TDS is three letters that confuse every freelancer: Tax Deducted at Source. Simply put, an Indian client deducts a percentage of your fee and deposits it with the government against your PAN. You receive the net amount. When you file your ITR, that deposit counts as tax you have already paid. It's not double taxation. It's advance tax collection, done by the person paying you. ## What is TDS? TDS is a mechanism where the government collects income tax at the point of payment rather than waiting for you to file. Example: a client owes you ₹10,000 for a project. They deduct 10% (₹1,000), deposit it with the government under your PAN, and pay you ₹9,000. When you file, you declare ₹10,000 as income and the ₹1,000 shows up as tax already paid. ## TDS rates for freelancers ### Section 194J [Section 194J](https://www.incometaxindia.gov.in/w/section-194j-32): 10% on professional fees; this is the one that applies to most freelancers with Indian clients. #### Who deducts Companies, firms, and individuals or HUFs whose own accounts are subject to tax audit. An individual client who is not audited does not deduct TDS on professional fees at all. #### Threshold From FY 2025-26, a payer deducts once payments to you in the year cross ₹50,000 (it was ₹30,000 earlier). #### Rate 10% on fees for professional services. Fees for technical services are 2%, so a client may apply 2% if they classify your work that way. The rate jumps to 20% if you have not given them your PAN. Real example: an Indian company hires you for software consulting at ₹1,00,000. They deduct ₹10,000 and pay you ₹90,000. The ₹10,000 appears in your Form 26AS within a quarter. ### Section 194O [Section 194O](https://www.incometaxindia.gov.in/w/section-194-o): 0.1% on e-commerce sales, if you sell through an Indian e-commerce operator, the platform deducts 0.1% of gross sales. Individuals and HUFs are exempt up to ₹5 lakh of gross sales in a year. Most service freelancers never see this. ### When is TDS not deducted? * **Foreign clients:** a client in the US, UK or anywhere outside India does not deduct Indian TDS. They are not Indian deductors. Some countries apply their own withholding on payments abroad, which is a different thing, covered below. * **Non-audited individuals:** a personal client in India who is not subject to tax audit does not deduct. * **Below the threshold:** payments under ₹50,000 in the year from one payer. * **Lower deduction certificate:** if you are on Section 44ADA and pay tax on 50% of receipts, 10% TDS on 100% is usually more than your actual liability. You can apply for a certificate under Section 197 (Form 13) asking the department to authorise a lower rate for named clients. Your CA can file it. ## Real-world example: how TDS works You invoice an Indian company ₹50,000 for web development. ### The company's side: * TDS applicable: Section 194J at 10% * TDS deducted: ₹5,000 * Paid to you: ₹45,000 * Deposited with the government under your PAN: ₹5,000 ### At year-end: * You declare ₹50,000 as professional income * The ₹5,000 shows in Form 26AS as tax already paid * If your final tax liability is more than ₹5,000, you pay the balance. If it is less, you get the difference refunded after processing. ## TDS certificate: Form 16A Your client is required to issue [Form 16A](https://www.incometaxindia.gov.in/tax-services/form-16a-download-deductor), the TDS certificate for non-salary payments, every quarter. It shows your name and PAN, the client's TAN (Tax Deduction and Collection Account Number), the amount paid, and the TDS deducted and deposited. Form 16 is the salary equivalent and does not apply to freelance income. ### What if your client doesn't issue a TDS certificate? Common, and less of a problem than it looks. The certificate is not what gives you credit. Credit comes from the client's own TDS filing, which flows into your Form 26AS and AIS automatically. * **Check Form 26AS:** log in at incometax.gov.in and download it. If the ₹5,000 is there against the client's TAN, you have the credit whether or not the certificate ever arrives. * **If it is not there:** the client deducted but did not deposit or file. Chase them, because you cannot claim credit for TDS that is not in 26AS. A bank statement showing the net payment is not proof the tax was deposited. * **File anyway:** declare the full ₹50,000 and claim only the TDS that appears in 26AS. If the client files late, revise your return. ## TDS on international payments Foreign clients do not deduct Indian TDS, and your Indian bank does not deduct TDS when the money arrives. A foreign inward remittance for services lands in full, and you settle your tax through advance tax and the return. Two things do happen occasionally: * **Foreign withholding:** some countries require their businesses to withhold tax on payments to foreign contractors. US clients generally do not if you give them a [Form W-8BEN](https://www.irs.gov/pub/irs-pdf/fw8ben.pdf). Where a client does withhold, you may be able to claim credit for it in India under the relevant tax treaty. That needs Form 67 and Schedule FSI, which are only in ITR-3, so raise it with your CA before the year ends. * **TDS on your own payments:** if you pay Indian contractors and your accounts are audited, you become a deductor. That is a separate topic. ## How TDS affects your net income TDS is not your final tax. Your liability depends on your total income and slab. If you earn ₹10 lakh from Indian clients and every payment carries 10% TDS, you have paid ₹1 lakh in advance. Whether you owe more or get a refund depends on the tax on your taxable income, which under 44ADA is computed on ₹5 lakh, not ₹10 lakh. For most 44ADA freelancers with Indian clients, TDS at 10% of gross ends up higher than the tax due, and the excess comes back as a refund after the return is processed. The Section 197 certificate is how you stop over-deducting in the first place. ## Takeaway: TDS is not a final tax TDS is advance tax collection by Indian clients. Foreign clients do not deduct it. Check Form 26AS before filing, claim what is there, and if you are on 44ADA with steady Indian clients, ask your CA about a lower deduction certificate. ### How DashX fits [DashX](https://dashx.xyz/) is built for payments from clients outside India, which arrive without TDS. DashX operates through RBI-authorised AD Category I banks (JP Morgan and HDFC) and PA-CB licensed partners, so each payment lands in your own Indian bank account in full, with FIRA and the correct RBI purpose code attached. * Full invoice value settled, no Indian TDS on the way in * FIRA for every payment, which is the documentation for foreign receipts in your return * Export documents in one dashboard when your CA reconciles 26AS, AIS and your receipts DashX doesn't give tax advice. TDS credits, foreign tax credit and the Section 197 certificate are for you and your CA. [Try DashX](https://gateway.dashx.xyz/login?redirect=%2F). For how TDS fits into filing, see our [ITR-4 foreign income guide](/blogs/itr-4-foreign-income-freelancers) and [income tax return guide](/blogs/income-tax-return-freelancers).