"What should I charge?" is usually answered by checking what other people charge. That tells you what the market will bear, but not whether the rate will actually pay your bills. A steadier way is to work backwards from the money you need.
1. Start with the take-home you need
Begin with the amount you want in your bank account each month, after business costs and income tax. Include your household spending, savings and investments. Leave out business expenses here; they come next.
2. Add your business expenses
These are the costs of running your practice: software subscriptions, a laptop spread over its useful life, internet, a co-working desk, professional fees and your accountant. They have to be paid before you see a rupee of take-home.
3. Count the hours you can actually bill
This is where most rates go wrong. A year has 52 weeks, but you will not bill all of them. Take out holidays, sick days, festivals and the quiet weeks between projects. Six to eight weeks off is realistic for many freelancers.
Then count billable hours, not working hours. Proposals, invoicing, calls that do not turn into work, learning and admin all take time you cannot charge for. Thirty billable hours in a fifty-hour week is a common pattern.
4. Account for income tax
Freelance income is taxed as income from business or profession. You can usually compute it in one of two ways:
- Presumptive scheme for professionals. If you are a resident individual in a specified profession, and your gross receipts are within the limit, you can declare a fixed share of receipts as income and skip detailed books. For income earned from 1 April 2026 this is section 58 of the Income-tax Act, 2025; before that it was section 44ADA of the 1961 Act. The deemed share is 50% of gross receipts. The limit is ₹50 lakh, or ₹75 lakh if cash receipts are no more than 5% of the total.
- Regular computation. You are taxed on receipts minus actual expenses. This needs proper books of account, and possibly an audit. It can work out cheaper when your expenses are high.
Check whether your work is a specified profession before relying on the presumptive scheme. Technical consultancy, legal, medical, engineering, architecture and accountancy are among those covered.
A worked example
Say you want ₹1,00,000 a month, have ₹15,000 a month of business expenses, bill 30 hours a week and take 6 weeks off. Under the new regime for FY 2026-27:
- Yearly take-home needed: ₹12,00,000
- Yearly expenses: ₹1,80,000
- Billing needed under the presumptive scheme: ₹13,80,000. Half of that, ₹6,90,000, is taxable income, and it is fully covered by the rebate.
- Billable hours: 30 × (52 − 6) = 1,380
- Hourly rate: ₹1,000. Day rate for 8 hours: ₹8,000.
Push the target higher and tax starts to bite, so the rate climbs faster than the take-home does. That is why it pays to run your own numbers.
Two things the rate does not cover
- GST. Once your turnover from services crosses the registration threshold (₹20 lakh for most service providers), you will generally need to register and charge GST on top of your fees. Quote business clients "plus GST".
- A buffer for lean months. Irregular income makes an emergency fund more important. Six months of expenses is a sensible goal.
Try it
The freelancer income & rate calculator does this for any target. It compares the presumptive scheme with regular computation and shows the hourly and day rate. Save the result to FID and your monthly take-home flows into your budgets and forecasts.