Your 44ADA Gross Receipts Don't Match Your 26AS

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. 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 — money actually received in the year. 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.

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. Rule 37BA(3) of the Income Tax Rules, 1962directs 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.

---

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, Toptal or similar, 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.

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.

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. Where the invoice does not split GST out, the deductor is liable 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.

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.