Every month, thousands of Indian freelancers get paid in dollars by US tech companies. Most of them handle the tax side by guesswork, a WhatsApp group, or one half-remembered YouTube video. The questions are always the same. Does the client deduct TDS? Do I need GST? Which ITR form do I file?
Here is our position, up front. For most solo freelancers billing US clients, the winning setup is boring: a Letter of Undertaking (LUT) for GST, presumptive taxation under Section 44ADA, and the new tax regime. Everything else is noise. Below is why, and where people still get burned.
This is general information, not tax advice. Rules change, and your facts matter. Have a chartered accountant confirm before you file.
First, Get the Basic Classification Right
Money you earn from a foreign client for work you do from India is business or professional income. It is not "salary" and not "other sources." That single classification drives everything else: which ITR form you use, what deductions exist, and how GST treats you.
It is also fully taxable in India. You are a resident, so your global income is taxable here. The fact that the cash landed in a Payoneer or Wise balance, or never touched an Indian rupee account, changes nothing.
TDS: The Question That Confuses Everyone
Your US client will not deduct Indian TDS
TDS under sections like 194J is an obligation on Indian payers. A US company paying an Indian freelancer for work done in India has no Indian TDS duty. If your invoice shows none, that is normal.
Do they withhold US tax instead?
Usually not, if you give them the right form. US clients typically collect a W-8BEN from individual foreign contractors. It certifies you are a non-US person. Services performed entirely outside the US are generally treated as foreign-source income, so US withholding should not apply.
Two things trip people up:
- Skipping the W-8BEN. Some clients then default to withholding at a punitive rate. Send it on day one.
- Doing part of the work in the US. A month-long trip to the client's office can change the sourcing of that income. Talk to a professional before you assume.
If US tax was withheld anyway
You can claim a credit in India under the India-US tax treaty by filing Form 67. The catch: it must be filed before your ITR deadline, and you need proof of the foreign tax paid. Most freelancers only learn this after the fact.
GST: Zero-Rated, But Only If You Do the Paperwork
Services exported from India are zero-rated under the IGST Act. That means 0% GST, not "exempt." To qualify, the usual conditions are:
- The service provider is in India and the recipient is outside India.
- The place of supply is outside India.
- Payment is received in convertible foreign exchange (or in INR where RBI permits).
- Provider and recipient are not merely establishments of the same entity.
Do you need to register at all?
Service providers must register for GST once aggregate turnover crosses ₹20 lakh in a year. That is ₹10 lakh in some special-category states. Export receipts count toward that turnover, even though they carry 0% GST.
Below the threshold, registration is optional. Our view: don't register voluntarily unless you have a reason. A reason might be a client that demands a GST number, or heavy input costs where you want refunds. Registration brings monthly and annual compliance, and for a solo freelancer with a laptop and a coworking seat, the benefit is thin.
The LUT: the form that saves you real money
Once registered, you can export services without paying IGST if you file a Letter of Undertaking (LUT) on the GST portal. Without it, you must pay 18% IGST upfront and then claim a refund, which means locking up cash for months.
The LUT is valid for one financial year. Renew it every April. A lapsed LUT is the single most common avoidable GST error we see. Set a calendar reminder for April 1 and treat it as non-negotiable.
The Income Tax Play: 44ADA Plus the New Regime
Section 44ADA is the presumptive scheme for specified professions. You declare 50% of your gross receipts as profit and pay tax on that. You skip detailed books and you don't itemise expenses. The turnover ceiling is ₹50 lakh, rising to ₹75 lakh if cash receipts stay within 5% of the total. Foreign remittances through banks are not cash.
Whether your specific work qualifies (software development, design, consulting, and so on) depends on how it fits the "specified profession" list, which includes technical consultancy. Many freelancers use it, but classification is a judgment call. Have your CA confirm it, especially if your work is closer to creative services than engineering.
The math most people miss
Under the new tax regime, the rebate under Section 87A has been extended so that resident individuals with taxable income up to ₹12 lakh pay no tax on it. That rebate does not apply to special-rate income such as capital gains, but it does apply to business income.
Now combine the two. A freelancer with ₹24 lakh in gross US receipts, taxed under 44ADA, is deemed to earn ₹12 lakh. The tax bill on that can be close to zero. That is roughly $27,000 to $29,000 a year at current exchange rates, depending on the rate.
Two cautions:
- The new regime removes most deductions (80C, 80D, HRA and so on). If you have a big home loan or lots of insurance, run both regimes.
- If your actual expenses are well over 50% of receipts, say you pay a team or subcontractors, presumptive taxation may cost you. Then keep proper books and claim actuals.
Which ITR form?
If you opt for 44ADA, you typically use ITR-4 (Sugam). If you keep regular books, you use ITR-3. You also need to disclose foreign assets and foreign-source income where applicable, which people forget to do when they hold a US bank account or a brokerage account.
Converting Dollars to Rupees Without Getting Audited Into a Corner
Your income is reported in rupees. The convention is to use the SBI telegraphic transfer buying rate on the last day of the month preceding the month of receipt. Whatever method you pick, be consistent and keep a spreadsheet: invoice date, received date, USD amount, rate used, INR amount.
Also collect the e-FIRA or FIRC from your bank or payment platform. It is your proof that the money came in as foreign exchange. Without it, your GST export claim is weaker, and your ITR is harder to defend if the department asks questions.
Advance Tax: The Cash-Flow Trap
If your estimated tax liability for the year exceeds ₹10,000, advance tax applies. The regular schedule is 15% by June 15, 45% by September 15, 75% by December 15 and 100% by March 15.
Taxpayers on 44ADA get a concession: they can pay the entire advance tax in one go by March 15. That suits freelancers whose income is lumpy. Miss it, and you pay interest under sections 234B and 234C. It won't ruin you, but it is a pure waste.
A Note on the Rule Change Coming
India's new Income-tax Act replaces the 1961 Act for tax years starting April 2026. Income earned in the current financial year will be reported under the new framework's terminology, "tax year" instead of "previous year and assessment year." The substance for freelancers, such as the presumptive scheme and the regime choice, was carried over. Still, section numbers, forms and portal labels will differ. If you read older guides, expect mismatches and verify against the current portal.
A Practical Checklist for US-Facing Freelancers
- W-8BEN submitted to every US client.
- Bank or platform that issues e-FIRA or FIRC for each remittance.
- Turnover tracked monthly against the ₹20 lakh GST line.
- LUT filed and renewed every April, if registered.
- Advance tax scheduled: March 15 if on 44ADA, quarterly otherwise.
- Form 67 filed on time if any US tax was withheld.
- Regime comparison run once a year, not assumed.
- A CA on call. A few thousand rupees a year is cheap next to a notice.
The Bottom Line
The freelancers who get hurt are rarely the ones who earned too much. They are the ones who never kept records, let an LUT lapse, or assumed "the client handles tax." No one handles it for you. The good news is that the system, for once, rewards simplicity. Presumptive taxation, a zero-rated export regime, and a generous rebate mean a well-organised freelancer can keep a very large share of what US clients pay.
If you're building a dollar-earning career from India, or advising family and friends who are, follow The Irola. We publish plain-spoken guides on money, cross-border income and the practical side of working across borders, with no jargon and no fluff. Subscribe to our next briefing and stop guessing at tax season.