TDS on freelance income, explained simply
If a client has ever paid you less than your invoice amount and mentioned 'TDS,' this is what happened — and why it's not actually a loss, even though it feels like one when the payment lands short.
What TDS actually is
TDS (Tax Deducted at Source) means your client deducts a percentage of your payment and deposits it directly with the government on your behalf, rather than paying you the full amount and leaving you to pay tax later. It's tax collection built into the payment itself.
Why it feels like a loss but usually isn't
The TDS deducted isn't an extra tax on top of what you owe — it's an advance payment toward your total tax liability for the year. When you file your ITR, this amount shows up as credit, and if your actual tax owed is less than the TDS already deducted, you get the difference refunded.
Common TDS sections that apply to freelancers
- Section 194J — 10% TDS on professional or technical service fees, when payment from one client crosses ₹30,000 in a year.
- Section 194C — lower TDS (commonly 1-2%) for contract/work-based payments, distinct from professional fees.
- Threshold and rate details can change; always check the applicable rate for your specific type of work.
How to track it properly
Every client deducting TDS should give you a TDS certificate (Form 16A), and the same information shows up in your Form 26AS (available on the income tax portal) — reconcile these against your own invoice records before filing, since mismatches are one of the most common reasons for delayed refunds.
What if a client doesn't deduct TDS at all?
Some smaller clients or those unfamiliar with compliance may not deduct TDS even when required to. This doesn't reduce your own tax liability — you still owe tax on the full income; you simply don't get a TDS credit for that particular payment, so budget for the full tax amount yourself in that case.