GST and income tax for freelancers in India

Worried about GST and tax now that money is coming in from abroad? If you are just starting with clients abroad, you probably do not need GST registration yet. For services, registration becomes compulsory once your total turnover crosses ₹20 lakh in a financial year, or ₹10 lakh in a few special category states.² The notification that exempts service providers below that limit speaks of supplies to other states,³ so ask an accountant whether it covers your clients abroad too. Once you do register, you can file a letter of undertaking (LUT) each year, so you can bill clients abroad without adding GST.⁶⁷ Income tax works differently: your income from clients counts for the year from the first payment, and it is your income from the work that is taxed, not everything clients paid you.

Everything here comes from my own experience and from the government's published rules, which I have linked. It is not tax advice. A chartered accountant should confirm what applies to you.

How the tax rules see a payment from abroad

Take one payment from a client abroad. It reaches your bank as rupees, and in my experience your bank or payment provider can give you a remittance advice (a FIRA or eFIRC), a record that shows the money came from abroad in foreign currency. Two different taxes look at that same payment, and they ask different questions.

GST looks at what you supplied. The payment is part of your aggregate turnover, the total value of everything you supply in a financial year, across India. Exports are included in it.¹ Whether the work is an export of services depends on five conditions, and one of them is that you are paid in foreign currency, or in rupees only where the Reserve Bank of India allows it.⁴ I keep the remittance advice for every payment as my record of that.

Income tax looks at what you earned. For income tax, the money from clients is income from your business or profession, and it counts from the first payment. What is taxed is your income from the work, not the whole amount clients paid. Under the presumptive scheme in Step 5, for example, the income is taken as half of your receipts.¹⁰ If you still have a job, that income and your salary are both part of your total income for the year.

Counted, but not charged: what zero-rated means

Under GST, an export of services is a zero-rated supply.⁵ In plain words, the work is counted, but it need not carry GST. It counts towards your turnover and your ₹20 lakh limit like any other work.¹ Once you are registered, if you file an LUT, you bill your client abroad without GST. Otherwise, you charge the GST and claim it back later as a refund.⁵ So keep a running total of what clients abroad pay you, even while the amounts are small.

₹1.5 lakh a month is ₹18 lakh a year, which is still under the ₹20 lakh limit, so registration was not yet compulsory for me. Only a registered person can file an LUT,⁶ and I wanted the LUT. That is why I registered before I had to. Speak to an accountant when you get close.

Step 1: check whether you need GST registration yet

GST registration depends on your aggregate turnover, and money from clients abroad counts towards the limit.¹

Step 2: check that your work counts as an export

For GST, your work for a client abroad is an export of services only when all five of these are true:⁴

1. You are located in India.
2. Your client is located outside India.
3. The place of supply is outside India.
4. You are paid in foreign currency, or in rupees only where the Reserve Bank of India allows it.
5. You and the client are not two branches of the same business.

For the fourth point, in my case the remittance advice for each payment is the record that the money came from abroad in foreign currency. How to get paid by international clients in India explains which routes give you one.

Once you are registered, you can either bill the client without GST under an LUT, or charge the GST and claim it back later as a refund.⁵ I use the LUT, so my clients abroad are billed without GST.

Step 3: file an LUT every year

The LUT is a promise to the government, made online on form GST RFD-11. In it you undertake to pay the tax, with interest, if you do not receive payment for an export within one year of the invoice.⁶

These are the steps on the GST portal:⁷

1. Log in, and go to Services, then User Services, then Furnish Letter of Undertaking (LUT).
2. Choose the financial year the LUT is for.
3. Enter the name, address and occupation of two independent witnesses.
4. Tick the self-declarations.
5. Sign it with your digital signature or with the one-time code the portal sends (EVC).

If the tax officer does not act on it within three working days, it is treated as approved. An LUT expires at the end of the financial year.⁷ So you file a new one every year, before you send the first export invoice of that year. Without a current LUT, you would have to charge GST on the invoice and claim it back.⁵

Step 4: put the export wording on your invoice

A registered freelancer's export invoice needs one line of wording that a domestic invoice does not. Under an LUT, the invoice must carry this endorsement:⁸

"SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER FOR AUTHORISED OPERATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX"

It must also show the client's name and address, the delivery address and the client's country.⁸ The export invoice format opens with this wording, the place of supply and an SAC code already filled in, ready for your own details. The rest of the invoice, from payment details to due dates, is in Freelance invoices and getting clients to pay on time.

Step 5: plan for income tax

India's new Income-tax Act, 2025 has applied since 1 April 2026. It replaced the 1961 Act with new section numbers and simpler language, and the government says it does not change the underlying tax policy.⁹ Older articles online still quote the old section numbers, so check with your accountant which ones apply to your return.

Some professions can use a simpler presumptive scheme. Under it, you declare half of your total receipts as income. The Income Tax Department lists the professions it covers as legal, medical, engineering or architectural, accountancy, technical consultancy, interior decoration, and others the tax board notifies.¹⁰ Whether your work fits, and whether the scheme suits you, is a question for your accountant.

In my case, I have never used a tax scheme like this, either when I started or now. My accountant took care of my filing, so there were no major surprises when I was starting. Today I am more careful about transfers and expenses, and all my income comes into one company bank account in India.

Step 6: keep the records from your first payment

Keep one bank account for freelance money, and for every payment keep the invoice, the remittance advice and the bank statement line, plus receipts for work expenses. How to get paid by international clients in India lists these papers and where each one comes from.

If you can, find an accountant early, and ask them two things: which income tax form you should file, and when you will need GST.

A worked example

Say you are a graphic designer in Kochi, still in a salaried job, and clients abroad have started paying you about ₹60,000 a month.

1. This year. Over twelve months that is about ₹7.2 lakh of turnover, well under the ₹20 lakh limit, so GST registration is not compulsory yet, subject to the point about clients abroad in Step 1. You keep one bank account for the freelance money, an invoice for every payment and a remittance advice for each one.
2. Income tax. Your income from the work, not the full ₹7.2 lakh, is part of your total income for the year along with your salary. You give your accountant the folder of invoices, remittance advices and expense receipts, and ask how to work out that income and which form to file.
3. A year later. You have left the job, and clients abroad now pay you about ₹1.8 lakh a month, which is about ₹21.6 lakh a year. That is over ₹20 lakh, so you speak to an accountant before you cross the limit, and register.
4. After registering. Before your first invoice of the financial year, you file an LUT on the GST portal. Every invoice to a client abroad now carries the export wording from Step 4, and no GST is added to it.⁸

To see what each payment route leaves you with, and which ones give you a remittance advice, use the payout comparison. The other steps for this stage are on the growing page.

At the top of this year's folder, write the running total of what clients have paid you, and update it each month. If you are already registered, put a reminder in your calendar for the first week of April: file the new LUT before the first invoice of the year, and write the date you filed it on the folder.