Freelancers earning income from US IT companies: Key FAQs answered on tax calculation, TDS, GST and ITR filing

Indian freelancers working for US-based IT companies need to understand how their income should be classified, converted into rupees, and reported in the income tax return .

Isha Sekhri, Founder, Isha Sekhri & Associates LLP, explains the key tax , ITR, GST, and foreign-income compliance requirements.

Sekhri noted that freelance IT/software work is generally taxed under “Profits and Gains of Business or Profession.”

Specified professionals, including technical consultants and certain IT-related professional services notified under Section 44AA(1), can opt for the presumptive scheme.

Under Section 44ADA, 50% or more of gross receipts is deemed as income. The gross receipts limit is ₹ 50 lakh, or ₹ 75 lakh where at least 95% of receipts are through banking channels. If receipts exceed the applicable limit, tax audit provisions apply.

For non-specified professions, income is treated as other service income.

Sekhri explained that the SBI TT Buying Rate on the last day of the month immediately preceding the month in which income accrued or was received should be used.

For example, if a USD 1,000 invoice is raised in February 2026, the relevant date is 31 January, 2026.

Sekhri explained, “No Indian TDS applies — Section 195 targets Indian residents paying non-residents, not a foreign payer with no India presence paying an Indian resident.”

US withholding typically also does not apply if Form W-8BEN is on file and services are performed remotely from India. Without W-8BEN, some payers may apply default backup withholding.

Sekhri noted that independent-services income is generally governed by Article 7 (Business Profits) of the India-US treaty, since there is no applicable “make available” clause and no permanent establishment in India.

If US tax is withheld, a foreign tax credit (FTC) can be claimed in India through Form 67, filed on or before the ITR due date.

The credit is the lower of foreign tax actually paid or Indian tax payable on the same income. Supporting documents such as Form 1042-S should be maintained.

Sekhri stated, “File ITR-3 — even under the 44ADA presumptive scheme.”