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Tax6 min read

TDS Section 194J for Freelancers: How the 10% Deduction Actually Works

Your client is deducting 10% TDS under Section 194J. Here's exactly what it means, how to show it on your invoice, and how to claim it back when filing your ITR.

You sent a ₹1,00,000 invoice. Your client paid ₹90,000. The other ₹10,000 didn't go missing — it went to the government against your PAN under Section 194J, and you can claim every rupee of it back. Here's exactly how this works.

What is Section 194J?

Section 194J of the Income Tax Act requires certain payers (mostly companies, partnership firms, and high-turnover individuals) to deduct tax at source when paying professionals. For freelance services — IT, design, writing, consulting, legal, medical, technical — the standard rate is 10%.

The clause kicks in when the total annual payment to a single professional exceeds ₹30,000 in a financial year. Below that threshold, no TDS is deducted.

Who deducts TDS, and who doesn't?

| Client type | Deducts 194J TDS? | |---|---| | Private/public limited company | Yes | | Partnership firm or LLP | Yes | | Individual/HUF with audited turnover (₹1 crore+ business / ₹50L+ profession) | Yes | | Individual/HUF below audit threshold | No | | Foreign company / overseas client | No (different rules — TDS doesn't apply to non-resident payers under 194J) | | Government department | Yes, under 194J or 194Q depending on context |

So if you bill a small Indian individual or HUF, no TDS. If you bill a startup, a company, or a partnership — yes, expect 10% off your invoice.

What the math looks like

Take a ₹1,00,000 service invoice with 18% IGST:

| Line | Amount | |---|---| | Professional fee | ₹1,00,000 | | IGST 18% | ₹18,000 | | Invoice total | ₹1,18,000 | | TDS @ 10% on ₹1,00,000 | -₹10,000 | | Net you receive | ₹1,08,000 |

Two important points:

  1. TDS is calculated on the pre-GST amount, not on the gross. The 10% applies to the ₹1,00,000 fee, not the ₹1,18,000 total.
  2. The ₹10,000 isn't lost. Your client deposits it with the government against your PAN. You see it in your Form 26AS / AIS, and you claim it as a refund or set-off when filing your ITR.

How to show TDS on your invoice

Your invoice should explicitly show the deduction so there's no dispute later. The cleanest format:

Subtotal:            ₹1,00,000.00
IGST 18%:            ₹  18,000.00
─────────────────────────────────
Invoice total:       ₹1,18,000.00

Less TDS (Sec 194J @ 10%):  ₹10,000.00
─────────────────────────────────
Net payable:         ₹1,08,000.00

This isn't legally mandated — TDS happens regardless of what your invoice says — but showing it explicitly:

  • Avoids your client and you arguing about the net.
  • Documents the expected TDS for your own records.
  • Makes the invoice line up with what they actually pay.

invoicely handles this automatically — set the TDS rate on the invoice and net payable updates instantly.

What's the difference between 194J and 194JA / 194JB?

The Finance Act 2020 split 194J into two subsections:

  • 194JA — 2% TDS on technical services (call centres, technical consultancy without IP transfer).
  • 194JB — 10% TDS on professional services (the standard one for most freelancers).

For day-to-day freelance design/dev/writing/consulting, 194JB at 10% is what applies. Your client's TDS certificate (Form 16A) will show which subsection they used.

Claiming TDS when you file your ITR

This is where most freelancers leave money on the table by not understanding the flow.

  1. End of every quarter, your client files a TDS return (Form 26Q). The amount shows up in your Form 26AS within 30-45 days.
  2. At year end (post March 31), download your Form 26AS and AIS from incometax.gov.in. They list every TDS deduction against your PAN.
  3. When filing your ITR:
    • Report your gross professional income (the full ₹1,00,000, not the ₹90,000).
    • Claim the ₹10,000 as TDS credit.
    • If your final tax liability is less than total TDS deducted, you get a refund from the income tax department.

If you're under Section 44ADA presumptive taxation, the math gets simpler — but the TDS claim still works the same way.

What if my client deducts but doesn't deposit?

Rare but it happens. Check your Form 26AS quarterly. If a client deducted TDS but it isn't showing up there:

  1. Email the client asking for the TDS challan number and deposit date.
  2. Their payroll/finance team should provide it within a week.
  3. If not, you can still claim the TDS in your ITR — but be ready for a notice from the IT department asking for proof of deduction.
  4. As a last resort, file a complaint with the TDS officer in your jurisdiction (using your PAN's range).

Common mistakes that cost freelancers money

  1. Not tracking 26AS quarterly. By the time you file ITR in July, a missing TDS deduction from April is hard to chase. Check every quarter.
  2. Reporting net income instead of gross. Your ITR should show ₹1,00,000 received and ₹10,000 TDS — not ₹90,000 received. Different numbers, same outcome, but the IT system flags mismatches.
  3. Forgetting to update PAN with the client. If their books have your old/wrong PAN, the TDS shows up against someone else.
  4. Assuming foreign clients deduct. They don't — Section 194J only binds Indian payers.

When does TDS not apply?

  • First ₹30,000 in a financial year from a single client (the threshold).
  • Foreign clients (overseas payers aren't bound by Indian TDS law).
  • Below-threshold individual/HUF clients (most personal-capacity buyers).
  • Reimbursements pure-and-simple — if a line item is purely a pass-through expense (you paid for hosting, the client reimburses exactly that), it shouldn't attract TDS. In practice, many clients deduct anyway; argue this case before invoicing.

A clean checklist for handling TDS

  • ☐ Add a TDS line on every invoice to a TDS-deducting client
  • ☐ Confirm your PAN is on file with each client before sending the first invoice
  • ☐ Check Form 26AS at end of each quarter (around July, October, January, April)
  • ☐ Keep all Form 16A certificates received from clients (digital copies fine)
  • ☐ Match TDS reported in 26AS to TDS shown on your invoices each quarter
  • ☐ Claim the full TDS as credit when filing ITR

Frequently asked questions

Why does my client deduct 10% but my CA says 2%? You're probably negotiating between 194JA (technical services, 2%) and 194JB (professional services, 10%). Most freelance work is professional. Your CA might be mistaken — or you're doing pure technical/call-centre work. Get a written description of the service from the client to settle it.

Can I ask my client not to deduct TDS? Generally no. They're legally required to deduct above the threshold. You can apply for a lower deduction certificate under Section 197 if your tax liability is genuinely lower (e.g., heavy losses or 44ADA), but it's a paperwork-heavy process.

Does TDS apply to the GST portion of my invoice? No — TDS under 194J is calculated on the pre-GST fee only. CBDT clarified this explicitly in Circular 23/2017.

What if a client deducts TDS twice (once at quarterly TDS, once at GST TDS under Section 51)? GST TDS (Section 51) only applies to government departments and a few notified entities. Regular companies don't deduct GST TDS. If both showed up on a non-government client's invoice, that's an error — push back.

invoicely automatically handles the TDS line, updates net payable, and keeps a clean record per client. Free for your first 3 invoices/month.

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