Income Tax Act, 2025: What changes for freelancers and consultants?

• Income Tax Act, 2025 takes effect from April 1, 2026
• Presumptive tax regime now under Section 58, with key changes
• Freelancers must track TDS, digital receipts, and advance tax

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The Income Tax Act, 2025, slated to take effect from April 1, 2026, has drawn the attention of taxpayers who are keen to understand how the new law will shape their tax compliance and planning once it replaces the Income Tax Act, 1961.

The government has renumbered most sections under the ITA, 2025, without materially changing the core philosophy of the Income Tax Act, 1961. For consultants, to cite an example, presumptive taxation provisions earlier covered under Sections 44A, 44ADA and 44AE are now consolidated under Section 58 of the ITA 2025.

The Central Board of Direct Taxes also published a draft of the Income Tax Rules, 2026, on February 7, outlining the blueprint for implementing the ITA 2025.

Here’s what freelancers and consultants should know when the ITA 2025 takes effect on April 1, 2026.

Presumptive tax simplified, but not for all

According to tax experts, the law largely preserves existing rules on TDS rates, advance tax instalments, and audit thresholds. However, consultants earning from multiple sources may not be eligible for the presumptive taxation regime.

“Consultants earning from multiple sources, including commissions and agency work, may be ineligible for the presumptive taxation regime, even if their primary income is derived from consulting,” said SR Patnaik, Partner (head - taxation) at Cyril Amarchand Mangaldas, adding that the provision makes income classification and planning more important under the new regime.

Read more: Presumptive taxation: Old vs. new tax regime

Under the presumptive taxation scheme, consultants can declare net taxable income based on gross receipts up to Rs 75 lakh, with 50 percent of their earnings deemed expenses and tax payable on the remaining 50 percent.

According to Patnaik, Section 44AD (6) of the Income Tax Act, 1961, delineates the class of persons who are not eligible to avail the benefit of presumptive taxation. It excludes persons deriving income in the nature of commission or brokerage, as well as those engaged in any agency business.

A consultant deriving income from multiple sources, such as professional services, commissions, and agency activities, can presently claim eligible business income under presumptive taxation while separately reporting commission or agency income.

"However, under Section 58 of the Income Tax Act, 2025, the definition of 'eligible assessee' has been expanded to subsume the entire content of the present 44AD(6). Consequently, a consultant deriving income from multiple sources, such as professional services, commission and agency activities, becomes ineligible for presumptive taxation altogether," said Patnaik.

Tax experts are of the view that, though increased digitisation of tax compliance under ITA 2025 has made the filing process faster and more efficient, it has also made consultants heavily dependent on online portals and technology platforms.

“Overall, the compliance burden eases marginally for pure professionals but increases for diversified professionals, with a greater emphasis on strategic planning over mechanical filings,” said Patnaik.

Which forms will freelancers and consultants need to file?

As per the ITA 2025 and ITA Draft Rules, 2026:

• ITR-4 (SUGAM) – For freelancers and consultants opting for presumptive taxation under Section 58.
• ITR-3 – For professionals maintaining books and declaring actual profits.
• AIS (Annual Information Statement) – Auto-populated, used for reconciliation.
• Draft Form No. 26 – New consolidated audit report (replacing old Form 3CD), if audit is applicable
• Form 141 – Consolidated TDS reporting form for those with employees, contractors or subcontractors.

For most consultants and freelancers who opt for the simplified presumptive scheme under Section 58, the primary form for filing a return is Form SUGAM (ITR-4). However, if actual business expenses are high and a consultant wants to declare a profit below the 50 per cent limit, their compliance process would change slightly.

“You’ll need to submit Draft Form 26, the new consolidated audit report that replaces the old Form 3CD. If one is managing office overheads or hiring subcontractors, Form 141 must be filed, which serves as a single, consolidated form for all TDS reporting,” said Ritika Nayyar, Partner, Singhania & Co.

She suggests, “They will need to be vigilant regarding TDS compliance under the new forms, advance tax payment formalities and timelines, ensuring maximum receipts through valid digital modes of payment, etc.”

What changes in advance tax payment?

The ITA 2025 retains the existing advance tax framework, with the same four-instalment payment schedule, thresholds, and interest provisions for defaults, as follows:

• Advance tax can be paid as a single 100 percent instalment by March 15, rather than the traditional quarterly schedule.

• Payment modes remain unchanged and are made via electronic channels or Challan 280 using PAN-based identification.

• The relevant provision for instalments of advance tax and due dates is Section 408(2) of ITA 2025 (corresponding to Section 211 of the old Act).

Key things freelancers and consultants should note from April 1

Single “Tax Year” concept

The ITA 2025 replaces “Previous Year” and “Assessment Year” systems with a single “Tax Year”.

Presumptive taxation continuity, but excludes multiple incomes

Consultants can still declare 50 percent of their gross receipts as income, up to Rs 75 lakh, subject to the eligibility criteria applicable to the assessee. However, earnings from multiple sources may not qualify for the presumptive taxation regime.

Digital-first compliance

Greater reliance on auto-populated data and online systems means fewer forms, but also a stronger dependence on portals, which may be challenging for non-tech-savvy professionals.

Greater vigilance on TDS and receipts

Professionals must closely track TDS credits, digital receipts, and advance tax timelines to avoid mismatches.

Nayyar notes that the reforms “transform compliance from a year-round accounting burden into a streamlined annual verification,” especially for those opting for presumptive taxation.