, are nil up to ₹4 lakh, 5 percent from ₹4 to ₹8 lakh, 10 percent from ₹8 to ₹12 lakh, 15 percent from ₹12 to ₹16 lakh, 20 percent from ₹16 to ₹20 lakh, 25 percent from ₹20 to ₹24 lakh and 30 percent above ₹24 lakh. Section 87A gives a rebate of up to ₹60,000 when taxable income does not exceed ₹12 lakh. The slab tax on ₹12 lakh is exactly ₹60,000, so the rebate wipes it out.
The rebate is for resident individuals and is claimed in the return. You do not apply for it separately. Under the old regime the rebate is only ₹12,500 for taxable income up to ₹5 lakh, which is why the new regime usually wins for a freelancer with modest deductions.
On 44ADA, gross receipts of ₹24 lakh produce ₹12 lakh of taxable income
Section 44ADA lets eligible professionals declare 50 percent of gross receipts as profit, without keeping detailed books, as the ITR-4 FAQ explains. It is open to resident individuals in a specified profession, and the receipts ceiling is ₹50 lakh, or ₹75 lakh where cash receipts are no more than 5 percent. Not every freelance skill is automatically a specified profession, so confirm yours with a CA, a point covered in the guide on ITR-3 versus ITR-4.
With ₹10 lakh of receipts the taxable income is ₹5 lakh, slab tax is ₹5,000, and the rebate makes it nil. With ₹20 lakh the taxable income is ₹10 lakh, slab tax is ₹40,000, and the rebate makes it nil. At ₹24 lakh the taxable income is exactly ₹12 lakh and the tax is still nil. At ₹30 lakh the taxable income is ₹15 lakh, the slab tax is ₹1,05,000, and the 4 percent cess brings it to ₹1,09,200, about 3.6 percent of gross receipts. These figures assume no other income, no capital gains and no TDS, and they use the AY 2026-27 slabs.
Just above ₹12 lakh, marginal relief stops the tax from jumping
Without a safeguard, earning ₹1 more than ₹12 lakh would cost you the whole ₹60,000 rebate. Commentary on the rebate describes marginal relief that caps your tax at the amount by which your taxable income exceeds ₹12 lakh, which stops helping at roughly ₹12.7 lakh. For example, taxable income of ₹12.1 lakh would carry tax of about ₹10,000 plus cess instead of ₹60,000. Treat that as a rule of thumb and have your CA compute your exact figure.
The rebate also does not erase tax on special-rate income such as short-term capital gains. A freelancer who sells shares in the same year should not assume the headline rule covers those gains.
The standard deduction and the old deductions do not stretch this limit
The ₹12.75 lakh tax-free figure you may see quoted applies to salaried people who also get the ₹75,000 standard deduction. It does not apply to professional income, so do not add it to the 44ADA numbers above. The new regime also drops deductions such as 80C and 80D, and the 50 percent deemed profit already stands in for your business expenses. The guide on saving tax as a freelancer covers when the old regime still wins.
Nil tax does not mean you skip the return
If your income is above the basic exemption limit, which is ₹4 lakh under the new regime, you file a return even when the rebate brings the tax to nil. Filing keeps your record clean for loans and visas, lets you claim a refund of any TDS your clients deducted, and avoids notices when your income shows up in AIS. The step-by-step is in the guide to filing ITR-4 as a freelancer.
Advance tax is the same story. If the tax payable after TDS is ₹10,000 or more you pay it, and a 44ADA freelancer pays in one instalment by 15 March, as the guide on how much to set aside from every payment explains. If your rebate makes tax nil, there is nothing to pay in advance. The GST threshold of ₹20 lakh is a separate rule and has no link to these income-tax numbers.
Check these figures for the current year before you rely on them
The slabs and rebate above are for AY 2026-27 (FY 2025-26). The Income-tax Act 2025 applies from 1 April 2026, and coverage of Budget 2026 reports the rebate continuing for income up to ₹12 lakh, but confirm the current year's slabs on the portal before you plan an estimate around them. Rinto's income-by-client view shows which clients bring in the most, and you can mark invoices paid and always know who owes you what, which gives you a running picture of receipts to compare with these levels. Rinto does not compute your tax on your invoices, but the free tax-free income calculator shows your own numbers for salaried or freelance income, so confirm the figure with a CA. This post is general information, not tax advice.
Frequently Asked Questions
How much freelance income is tax-free in India?
Under the new tax regime for AY 2026-27, tax is nil when taxable income is up to ₹12 lakh, because the Section 87A rebate of up to ₹60,000 cancels the slab tax. For a freelancer on Section 44ADA, taxable income is 50 percent of gross receipts, so gross receipts of up to ₹24 lakh can mean nil tax. This assumes no other income and no capital gains. Confirm the slabs for the current year on the portal and have a CA check your own numbers.
Do I still have to file an ITR if my tax is nil?
Yes, if your income is above the basic exemption limit, which is ₹4 lakh under the new regime. The Section 87A rebate reduces the tax to nil but does not remove the duty to file. Filing also lets you claim a refund of TDS your clients deducted, keeps your record clean for loans and visa applications, and matches what AIS shows about your receipts. File ITR-4 if you use Section 44ADA and qualify, and ask a CA if your case is complicated.
What happens if my taxable income is just above ₹12 lakh?
Marginal relief softens the jump. Commentary on the rebate describes it as capping your tax at the amount by which taxable income exceeds ₹12 lakh, so taxable income of ₹12.1 lakh would carry tax of about ₹10,000 plus cess instead of ₹60,000. The relief stops helping at roughly ₹12.7 lakh, after which the normal slab tax applies. Use this as a guide only, and ask your CA to compute your exact figure, especially if you have other income in the same year.
Is the ₹12.75 lakh tax-free limit valid for freelancers?
No. The ₹12.75 lakh figure adds the ₹75,000 standard deduction, which is available to salaried people and pensioners. Professional income does not get it. A freelancer's tax-free level is taxable income of ₹12 lakh, which on Section 44ADA means about ₹24 lakh of gross receipts, because only 50 percent of receipts is treated as profit. Do not add the standard deduction to those numbers, and do not assume your expenses reduce them further under the presumptive scheme. If you also earn salary in the same year, the standard deduction applies to the salary part only.
Does the 87A rebate apply to capital gains from shares?
Not fully. Commentary on the rebate says it cannot reduce the tax on special-rate income such as short-term capital gains, even when your total income is within ₹12 lakh. A freelancer who sells shares or mutual funds in the same year should therefore not assume the headline rule wipes out all tax, and should also check which ITR form applies, since ITR-4 is not available with short-term capital gains. Ask a CA to run the numbers before you file in that situation.