Is freelance income up to ₹12 lakh tax-free in tax year 2026-27?
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Short answer
Effectively yes under the new regime, if your total income (not your gross receipts) is ₹12 lakh or less. Section 156(2) of the Income-tax Act, 2025 gives a resident individual taxed under the section 202(1) slabs a rebate of the full tax up to ₹60,000 where income does not exceed ₹12 lakh, which covers the slab tax on ₹12 lakh exactly.12 A freelancer on the 50% presumptive scheme can therefore have gross receipts up to ₹24 lakh and pay no tax, if there is no other income.123
A freelance tutor billing students abroad, a part-time illustrator or a developer in the first year of freelancing may wonder whether any tax is due at all. For tax year 2026-27 (income earned from 1 April 2026), the answer turns on the rebate in section 156 of the Income-tax Act, 2025 and the new-regime slabs in section 202.12
How do the slabs and the rebate combine?
Section 202(1) sets the new-regime rates for an individual: nil up to ₹4 lakh, 5% from ₹4 lakh to ₹8 lakh, 10% to ₹12 lakh, 15% to ₹16 lakh, 20% to ₹20 lakh, 25% to ₹24 lakh and 30% above ₹24 lakh.2 On income of exactly ₹12 lakh, slab tax is ₹20,000 plus ₹40,000, which is ₹60,000.2
Section 156(2)(a) allows a resident individual taxed under section 202(1) a deduction of 100% of the income-tax or ₹60,000, whichever is less, where income does not exceed ₹12 lakh.1 The two cancel out, so tax is nil.
Is it ₹12 lakh of receipts or of income?
Income. That makes a big difference for professionals on the presumptive scheme in section 58(2), Table row 3, where income is deemed at 50% of gross receipts.3
| Freelancer | Gross receipts | Income | Tax for tax year 2026-27 |
|---|---|---|---|
| IT consultant on row 3 | ₹20,00,000 | ₹10,00,000 | Nil after rebate |
| Architect on row 3 | ₹24,00,000 | ₹12,00,000 | Nil after rebate |
| Sole proprietor running a small agency, declaring actual profit | ₹40,00,000 | ₹12,00,000 | Nil after rebate |
The table assumes no other income and applies sections 58, 156 and 202.123 Rows depend on the freelancer qualifying for the scheme used.
What happens just above ₹12 lakh?
Marginal relief in section 156(2)(b) applies. Where total income exceeds ₹12 lakh and the tax on it exceeds the amount by which income exceeds ₹12 lakh, the rebate reduces tax to that excess.1 On income of ₹12,50,000, slab tax would be ₹67,500, but tax payable is limited to ₹50,000, before Health and Education Cess.12
Do I still file a return?
In most cases, yes. Section 263(1)(a)(iii) requires a return where total income, before certain deductions, exceeds the maximum amount not chargeable to tax, and section 263(1)(a)(ix) requires a resident with assets or signing authority outside India to file regardless of income.4 See which ITR form freelancers file.
The rebate depends on total income from all sources, so salary, interest or capital gains change the picture. Confirm your own figures with a chartered accountant (CA); the worked examples in the section 44ADA guide show the full computation.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
- [1]Income-tax Act, 2025, section 156 (rebate) (Income Tax Department section page)
- [2]Income-tax Act, 2025, section 202 (new tax regime) (Income Tax Department section page)
- [3]Income-tax Act, 2025, section 58 (Income Tax Department section page)
- [4]Income-tax Act, 2025, section 263 (return of income) (Income Tax Department section page)
Frequently asked questions
Does the ₹12 lakh limit apply to my gross receipts from clients?+
No. Section 156(2) looks at total income. Under the 50% presumptive scheme, ₹24 lakh of receipts gives ₹12 lakh of income.13
Do I still need to file a return if my tax is nil?+
Usually yes. Section 263(1)(a)(iii) requires a return where total income, before certain deductions, exceeds the maximum amount not chargeable to tax, and residents with foreign assets must file regardless of income.4
Does the rebate apply under the old regime?+
The ₹60,000 rebate in section 156(2) applies where income is chargeable under section 202(1), the new regime. Section 156(1) gives a smaller rebate of up to ₹12,500 for total income up to ₹5 lakh.1
What if my income is ₹12.2 lakh?+
Marginal relief applies: tax is limited to the amount by which income exceeds ₹12 lakh, here ₹20,000, before cess.1
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
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