Given medical expenses, retirement needs and support for old parents, how much corpus does she require? They suggest that for others in a similar situation it is important to assess your current finances, potential growth, overall risk profile and future goals to ensure long-term financial stability and wealth building.
For our hypothetical client, she owns a house in Chennai, has medical insurance, PPF, and a ₹5,000 per month SIP already in place.
How should a freelancer prioritise investments?
According to Chartered Accountant (CA) Chandni Anandan, Tax expert at ClearTax, for a freelancer with variable income, retirement planning becomes inherently more dynamic compared to salaried individuals. “Unlike structured monthly SIPs, investment contributions in this case are likely to be irregular and dependent on project inflows. Therefore, investment priority shifts from fixed contribution planning to a cashflow-first strategy, where liquidity and emergency buffers take precedence,” she explained.
In order to do this, Anandan advises that freelancers target surplus earnings during higher-income periods towards building financial security buffers and long-term investments. “Lower-income phases should focus on preserving liquidity and maintaining essential coverage without disrupting core financial stability. As a result, the projected retirement corpus should be interpreted as a broad indicative range rather than a fixed outcome, given the inherent variability in freelance income cycles,” she added.
Breaking down the allocation for out hypothetical client, Apurv Gupta, Co-Founder and CEO of Wealth Beacon felt that for such volatile income stream, the approach is to fund the most critical goal i.e. retirement. “For planning, we have made conservative estimates (as in take the lower end of the income). Assuming client’s longevity is 85 years, and assuming she spends 80% of the income and saves/invests 20% i.e. ₹4 lakh annual expenses, of which 40% is for parents and balance for self,” he explained.
He pointed that other items that should be factored (good to have) include an emergency corpus, health/medical corpus (both for parents and the freelancer), lifestyle improvements , property maintenance and upkeep, step up in old age. “In a good year, the additional earnings (over and above the ₹5 lakh lower threshold), can go towards funding these additional goals and this can be invested in a higher risk portfolio,” Gupta added.
Retirement: How you really need ₹20-50 crore corpus?
When asked, Anandan agreed that a retirement corpus of ₹1.5–3 crore is a realistic and achievable benchmark for a normal freelancing income profile, rather than the ₹20–50 crore figures often promoted in public discourse. She however noted that for a single-income freelancer, who also bears parental responsibilities — which materially reduces investible surplus, the projected requirement is on the higher end of the spectrum.
Anandan also noted that given the freelancer’s irregular and single-income, the annual savings base remains constrained, and despite assuming a 10% annual growth in savings and an 8% investment return over 25 years, the projected corpus is approximately ₹1.71 crore in nominal terms. When adjusted for inflation, the real value reduces further in purchasing power terms, she added.
She suggested a more dynamic retirement planning compared to salaried individuals. “Unlike structured monthly SIPs, investment contributions in this case are likely to be irregular and dependent on project inflows. Therefore, investment priority shifts from fixed contribution planning to a cashflow-first strategy, where liquidity and emergency buffers take precedence,” Anandan noted. Here’s how:
- During higher-income periods, surplus earnings should be prioritised towards building financial security buffers and long-term investments.
- Lower-income phases should focus on preserving liquidity and maintaining essential coverage without disrupting core financial stability.
How does the investment breaks work out? According to Gupta, the following plan helps the client reach her targets:
- Invest 20% of the income ( ₹1 lakh) annually and it is stepped up in-line with income increase. This could be ₹60,000 in equity SIP and ₹40,000 in PPF, with expected return of 10%.
- “The investment horizon is long term. There is no other goal. The house, in Chennai is owned and the proceeds from this house can go towards funding the house in Munnar,” he added.
- With an annual saving of ₹1 lakh — this is ₹8,333 per month — stepped up in-line with increase in income, the corpus at retirement should be ₹2.4 crore.
- The annual expenses at the time of retirement is ₹9.81 lakh (adjusting for inflation and lifestyle changes). The corpus required at retirement is ₹2.33 crore. So, funding ratio is higher than 1.
- Gupta has assumed base earning (worst case scenario) of ₹5 lakh, income increase of 5% p.a., and inflation growth at 7%.
What should be the tax considerations for freelancers?
When it comes to filing returns, for our hypothetical client the lower income is below the basic threshold and hence would not require action.
Anandan added that since freelance income is treated as business income there is need to maintain recored. “Proper maintenance of books of accounts, supported by documentation of income and expenses, is essential under applicable income tax provisions. Where required, statutory audit compliance must also be ensured,” she stated.
In years where the income exceeds basic threshold, business-related expenses should be claimed on a proportionate basis, “where deduction is allowed in line with the extent of their use for income-generating activity, subject to applicable tax rules and reasonable allocation principles,” she noted.
“Overall, effective tax management in freelance income structures depends on disciplined record-keeping, compliance with statutory requirements, and structured optimisation of allowable business deductions,” according to Anandan.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
