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As a consultant, managing your own business or working independently comes with freedom and flexibility—but it also means taking full responsibility for your taxes. Unlike salaried individuals whose taxes are deducted at source, consultants need to ensure they calculate and file their Income Tax Returns (ITR) correctly to avoid penalties and stay compliant. With multiple income sources, business expenses, and potential deductions, ITR filing for consultants can seem complex at first. In this guide, we break down everything you need to know about ITR filing as a consultant in India—right from choosing the correct ITR form to claiming deductions and understanding advance tax payments.
Latest updates
- ITR filing Due date for FY 2024-25 (2025-26) has been extended from 31st July 2025 to 15th September 2025
Benefits of ITR Filing for Consultants
Establishes legal proof of income for visa applications, loan approvals, term insurance and financial planning
Helps claim deductions on business expenses, home office costs, depreciation, etc.
Enables carry-forward of losses to reduce future tax liability
Facilitates refund claims in case of excess TDS or advance tax paid
Enhances financial credibility and professional reputation
Mandatory for avoiding penalties if income exceeds the basic exemption limitt
Useful for government tenders or contracts requiring proof of tax compliance
Income Sources for Consultants
As a consultant, your income streams can be diverse and may include various sources, each requiring careful consideration and accurate reporting during the ITR filing process:
Fees for Professional Services: This is the primary source of income for most consultants. It includes payments received for providing expertise, advice, or specialized services to clients. These fees could be for consulting assignments, project management, training sessions, or any other professional service rendered.
Royalties: Consultants who have authored books, created intellectual property, or developed proprietary methodologies may receive royalties as income. Royalties are payments made for the use or sale of intellectual property rights, such as patents, copyrights, trademarks, or trade secrets.
Commissions: Some consultants may earn commissions or referral fees for facilitating transactions or connecting clients with third-party products or services. These commissions can vary based on the nature of the transaction and the terms of the agreement with the client or the product/service provider.
Income tax for Consultants
Consultants in India are typically considered self-employed professionals and are taxed under the head “Profits and Gains from Business or Profession.” Their income is subject to tax as per the applicable slab rates for individuals. Unlike salaried employees, consultants do not have TDS (Tax Deducted at Source) automatically handled by an employer (unless hired on contract, in which case TDS under Section 194J may apply).
They are required to:
Maintain books of accounts (unless opting for presumptive taxation under Section 44ADA).
Pay advance tax in four installments if total tax liability exceeds ₹10,000 in a year.
File their Income Tax Return (ITR-3 or ITR-4) based on whether they opt for the regular or presumptive scheme.
Claim business-related expenses such as internet, office rent, travel, and depreciation to reduce taxable income (only if not using the presumptive scheme).
Consultants must also be cautious about GST registration if their gross receipts exceed the prescribed threshold (generally ₹20 lakhs).
Presumptive Taxation Scheme for consultants
The Presumptive Taxation Scheme under Section 44ADA of the Income Tax Act offers a simplified tax compliance option for independent professionals, including consultants. Under this scheme, consultants with gross receipts up to ₹50 lakhs in a financial year can declare 50% of their receipts as taxable income, without the need to maintain detailed books of accounts or get their accounts audited. This deemed income is taxed at applicable slab rates, and no further deductions for expenses are allowed. The scheme is particularly beneficial for small consultants who want to reduce compliance burdens while staying tax-compliant. However, once opted out, a consultant cannot re-enter the scheme for five assessment years.
Which ITR form is applicable for consultants?
Consultants typically earn income under the head “Profits and Gains from Business or Profession.” Therefore, the applicable ITR form depends on how they report their income. If a consultant opts for the presumptive taxation scheme under Section 44ADA (available for eligible professionals with gross receipts up to ₹50 lakhs), they should file ITR-4.
However, if their income exceeds ₹50 lakhs or they do not opt for the presumptive scheme and instead maintain books of accounts, they should file ITR-3. Choosing the correct form is essential to ensure accurate filing and avoid defective ITR notices from the Income Tax Department.
What are Deductions and exemptions available to Consultants?
Expenses directly related to consultancy work such as office rent, phone bills, internet charges, and utility expenses
Depreciation on assets like laptops, office furniture, and vehicles used for professional purposes
Salaries or payments made to employees, assistants, or freelancers
Travel and conveyance expenses incurred for business purposes
Professional development costs including courses, certifications, and seminars
Interest on loans taken for professional use (e.g., laptop, office setup)
Health insurance premiums under Section 80D
Investments in tax-saving instruments like ELSS, PPF, and NSC under Section 80C
Contributions to National Pension Scheme (NPS) under Section 80CCD(1B)
Deduction of 50% of gross receipts under Section 44ADA if opting for presumptive taxation
Rent paid for residential accommodation under Section 80GG (if not receiving HRA)
Income tax rates for Consultants
Old tax Regime
| Income | Tax rates |
| Upto ₹ 2.50 lakh | 0% |
| ₹ 2.50 lakh – ₹ 5 lakh | 5% |
| ₹ 5 lakh – ₹ 10 lakh | 20% |
| Above ₹ 10 lakh | 30% |
You Can claim deduction under Section 80C, 80D, 80G, etc
For senior citizen (age between 60 & 80 years), tax rate is 0% upto ₹ 3 lakhs. Rest of the rates are same.
For super senior citizen (age above 80 years), tax rate is 0% upto ₹ 5 lakhs. Rest of the rates are same.
In Old tax regime, a maximum tax rebate under section 87A of Rs. 12,500 is available for income upto Rs. 5 lakhs meaning your income is totally tax free till Rs. 5 lakhs. The rebate under section 87A is not allowed to a Non-resident.
New tax Regime (FY 23-24)
| Income | Tax rates |
| Upto ₹ 3 lakh | 0% |
| ₹ 3 lakh – ₹ 6 lakh | 5% |
| ₹ 6 lakh – ₹ 9 lakh | 10% |
| ₹ 9 lakh – ₹ 12 lakh | 15% |
| ₹ 12 lakh – ₹ 15 lakh | 20% |
| More than ₹ 15 lakh | 30% |
New tax Regime (FY 24-25)
Income | Tax Rate |
Upto ₹ 3 lakh | 0% |
₹ 3 lakh – ₹ 7 lakh | 5% |
₹ 7 lakh – ₹ 10 lakh | 10% |
₹ 10 lakh – ₹ 12 lakh | 15% |
₹ 12 lakh – ₹ 15 lakh | 20% |
Above ₹ 15 lakh | 30% |
New tax Regime (FY 25-26)
| Income Range (₹) | Tax Rate |
|---|---|
| Upto ₹ 4 lakh | Nil |
| ₹ 4 lakh – ₹ 8 lakh | 5% |
| ₹ 8 lakh – ₹ 12 lakh | 10% |
| ₹ 12 lakh – ₹ 16 lakh | 15% |
| ₹ 20 lakh – ₹ 20 lakh | 20% |
| ₹ 20 lakh – ₹ 24 lakh | 25% |
| Above ₹ 24 lakh | 30% |
TDS on Professional fees of consultants
When a consultant provides professional services to a client or company, the payer is required to deduct Tax Deducted at Source (TDS) under Section 194J of the Income Tax Act. Here are the key points:
Rate of TDS: 10% on the amount paid for professional services.
Threshold limit: TDS is applicable only if the total payment to the consultant exceeds ₹30,000 in a financial year (₹50,000 from FY 25-26 onwards).
PAN requirement: If the consultant does not provide a valid PAN, TDS may be deducted at a higher rate of 20%.
Nature of services: Applies to professional services such as legal, medical, engineering, accounting, consultancy, technical, etc.
TDS credit: The consultant can claim credit for the TDS deducted while filing their ITR and may also be eligible for a refund if excess tax is deducted.
Form 26AS and AIS: These documents show the TDS deducted and help consultants in reconciling their income while filing returns.
How to use GST Information while filing ITR
Utilizing GST information can be immensely beneficial for consultants who are registered under the GST regime. Here’s how consultants can leverage their GST data while filing their Income Tax Return (ITR):
Business Transactions Tracking: GST returns contain comprehensive details of all business transactions, including sales, purchases, and expenses. By analyzing this data, consultants can gain insights into their business activities throughout the financial year. They can track the flow of income and expenditure, identify trends, and assess the overall financial health of their consultancy business.
Income Documentation: GST data provides a structured record of the revenue generated from taxable supplies made by the consultant. This information is invaluable when reporting income in the ITR. Consultants can cross-reference their GST sales data with their other income sources to ensure accuracy and consistency in reporting their total income.
Expense Verification: In addition to tracking income, GST returns also capture input tax credits claimed on business expenses. Consultants can review their GST input tax credit statements to verify the legitimacy of claimed expenses. This helps ensure that only eligible expenses are deducted while filing the ITR, reducing the risk of tax audits or disputes with income tax department.
Financial Reporting: GST-compliant accounting software often generates reports that categorize income and expenses according to GST codes and tax rates. These reports can be used to generate financial statements, such as profit and loss statements and balance sheets, which may be required for filing certain types of ITR forms, such as ITR-3.
Data Consistency: By aligning GST data with ITR filings, consultants can maintain consistency in reporting their financial information to tax authorities. This reduces the likelihood of discrepancies or errors that could trigger income tax notices. Consistent reporting also builds credibility and trust with tax authorities.
Tax Planning: Analyzing GST data can also aid consultants in tax planning strategies. By identifying areas of high expenditure or potential tax savings opportunities, consultants can make informed decisions to optimize their tax liability and maximize tax benefits available under the tax laws.
Documents required for ITR filing for Consultants
- PAN (Permanent Account Number)
- Aadhaar Card
- Bank statements
- Details of income and expense
- Invoices
- 26AS
- AIS
- Any other relevant financial documents
ITR filing step by step process
Step 1: Gather Necessary Documents as mentioned above
Step 2: Choose the Right ITR Form
As consultants, you typically fall under the category of professionals. Hence, you’ll likely file ITR using Form ITR-4 (Sugam) or Form ITR-3, depending on your income sources and business structure.
Step 3: Fill in the Details
Ensure you input accurate information regarding your income, deductions, and tax payments. Double-check to avoid any errors that might lead to complications later on.
Step 4: Claim Deductions
You’re entitled to various deductions under Section 80C (like investments in PPF, LIC, etc.), Section 80D (health insurance premiums), and Section 80G (donations). Claim these deductions wisely to minimize your tax liability.
Step 5: Submit and Verify
Once you’ve filled in all the required details and submitted the ITR, it’s time to verify your return. You can do this electronically using Aadhaar OTP, Net Banking, or by sending a signed physical copy.
Step 6: Keep Records
After filing your ITR, maintain copies of the filed return, acknowledgment receipt, and supporting documents for future reference. These records are essential for income tax notice.
Looking for help?
At A R Dhorajiya & Co., we specialize in income tax return filing for consultants. From choosing the right ITR form to optimizing deductions , we ensure complete compliance with minimal effort on your part.
Let us handle your taxes so you can focus on your consultancy work.
Contact us today at +91 9769647582 for a consultation or to get started with your ITR filing
Frequently Asked Questions
Consultants can file ITR online via the Income Tax e-filing portal. Choose the correct form (ITR-3 or ITR-4), report income, claim deductions or presumptive income, pay any balance tax, and verify the return electronically.
TDS under Section 194J is applicable if the total payment to a consultant exceeds ₹30,000 in a financial year. The TDS rate is 10%.
You cannot completely avoid TDS if it’s applicable. However, if your total income is below the taxable limit, you may submit Form 13 to the Assessing Officer for a certificate of lower or nil TDS deduction.
You can calculate tax based on:
50% of gross receipts under presumptive taxation (Section 44ADA), or
Actual profits after deducting allowable business expenses under regular provisions.
Apply the applicable individual slab rates on taxable income.
Yes, if their gross receipts exceed ₹20 lakhs (₹10 lakhs for NE and hill states), consultants must register for GST and charge 18% GST on their services.
Form 16A is a TDS certificate issued by the client (payer) showing the amount of tax deducted on professional fees. It can be used to claim credit while filing ITR.
Consultancy income is taxable under “Profits and Gains from Business or Profession” as per the Income Tax Act.
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