If you are working as a freelancer for a US-based IT company and earning in dollars, the income still needs to be properly reported and taxed in India.
From converting dollar payments into rupees to filing the right ITR, claiming business expenses and dealing with GST, there are several rules freelancers need to keep in mind.
How Is The Income Taxed?
Income from freelance IT, software, and certain technical services is generally treated as income from a business or profession. Some specified professionals can choose the presumptive taxation scheme under Section 44ADA. Under this scheme, 50% of the gross receipts is treated as taxable income.
The scheme is available for gross receipts of up to Rs 50 lakh. The limit can go up to Rs 75 lakh if at least 95% of the receipts are received through banking channels.
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What Happens When The Payment Is In Dollars?
A freelancer cannot report the dollar amount directly in the ITR. The income has to be converted into Indian rupees using the prescribed exchange rate. For instance, if a freelancer has a $1,000 invoice in February 2026, the relevant rate would be the SBI TT Buying Rate on January 31, 2026 (last day of the month immediately preceding, as per the rule).
How Much Tax Does A Freelancer Have To Pay?
The calculation starts with adding all freelance receipts after converting them into rupees. The freelancer then needs to calculate taxable income either under the normal provisions or the presumptive scheme. Any other taxable income also has to be included.
The old and new tax regimes should then be compared to see which one works better.
After the income-tax amount is calculated, a 4% health and education cess and applicable surcharge have to be added. Freelancers who have a tax liability requiring advance tax payments must also pay it in installments.
Will The US Company Deduct TDS?
Freelancers working remotely from India should generally submit Form W-8BEN to the US client. Where the relevant conditions are met, this helps establish that the freelancer is not a US person and that the services are being performed outside the US.
If the form is not submitted, a US payer may in some cases apply default withholding.
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Can Freelancers Claim Relief If US Tax Is Deducted?
Yes, the India-US Double Taxation Avoidance Agreement can become relevant if tax has been withheld in the US. If US tax has already been paid, the freelancer may be able to claim a foreign tax credit while filing the Indian ITR.
Form 67 has to be filed on or before the applicable ITR due date. Documents such as Form 1042-S should also be kept as proof of the tax withheld.
What About GST?
If you are a freelancer in India and provide services to a US company, your work can be treated as an export of services under GST rules. If your total turnover is up to Rs 20 lakh, you generally do not need to register for GST, subject to applicable exceptions.
If your turnover crosses the GST registration limit, you need to register. You can then file an LUT (Letter of Undertaking), which allows you to provide services to the US company without charging GST/IGST.
If you do not file an LUT, you may have to pay IGST first and later claim a refund from the government.
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