TDS on Freelancer Income: Complete Guide for FY 2025-26

1. What is TDS and Why Does It Matter?

TDS (Tax Deducted at Source) is a mechanism where the person paying you (client/company) deducts tax before making the payment and deposits it with the government on your behalf.

For freelancers, this means when a company pays you ₹1,00,000 for a project, they might only transfer ₹90,000 to your account and deposit ₹10,000 as TDS with the government.

💡 Key Point

TDS is NOT an additional tax. It's an advance payment of your income tax. If your actual tax liability is lower than TDS deducted, you get a refund when you file ITR.

2. TDS Sections for Freelancers

Different types of freelance work fall under different TDS sections:

Section 194J - Professional Services

Rate: 10% | Threshold: ₹50,000/year (increased in Budget 2025)

Applies to: Developers, designers, consultants, lawyers, doctors, architects, accountants, content creators

Section 194C - Contractor Payments

Rate: 1% (Individual) / 2% (Company) | Threshold: ₹30,000 single / ₹1,00,000 aggregate

Applies to: Manufacturing, construction, processing work

Section 194O - E-commerce Payments

Rate: 0.1% (reduced in Budget 2025) | Threshold: ₹5,00,000/year

Applies to: Amazon sellers, Flipkart sellers, Meesho sellers

Section 194H - Commission/Brokerage

Rate: 2% (reduced from 5% in Budget 2025) | Threshold: ₹20,000/year

Applies to: Affiliate marketers, sales agents, brokers

3. TDS Rates for FY 2025-26

Budget 2025 made several changes to TDS rates and thresholds:

Section	Nature	Old Rate	New Rate (2025-26)	Threshold
194J	Professional Services	10%	10% (unchanged)	₹50,000 ↑
194H	Commission	5%	2% ↓	₹20,000 ↑
194O	E-commerce	1%	0.1% ↓	₹5,00,000
194I	Rent	10%	10%	₹6,00,000 ↑
194A	Interest	10%	10%	₹50,000 ↑

Good News for Freelancers

Budget 2025 increased thresholds significantly. If you earn less than ₹50,000/year from a single client, no TDS will be deducted under 194J!

4. Why PAN is Critical

Warning: 20% TDS Without PAN

If you don't provide your PAN to the payer, TDS will be deducted at 20% instead of the normal rate. Always share your PAN with clients before receiving payment.

What to do:

Share your PAN with every client before the first payment
Include PAN on your invoices
Keep a copy of PAN card ready for verification
Link your PAN with Aadhaar (mandatory)

5. How to Check TDS in Form 26AS

Form 26AS is your tax passbook that shows all TDS deducted against your PAN. Here's how to check it:

Login to incometax.gov.in
Go to e-File → Income Tax Returns → View Form 26AS
Select the Assessment Year (e.g., 2026-27 for FY 2025-26)
Click "View Tax Credit (Form 26AS)"
Check Part A for TDS details

⚠️ Important

Always verify that TDS shown in Form 26AS matches what was deducted from your payments. If there's a mismatch, contact your client to file corrected TDS returns.

6. How to Claim TDS Refund

If TDS deducted is more than your actual tax liability, you can claim a refund by filing ITR:

Calculate Your Actual Tax

Use our free tax calculator to find your actual tax liability

File ITR Before Due Date

File ITR-3 or ITR-4 (if using 44ADA) by July 31st

Verify ITR

e-Verify using Aadhaar OTP within 30 days

Receive Refund

Refund credited to bank account in 1-4 months

7. How to Legally Avoid TDS

If your total income is below the taxable limit, you can submit Form 15G/15H to avoid TDS:

Form 15G

For individuals below 60 years

• Total income below ₹2.5 lakh
• Tax liability is NIL
• Submit to each payer

Form 15H

For senior citizens (60+ years)

• Total income below ₹3 lakh
• Tax liability is NIL
• Submit to each payer

💡 Pro Tip

Form 15G/15H is valid for one financial year. You need to submit it at the beginning of each FY to avoid TDS for that year.

Calculate Your TDS Instantly

Use our free TDS calculator to know exactly how much TDS will be deducted from your freelance income.

Try TDS Calculator Calculate Full Tax

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