Proforma Invoice vs Tax Invoice: What Freelancers Need to Know

Before a freelance project officially starts, corporate clients often ask for a "Proforma Invoice." If you're used to only sending an invoice after the work is completed, this can be confusing.

What is a Proforma Invoice?

A proforma invoice is essentially a preliminary bill of sale or quotation sent to a buyer in advance of a delivery of goods or services. It declares the seller's commitment to provide the specified services at the specified prices.

Unlike a standard Tax Invoice, a Proforma Invoice does not trigger a demand for immediate payment, and it is not a legally binding financial document for accounting purposes. Your client cannot use a proforma invoice to claim Input Tax Credit (ITC) for GST.

When should you send one?

• Advance Payments: If you require a 50% upfront deposit before starting a project, clients often need a Proforma Invoice to process the advance payment internally.
• Budget Approval: When a client's finance team needs to approve the estimated cost of your project before issuing a Purchase Order (PO).

How to create one using KaroTools

You don't need a separate software tool to create a Proforma Invoice. You can use our standard GST Invoice Generator.

Simply open the tool, and in the "Invoice Settings" panel, change the document title from "TAX INVOICE" to "PROFORMA INVOICE". Fill in your estimated line items and download the PDF. Once the project is complete, you can generate the final Tax Invoice.