A surge in young professionals earning through both salary and side hustles is prompting a shift in tax compliance strategies, with Section 44ADA offering simplified presumptive taxation for eligible freelancers, yet demanding careful record-keeping.
A 24-year-old on a ₹8 lakh salary may think tax season is simple, until a side hustle adds another ₹2 lakh to the mix. As Business Standard explains, that extra money is not folded casually into salary income. It has to be reported in the right place, and for eligible professionals it may fall under Section 44ADA, a presumptive taxation rule that can simplify the calculation.
In the example cited by ClearTax, a taxpayer earning ₹8 lakh from salary and ₹2 lakh from freelance work would first receive the standard deduction of ₹75,000. The salary portion would then fall to ₹7.25 lakh. Under Section 44ADA, only 50% of eligible freelance receipts are treated as taxable income, so the ₹2 lakh side income would be reduced to ₹1 lakh for tax purposes. That leaves total taxable income at ₹8.25 lakh, which can still qualify for a rebate under the new regime, resulting in no tax due if all conditions are met.
But zero tax is not the same as zero paperwork. According to the Income Tax Department, the Annual Information Statement, or AIS, provides a consolidated view of a taxpayer’s financial information, including tax deducted at source, tax collected at source, specified financial transactions and tax payments. The department says taxpayers can access the AIS on the e-filing portal and offer feedback, making it an important check before filing a return.
Section 44ADA is designed for specified professionals and can ease compliance by allowing 50% of gross receipts to be treated as income without detailed expense accounting. Guides from tax advisers, including Paisabazaar and other technical explainers, say the scheme is limited to eligible professions and comes with conditions, so it is not available to every freelancer. That distinction matters because many young workers now combine salaried employment with freelance projects, investing or other small ventures.
ClearTax said the share of taxpayers under 25 reporting multiple income sources has risen sharply, from 14% in assessment year 2022-23 to 76% at present. Archit Gupta, founder and chief executive of ClearTax, said younger earners are no longer waiting for a first permanent job before building financial lives. In practical terms, that means a return may now include salary, freelance receipts, capital gains, dividends and bank interest, not just a Form 16.
The risk is that many first-time filers still choose the simplest return form even after their finances become more complicated. Income from salary is taxed differently from professional receipts, while investment gains and dividend income follow their own rules. Where tax is not fully deducted at source, advance tax may also become necessary. For young side-hustlers, the lesson is straightforward: keep records, reconcile them with the AIS and file using the correct tax route rather than assuming all income can be treated the same.
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.
