TDS for Consultants and Freelancers in India: What Gets Deducted and What to Do

Every time a company or firm pays you a consulting or professional fee exceeding ₹50,000 in a financial year, they are legally required to deduct TDS before crediting you. This is not optional — it's a statutory obligation on the payer under Section 194J of the Income Tax Act.

Understanding how this works helps you invoice correctly, track what's been deducted, and make sure you claim every rupee at the time of filing your ITR.

Section 194J: The Governing Section

Note on section numbers: the Income-tax Act, 2025 (effective 1 April 2026) renumbered Section 194J as Section 393 (Table Sl. No. 6(iii)) — confirmed against the Income Tax Department's official transition FAQ and the Act's own text. The rates described throughout this page (10% for professional services, 2% for technical services) are unchanged. This page continues to use "Section 194J" since it remains the familiar, widely-searched name for this TDS obligation.

Section 194J covers TDS on fees for:

• Professional services
• Technical services
• Director's remuneration, fees or commission that is not paid as salary (sitting fees being the common case)
• Royalties
• Non-compete fees

Who is required to deduct: The obligation sits on a "specified person," which Section 402(37) of the Income-tax Act, 2025 defines as any person who is not an individual or HUF — so every company, firm, LLP, trust, society and government body — plus any individual or HUF whose sales, gross receipts or turnover in the immediately preceding tax year exceeded ₹1 crore from business or ₹50 lakh from a profession. Note that this is a turnover test, not an audit test: the two are often assumed to be the same thing and they are not.

An individual or HUF client below that turnover line is not simply exempt. They are outside the professional-fees rule above, but a separate rule catches them at a much higher level: once the amounts they pay you during a tax year — for contract work, for professional services, or as commission or brokerage — cross ₹50 lakh in aggregate, they must deduct at 2%, and the deduction applies to the entire amount rather than only the excess over ₹50 lakh. This is Section 393(1) (Table Sl. No. 6(ii)) of the Income-tax Act, 2025, the successor to the old Section 194M. Such a payer does not even need a TAN for it — Section 397(1)(c) specifically exempts them.

Threshold (professional and technical fees): ₹50,000, tested on the aggregate paid to you during a financial year rather than on any single invoice. The same ₹50,000 governs professional fees, technical fees, royalties and non-compete fees alike; it was raised from ₹30,000 with effect from 1 April 2025, and the Income-tax Act, 2025 carries the figure forward. Director's remuneration is the one category with no threshold at all: TDS on it applies from the first rupee.

Rate:

• Professional services (chartered accountants, doctors, lawyers, architects, etc.): 10%
• Technical services that are not professional services: 2% (reduced from a flat 10% in 2020)
• Payments to a payee engaged only in the business of running a call centre: 2%
• Director's fees: 10%
• Royalties: 10%, except royalty for the sale, distribution or exhibition of cinematographic films, which is 2%
• Non-compete fees: 10%

What counts as "professional services" vs "technical services": This distinction has led to disputes. CBDT clarification indicates that services requiring specialised manual skills or professional judgment (CA, legal advice, medical consultation, architectural services) are professional. Automated or systematic technical assistance (call centre services, software maintenance, technical helpdesk) may be treated as technical services at 2%.

For most freelancers and consultants doing knowledge work, clients typically deduct at 10%. If you're doing standardised technical work (software AMC, IT support), confirm with the client what rate they're applying and why.

What Happens on Both Sides

From the client's side:

• Client pays ₹1,00,000 gross fee
• Deducts TDS at 10% = ₹10,000
• Remits ₹90,000 to your account
• Deposits ₹10,000 to the government
• Issues you TDS certificate (Form 16A) after filing the quarterly TDS return

From your side:

• You receive ₹90,000 in your bank
• Your income is ₹1,00,000 (the gross amount, before TDS)
• The ₹10,000 deducted is your advance tax payment
• You declare ₹1,00,000 as income in your ITR
• You claim ₹10,000 TDS credit in Schedule TDS2
• If your actual tax liability is less than ₹10,000, you get a refund; if more, you pay the difference

Important: Your income is the gross fee (₹1,00,000), not the net amount received after TDS (₹90,000). Do not underreport income because TDS was deducted.

What to Invoice and How

When raising invoices as a consultant or freelancer:

Raise the invoice for the gross amount. Don't pre-deduct TDS in your invoice — that's the client's responsibility.

Optionally note TDS on the invoice:

Professional Fee: ₹1,00,000
Less: TDS @ 10% (u/s 194J) to be deducted by client: ₹10,000
Amount payable: ₹90,000

This is informational — it clarifies to the client what to pay and what to deposit. It's good practice but not mandatory.

GST on fees: If you're GST registered, GST is charged on top of the fee. TDS is deducted on the base fee (exclusive of GST).

Example:

Fee: ₹1,00,000
GST @ 18%: ₹18,000
Total Invoice Value: ₹1,18,000
TDS @ 10% on ₹1,00,000: ₹10,000
Amount payable: ₹1,08,000

TDS is not calculated on the GST component.

Tracking TDS Deducted Against Your PAN

Every rupee of TDS deducted by clients must appear in Form 26AS under your PAN. You verify this by:

1. Logging in to incometax.gov.in
2. Viewing Form 26AS under Services > View 26AS
3. Check Part A2 (TDS on income other than salary — Section 194J entries)

For each entry, verify:

• The deductor's name matches your client
• The TDS amount matches what you calculated from your invoices
• The TAN (Tax Deduction Account Number) of the deductor is correct

If TDS is missing from 26AS: Your client either hasn't filed their TDS return or filed it incorrectly. Steps:

1. Contact the client's accounts or finance team immediately
2. Ask them to verify their TDS return (Form 26Q) for the relevant quarter
3. Request a correction if your PAN was entered incorrectly or the payment wasn't mapped to you

Do not file your ITR claiming TDS that isn't in Form 26AS. Wait until it appears, or file without claiming the TDS amount and then file a revised return once it's corrected.

If you take the second route, watch the calendar — and note that which provision governs depends on the year you are revising, because two statutes are live at once:

• FY 2025-26 and earlier stay under the Income-tax Act, 1961, which the Income-tax Act, 2025 expressly preserves for those years (Section 536). Section 139(5), as substituted by the Finance Act, 2026, allows a revised return up to the end of the relevant assessment year (31 March) or the completion of assessment, whichever is earlier — and makes that right subject to the newly inserted Section 234-I, a fee of ₹1,000 where total income does not exceed ₹5 lakh and ₹5,000 in any other case.
• FY 2026-27 onward falls under the Income-tax Act, 2025. Section 263(5), as substituted by the Finance Act, 2026, gives you twelve months from the end of the tax year — again 31 March of the assessment year — or the completion of assessment, whichever is earlier, and makes the revision "subject to the provisions of section 428(b)" — a fee of ₹1,000 where total income does not exceed ₹5 lakh, and ₹5,000 in any other case, on the same two-tier pattern as Section 234-I.

Under the 2025 Act the trigger is explicit: Section 428(b) charges the fee only on a return furnished "beyond nine months from the end of relevant tax year," so for tax year 2026-27 a revision is free until 31 December 2027 and priced from 1 January 2028. The 1961 Act route is less clearly drafted on where inside the window the fee starts, so for FY 2025-26 and earlier do not plan around a free-until date. Either way, revise as soon as the 26AS entry is corrected.

Getting Form 16A from Clients

Form 16A is the TDS certificate for non-salary TDS. Your clients are required to issue this quarterly after filing their TDS returns.

When should you receive it: The Income-tax Act, 2025 does not fix these dates itself. Section 397(3)(b) requires the deductor to deliver the TDS statement "within such time as may be prescribed," and Section 395(4)(a) requires the certificate to be issued "within such period as may be prescribed" — both are left to the rules made under the Act rather than settled in the Act. What the structure guarantees is the shape of the lag: the certificate follows the quarterly TDS statement, which itself follows the close of the quarter, so a Form 16A is always some weeks behind the payment it certifies, and the final quarter of the year runs longest of the four. Before you tell a client they are late, check the notified due date for that specific quarter on the income tax portal rather than working from a remembered date.

If a client doesn't issue Form 16A: You can download the TDS certificate yourself from TRACES (traces.gov.in) after registration. Form 26AS is the authoritative reference — Form 16A is just a formatted version of the same data.

Advance Tax Obligations for Consultants

Advance tax becomes payable under Section 404 of the Income-tax Act, 2025 once the amount due for the year works out to ₹10,000 or more — and Section 405 tells you to compute that amount after subtracting the TDS your clients will deduct. So the practical question is not "what is my tax?" but "does my tax exceed the 10% my clients are already taking off the top?"

At ordinary consulting incomes it does not, and there is nothing to pay. Take a consultant billing ₹15 lakh of professional fees in FY 2026-27 who uses presumptive taxation. Deemed income is 50% of receipts, or ₹7.5 lakh. Tax on that under the default regime is nil on the first ₹4 lakh and 5% on the ₹3.5 lakh above it — ₹17,500 — which the Section 156(2) rebate wipes out entirely, since it covers total income up to ₹12 lakh. Clients have meanwhile deducted ₹1.5 lakh at 10%. There is no advance tax at all here; the whole ₹1.5 lakh comes back as a refund.

Even on full accounts with no expenses claimed whatsoever, ₹15 lakh of taxable income attracts ₹1,05,000 of tax plus 4% cess, or ₹1,09,200 — still comfortably below the ₹1.5 lakh already deducted. 10% TDS only falls short once the tax on your taxable income exceeds 10% of your gross receipts, which in practice means large receipts with a thin expense base.

A case where advance tax is genuinely due. A consultant bills ₹80 lakh — above the ₹75 lakh presumptive ceiling, so the presumptive scheme is not available — and has ₹35 lakh of business expenses, leaving taxable income of ₹45 lakh:

Tax on ₹45,00,000 (default regime, FY 2026-27)

  Up to ₹4,00,000                       Nil
  ₹4,00,001 - ₹8,00,000     @  5%       ₹   20,000
  ₹8,00,001 - ₹12,00,000    @ 10%       ₹   40,000
  ₹12,00,001 - ₹16,00,000   @ 15%       ₹   60,000
  ₹16,00,001 - ₹20,00,000   @ 20%       ₹   80,000
  ₹20,00,001 - ₹24,00,000   @ 25%       ₹ 1,00,000
  ₹24,00,001 - ₹45,00,000   @ 30%       ₹ 6,30,000
                                        -----------
  Tax before cess                       ₹ 9,30,000
  Surcharge (nil at or below ₹50 lakh)  ₹         0
  Health and Education Cess @ 4%        ₹    37,200
                                        -----------
  Total tax                             ₹ 9,67,200
  Less TDS @ 10% on ₹80,00,000          ₹ 8,00,000
                                        -----------
  Advance tax payable                   ₹ 1,67,200

How you pay it depends on whether you are on presumptive taxation. Section 408(1) sets the ordinary four-instalment schedule — at least 15% by 15 June, 45% cumulative by 15 September, 75% by 15 December, and the whole amount by 15 March. But Section 408(2) collapses that to a single instalment for anyone declaring income under the presumptive scheme: the entire amount by 15 March.

Working it out for yourself each quarter:

1. Estimate annual receipts from all clients, including invoices still outstanding
2. Convert that to taxable income — 50% of receipts if you are presumptive, receipts less actual expenses if you are on full books
3. Compute tax at the slab rates, apply the rebate if total income is ₹12 lakh or under, then add 4% cess
4. Subtract the TDS your clients will have deducted across the year
5. If what remains is ₹10,000 or more, that is your advance tax — spread across the four dates, or paid in one go by 15 March if you are presumptive

Falling short attracts simple interest at 1% a month: Section 424 of the Income-tax Act, 2025 (the old Section 234B) where the year's advance tax comes to less than 90% of the assessed tax, and Section 425 (the old Section 234C) where an individual instalment falls short.

If a Client Refuses to Deduct TDS

Some clients — especially smaller ones or individuals — refuse to deduct TDS saying it's your problem. This is legally incorrect. The deduction obligation is on the payer.

However, in practice, you cannot force a client to deduct TDS. What you can do:

• Educate them on the legal obligation
• Note in your invoice that TDS should be deducted
• For tax purposes, you declare the gross income regardless of whether TDS was deducted or not
• You pay advance tax on the income, as if TDS had been deducted (because you owe the tax regardless)

The fact that a client didn't deduct TDS doesn't mean you don't owe tax on that income. It means you must pay it yourself as advance tax or self-assessment tax.

Filing Your ITR as a Consultant

Professional income is typically reported in ITR-3 (if you maintain full accounts) or ITR-4 (if you opt for the presumptive taxation scheme under Section 44ADA — consolidated into Section 58 under the Income-tax Act, 2025, effective 1 April 2026, with the same 50% rate).

In the ITR, you declare:

• Gross professional income (before TDS)
• All allowable deductions (business expenses — more on this in other articles)
• Net taxable income
• TDS credit claimed (from Schedule TDS2, matching what appears in 26AS)

If you're under the presumptive scheme (44ADA), you declare 50% of gross receipts as income — no need to prove actual business expenses.

TDS on GST: A Common Confusion

Many freelancers are confused about whether TDS applies on the GST portion of their invoice. The answer is clear:

TDS is calculated on the base fee only — not on the GST component.

If your invoice is:

• Professional fee: Rs.1,00,000
• GST @ 18%: Rs.18,000
• Total: Rs.1,18,000

TDS @ 10% applies on Rs.1,00,000 only = Rs.10,000. Net payable by client: Rs.1,18,000 - Rs.10,000 = Rs.1,08,000.

This is confirmed by CBDT circulars: TDS deduction is on the amount excluding GST when GST is shown separately on the invoice. If the invoice doesn't show GST separately (shows just a total), TDS may be applied on the full amount — another reason to always show GST separately as CGST + SGST or IGST on your invoice.

Multiple Clients, Multiple TDS Sources: Reconciliation at Scale

For a consultant with 5-10 clients, all of whom may deduct TDS, the Form 26AS aggregation is your single reconciliation tool. What the process should look like quarterly:

Step 1 — Compile your invoice register: Total professional fee invoiced per client for the quarter. Calculate expected TDS (10% of professional fees from corporate/firm clients that have deducted in the past).

Step 2 — Check Form 26AS Part A2: List all entries under Section 194J for the quarter. For each entry, note: deductor name, deductor TAN, amount deducted, date of deduction.

Step 3 — Match entries: Every expected TDS from your invoice register should appear in Part A2. Any client who has not deducted (and should have) needs a follow-up.

Step 4 — Verify TAN of deductors: Occasionally, a client files their TDS return with an incorrect PAN for the deductee (you). The TDS will appear in 26AS under a different PAN or not at all. If you've received payment with TDS deducted but don't see it in 26AS, ask the client to share their TDS challan and check whether your PAN was entered correctly in their TDS return.

Step 5 — AIS cross-check: The Annual Information Statement (AIS) on the income tax portal also shows TDS data alongside other financial activity. Cross-reference for completeness.

This quarterly reconciliation (not just at filing time) means TDS errors are corrected while the client can still file a revised TDS return for the quarter — which is far easier than trying to fix it after the financial year closes.

TDS Under Section 194C: A Different Section for Project Work

Not all payments to freelancers are 194J. If the work is better characterised as a "contract for work" rather than a "professional service," the client may apply Section 194C instead:

• Section 194C applies to contracts for work, including advertising contracts, broadcasting, sub-contracts, and supply of labour
• Rate: 1% for individuals/HUFs, 2% for companies/firms
• Threshold: Rs.30,000 per transaction or Rs.1,00,000 in aggregate per year

The distinction matters because at 194C rates (1-2%), you're losing less TDS upfront, but this doesn't change your income tax liability. If a client applies 194C when the correct section is 194J, there is no immediate harm to you — the TDS credit still appears in 26AS, and you claim it in your ITR regardless of which section the client cited. However, it can indicate the client is trying to reduce their TDS obligation, which is technically their compliance issue to resolve.

Nil TDS Certificates Under Section 197

If your actual tax liability for the year is expected to be lower than the cumulative TDS that will be deducted by clients, you can apply for a certificate directing clients to deduct TDS at a lower or nil rate.

Process:

1. File Form 13 online through the TRACES portal (traces.gov.in) or through the income tax portal
2. State your projected income, deductions, and expected tax liability
3. The Assessing Officer reviews and either approves, partially approves, or rejects
4. If approved, you receive a certificate specifying the lower rate (e.g., 2% instead of 10%, or nil) and the validity period
5. Distribute this certificate to each client at the beginning of the financial year
6. Client deducts TDS at the certified lower rate instead of the standard rate

The Finance Act, 2026 added a second route: Section 395(6) of the Income-tax Act, 2025 now lets the application be filed before a prescribed income-tax authority, which can issue the certificate — or reject the application as incomplete — on electronic verification of its contents.

When this makes sense:

• Presumptive taxation caps your income at half your receipts. Under Section 58(2) (Table Sl. No. 3) of the Income-tax Act, 2025 — the successor to Section 44ADA — a resident individual in one of the specified professions (legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, IT or company secretary) with gross receipts up to Rs.50 lakh, or Rs.75 lakh where cash receipts are 5% or less, is taxed on 50% of receipts. Clients, though, deduct 10% on 100% of receipts. On Rs.24 lakh of fees that is Rs.2.4 lakh of TDS against deemed income of Rs.12 lakh, on which the Section 156(2) rebate leaves nil tax — every rupee of the Rs.2.4 lakh is refundable.
• Your total income lands at or below the rebate threshold. Any resident individual whose total income does not exceed Rs.12 lakh pays nothing under the default regime, because Section 156(2) allows a rebate of the tax payable or Rs.60,000, whichever is lower.
• Genuine business expenses under regular books. Rent, salaries, software, travel and subcontracting are deducted in arriving at professional income in the first place, so the new regime leaves them untouched — unlike the personal deductions below. (This route and presumptive taxation are alternatives: Section 58(4) bars any further deduction against presumptive income.)
• Carry-forward business losses offsetting current-year income. Section 202(2)(b) blocks carried-forward losses only where they are attributable to the deductions the new regime itself withdraws; an ordinary business loss still sets off.

For a freelancer with Rs.25 lakh gross receipts but Rs.14 lakh in legitimate expenses (real accounting, not 44ADA), taxable income is Rs.11 lakh. Under the default new regime the slab tax on that is Rs.50,000 — nil on the first Rs.4 lakh, 5% on the next Rs.4 lakh, 10% on the remaining Rs.3 lakh — and the rebate that covers total income up to Rs.12 lakh wipes out every rupee of it, so nothing is actually payable. But clients deducting 10% TDS on Rs.25 lakh have taken Rs.2.5 lakh, all of which sits with the government until the ITR refund is processed. This is precisely the situation a nil-deduction certificate under Section 197 exists for.

One thing that is not a reason, despite how often you will see it given as one: 80C, 80D, the Rs.50,000 NPS deduction and self-occupied home loan interest. The new regime is the default, and Section 202(2) of the Income-tax Act, 2025 withdraws all of them — Chapter VIII deductions generally, the Section 124(3) NPS deduction and the Section 22(1)(b) interest deduction alike. They help only if you have positively opted out into the old regime under Section 202(4), and for someone with professional income that opt-out is a serious commitment: it must be exercised by the return due date, it carries into later years, and once withdrawn it can never be exercised again while you still have business or professional income.

Impact of TDS on Your Working Capital

The working capital impact of TDS is often underappreciated. I have seen the same rhythm on the business side of cash-credit limits and receivables — a chunk of money that is technically yours sits out of reach for weeks or months, and if you do not plan around that gap, it turns into a crisis even when the underlying numbers are healthy. TDS does the same thing to a consultant's cash flow, just through a different mechanism. When 10% of every client payment is automatically deducted:

• You receive 90% of cash from each invoice
• 10% is "locked" until ITR refund (which arrives 3-6 weeks after filing in July-September)
• For a freelancer with Rs.30 lakh annual billing, Rs.3 lakh is locked until August-September each year

This matters for cash flow planning. If your advance tax liability is lower than Rs.3 lakh in TDS (because of deductions, presumptive taxation, etc.), you'll receive a refund — but that refund timing must be factored into your annual cash flow. The second half of the year, after ITR refund arrives, typically frees up meaningful cash.

Practical implication: if you're on 44ADA with Rs.30 lakh gross receipts, your taxable income is Rs.15 lakh, and the tax on that under the default new regime is Rs.1,05,000 plus 4% cess — Rs.1,09,200. But clients have deducted Rs.3 lakh in TDS. You're owed a refund of about Rs.1.9 lakh. File your ITR early, well ahead of the 31 August due date that applies to non-audit business and professional filers, to start the refund cycle as soon as possible.

For your exact TDS section, rate, or refund position, confirm with a CA — the figures above are illustrative, not a substitute for checking your own Form 26AS.