Salaried workers with side businesses must report income distinctly, with different tax rules applying to profit and salary, impacting filings and GST obligations.
Salaried workers who also earn from a side venture need to treat the two income streams separately when filing their tax return, according to Mint and tax advisers quoted in its report. A second job or freelance project is generally permitted, but the income must be reported in the correct return and under the right head of income.
If the extra work is carried on regularly and with the aim of making a profit, it will usually be treated as business or professional income. In that case, the return is typically filed under “Profits and Gains from Business or Profession”, with ITR-3 used where actual expenses are claimed and ITR-4 available for those choosing the presumptive scheme, Mint reported. For the financial year 2025-26, taxpayers whose accounts do not require an audit must file by 31 August 2026.
This distinction matters because salary income and business income are taxed differently. A salary earner cannot generally deduct day-to-day work expenses, although the law allows specific reliefs such as the standard deduction and certain exemptions under the old tax regime. By contrast, a side business is assessed on net profit, which means eligible business costs are subtracted from revenue before tax is calculated. Tax adviser Gaurav Makhijani told Mint that each source is computed separately under its own rules.
The same separation applies to withholding and advance tax. Employers usually deduct tax deducted at source, or TDS, from salary. A client or other payer may also deduct TDS on professional fees where relevant. But that does not end the obligation if the final tax bill remains high. Mint noted that if net tax payable for the year is ₹10,000 or more after TDS and other credits, advance tax must be paid in instalments on 15 June, 15 September, 15 December and 15 March.
There may also be goods and services tax implications. According to Mint and GST guidance from other tax advisories, registration can become compulsory once turnover crosses the relevant threshold, typically ₹20 lakh for services and ₹40 lakh for goods in ordinary states, with lower limits applying in special category states. For people monetising affiliate links, Fiverr work or other online gigs, tax specialists also advise keeping income statements, checking Form 26AS and AIS for deducted tax, and ensuring the return is not filed under “Other Sources” when the earnings are really business income.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
