Summary of this article
For freelancers, consultants and professionals, filing an income tax return can be a little more complicated than simply adding up what came into the bank account.
With August 31, 2026, the ITR filing deadline for taxpayers who do not require an audit, it is worth taking a closer look at some of the common mistakes that self-employed professionals tend to make.
A common mistake is to pick the turnover figure directly from the books or bank account without reconciling it with other information available with the tax department.
For salaried taxpayers, filing an income tax return (ITR) may largely involve checking Form 16 and other income details before submitting the return. For freelancers, consultants and professionals, however, filing an income tax return can be a little more complicated than simply adding up what came into the bank account. There could be payments from several clients, TDS deducted at different stages, business expenses to account for and a choice to make between the regular and presumptive methods of taxation. A small mismatch or a wrong choice can sometimes create unnecessary trouble later.
With August 31, 2026, the ITR filing deadline for taxpayers who do not require an audit, it is worth taking a closer look at some of the common mistakes that self-employed professionals tend to make.
Choosing The Wrong ITR Form
One of the first decisions is selecting the correct return form. An individual or HUF having income from business or profession is required to file ITR-3 unless eligible to use ITR-4 under the presumptive taxation provisions.
“ITR-4 is available to eligible resident individuals, HUFs and firms other than LLPs having total income up to Rs 50 lakh and business or professional income computed on a presumptive basis under sections 44AD, 44ADA or 44AE of the Income-tax Act, 1961. Taxpayers who do not satisfy the conditions for ITR-4 have to use ITR-3,” says Neeraj Agarwala, Senior Partner, Nangia & Co LLP.
Reporting Turnover Or Receipts Without Reconciling Them
A common mistake is to pick the turnover figure directly from the books or bank account without reconciling it with other information available to the tax department.
“Before filing, business owners and professionals should reconcile their books with bank statements, invoices, GST records, TDS certificates, Form 26AS and the Annual Information Statement (AIS). The AIS may contain information relating to receipts, financial transactions, securities transactions, interest and other reported information,” says Agarwala.
Business owners should ensure that turnover reported in the income-tax return is consistent with the underlying books and relevant GST returns.
Missing The Deadline When There Is A Business Or Professional Loss
Losses, particularly business or professional losses, can be carried forward to subsequent years only if the return of income is filed within the prescribed due date. If the taxpayer misses the August 31 deadline and files a belated return, the loss is not eligible to be carried forward and set off against income in future years.
Ignoring The Choice Between Presumptive And Regular Taxation
Eligible small businesses and professionals may be able to calculate income under the presumptive taxation provisions. Under presumptive taxation, income is determined in accordance with the applicable presumptive provisions rather than by claiming actual expenditure in the normal manner.
“For example, under section 44ADA of the Act, a sum equal to 50 per cent of the total gross receipts is presumed to be the gross taxable income under the head ‘income from business and profession’. Hence, specified professionals are not required to maintain books of accounts, and the income tax return is easily processed by the Income Tax Department,” informs Agarwala.
Choosing The Tax Regime Without Considering Future Years
Unlike salaried individuals, taxpayers having income from a business or profession cannot freely switch between the two regimes every year. The option to opt out of the new tax regime and move back to the old regime is available only once. Therefore, the decision should be made after considering not just the deductions and exemptions available in the current year, but also the taxpayer's expected income and other eligible deductions in future years.
