You computed your presumptive income under Section 44ADA on gross receipts of, say, Rs. 41 lakh. Your Form 26AS totals Rs. 46 lakh. Both numbers came out of real records, neither is invented, and the return you are about to file will not agree with the department’s.
In most freelance cases this gap is not an error at all — it is two systems measuring two different events. On a cash basis, 44ADA taxes what you received. Your clients report what they paid or credited. Those are not the same moment, and the difference between them is usually sitting in one specific place.
Cause 1: the March invoice that was paid in April
This is the big one, and it is entirely legitimate.
Section 44ADA computes your income as 50% of gross receipts for the year. If you keep your books on a cash basis, that is money actually received in the year. On a mercantile (accrual) basis an invoice may count when it falls due rather than when it is paid, so confirm with your CA which basis you follow before relying on the timing gap below. A deductor, by contrast, deducts and reports at the point of payment or credit, whichever is earlier. A client who books your March invoice into their accounts in March and pays it in April has credited you in FY1 and paid you in FY2.
| Event | When | Which year it lands in |
|---|---|---|
| You raise the invoice | 20 March | — |
| Client credits it and deducts TDS | 28 March | FY 2025-26 — appears in that year’s statement |
| Money reaches your bank | 12 April | FY 2026-27 — that year’s gross receipts (on a cash basis) for presumptive taxation, now Section 58(2) Sl. 3 (formerly 44ADA) |
Every March invoice paid in April produces this, and for a freelancer with a normal payment cycle that can easily be several lakh at the year boundary. Your receipts are lower than the statement, and both figures are right.
What the law says to do about it
This case is provided for. Under the 1961 rules, Rule 37BA(3) of the Income Tax Rules, 1962 directs that credit for TDS is given for the assessment year in which the income is assessable. If the receipt is assessable in the following year because that is when you received it, the credit belongs in that following year too — and the return has a mechanism for carrying a TDS credit forward rather than claiming it against income you have not yet declared. When the following year is tax year 2026-27, as in the example above, the claim falls under the Income-tax Act 2025 and its 2026 Rules, so ask your CA to confirm how the carried-forward credit is claimed in that return.
Claiming the credit this year while declaring the income next year is precisely the combination that produces a defect notice. The rule exists to keep them together.
Where the amounts are large or the pattern is repeated across many clients, get your CA to set the carry-forward correctly. It is a small mechanical step that prevents the exact mismatch this page is about.
Cause 2: marketplace income reported gross
If any of your receipts come through Upwork, Fiverr or a similar marketplace, the operator deducts and reports under Section 194-O on the gross consideration — before its own commission. Your payout is net of that fee; the statement records the gross. On a year of platform work the commission alone can account for the whole gap.
This one has its own page, because the presumptive base is the consequential part: when the statement shows more income than you earned.
Cause 3 — and the one that actually costs you: the ceiling
Presumptive taxation under 44ADA is not available above a gross-receipts limit, and the limit is measured on gross receipts, not on the presumptive income. So a statement figure higher than your own is not just a reconciliation nuisance — it can be the difference between filing presumptively and not.
| Limit | Amount | Condition |
|---|---|---|
| Base ceiling | Rs. 50 lakh | Applies generally |
| Enhanced ceiling | Rs. 75 lakh | Available only where cash receipts are 5% or less of total receipts (Finance Act 2023 proviso) |
For most freelancers billing by bank transfer the enhanced ceiling is the operative one. But if the difference between your figure and the statement’s straddles Rs. 75 lakh, settle which figure is correct before you file rather than after — the consequence is not a mismatch letter, it is a different return.
Free · no loginPut your figure and the statement’s figure through the same calculation and see what each does to your presumptive income, your tax, and whether you are still inside the ceiling.Cause 4: GST inside the reported amount
If you are GST-registered and a deductor reports the tax-inclusive invoice total as the amount paid to you, your receipts are overstated in the statement by the GST — money that was never your income. Across a full year of billing that alone can be an eighteen per cent gap with nothing wrong in your books at all.
Which side the error sits on depends on your invoice. Under CBDT Circular 23/2017, where GST is shown separately, TDS is deducted on the service value excluding it. The flip side follows from the same logic: the circular only carves GST out where it is shown separately, so where the invoice shows a single tax-inclusive figure the deductor is entitled to deduct on the full value — and the overstatement is then a consequence of how you billed rather than an error to raise.
Settling it before you file
All four causes resolve the same way, and it takes minutes rather than an afternoon: lay your own invoice list against the statement, entry by entry, and see which differences are timing, which are commission, which are tax, and which are genuinely missing or duplicated.
Free · no login · nothing storedMatched, pending, mismatch and unmatched, per client — so a March-credited invoice, a platform gross, and a genuinely absent deduction stop looking like the same problem. Parsed in your browser; nothing is uploaded.If the cause turns out to be a deduction that is missing rather than merely timed differently, the overview of what a client’s TDS deduction means routes to the right remedy.