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TDS on Freelancer and Contractor Payments in India: Sections 194C, 194J, and Form 16A
If you earn as a freelancer, contractor, consultant, or professional, the Income Tax Act 2025 requires the payer to deduct TDS before the money reaches you — different from employer salary TDS. Understanding which section applies, what rate your client should deduct, and how to claim the credit in your ITR helps you avoid a surprise tax demand.
When does a client deduct TDS on payments to you?
A client must deduct TDS when they pay you for work, services, or professional services, and the payment exceeds the threshold for that section. The client is responsible for deducting and depositing the tax to the government — you do not do this yourself.
The client issues you a TDS certificate (Form 16A for non-salary payments) showing the amount deducted and deposited. You then claim this TDS credit when you file your ITR.
Section 194C — Payments to contractors
Section 194C applies when you are hired as a contractor to do work — including supply of labour, material, or both. Common examples include:
- A freelance developer building a website
- A writer commissioned to produce content
- A photographer hired for a corporate shoot
- A vendor supplying and installing equipment
TDS rate under Section 194C:
| Situation | TDS rate |
|---|---|
| Individual or HUF (not maintaining books) | 1% |
| Company or firm (including partnership) | 2% |
| Single transaction exceeding ₹50,000 | Same rates apply |
The threshold is ₹30,000 per individual payment. If a single payment exceeds ₹30,000, TDS applies to the entire amount, not just the excess.
Example — TDS on a ₹75,000 contract:
A company hires you as a freelance developer and pays ₹75,000 for a website project. Since the payment exceeds ₹30,000, the company deducts TDS at 2% = ₹1,500 and pays you ₹73,500. The company deposits ₹1,500 to the government on your behalf.
Your client must deposit the TDS within 30 days of the end of the month in which the deduction was made and issue you Form 16A.
Section 194J — Professional and technical fees
Section 194J applies when you are paid for professional or technical services. This covers:
- Doctors, lawyers, and chartered accountants
- Consultants, architects, and engineers
- IT professionals and software consultants
- Directors of a company (fees other than salary)
TDS rate under Section 194J:
| Situation | TDS rate |
|---|---|
| General professional/technical services | 10% |
| Fees paid to a director | 20% |
| Royalty or copyright fees | 10% |
The threshold is ₹30,000 per payment. Unlike Section 194C, there is no distinction between individuals and companies for most professional fees — the rate is uniformly 10%.
Example — TDS on a ₹1,20,000 consulting fee:
A startup hires you as a business consultant and pays ₹1,20,000 for a market analysis project. They deduct TDS at 10% = ₹12,000 and pay you ₹1,08,000. You receive Form 16A with the TDS details.
Section 194H — Commission and brokerage
If you earn commission or brokerage — for example, as an insurance agent, real estate agent, or mutual fund distributor — the client deducts TDS under Section 194H at 5% if the commission exceeds ₹15,000.
Form 16A — Your TDS certificate for non-salary income
Form 16A is the TDS certificate issued to you for payments other than salary. It shows:
- Your name, PAN, and address
- The deductor’s name, TAN, and address
- The amount paid and TDS deducted (each quarter)
- The Challan Identification Number (CIN) confirming the tax was deposited
Your client must issue Form 16A by 15 June of the following financial year. You can also download all your Form 16A certificates from the TRACES portal at tdscpc.gov.in using your PAN.
How to claim TDS credit in your ITR
When you file your ITR, include the TDS deducted in your total income. The TDS credit appears in your Form 26AS and AIS, and you claim it as follows:
- In ITR-1 or ITR-2, go to the “Tax Details” section.
- Add the TDS amount under the relevant head of income (business/profession income).
- The TDS reduces your tax liability. If TDS exceeds your total tax, you receive a refund.
Important: TDS credit is only valid if the deductor has actually deposited the tax to the government. Check your Form 26AS on the Income Tax portal to verify that the TDS claimed by your client actually appears there. If the amount in your Form 16A does not match Form 26AS, ask your client to correct their TDS return.
What to do if TDS was deducted at the wrong rate
Sometimes a client deducts TDS at a higher rate than applicable — for example, because they treated a contractor as a professional when the contract provision applied, or because they applied the company rate when you are an individual.
Option 1 — Request a lower TDS certificate:
If your estimated total income for the year is below the taxable limit, or if a lower rate applies, you can apply to your Assessing Officer for a nil or lower TDS certificate using Form 13. Submit this to your client with the certificate, and they will deduct TDS at the lower rate going forward.
Option 2 — Claim refund when filing ITR:
If TDS was deducted at a higher rate but your actual tax liability is lower, the excess TDS becomes a refund when you file your ITR. Make sure to include all TDS certificates and verify amounts against Form 26AS.
Option 3 — Request correction from your client:
If the client made an error (wrong PAN, wrong section), ask them to file a correction TDS return and issue a corrected Form 16A. The client can revise the TDS return within one year of the end of the financial year.
What to do when a client does not deduct TDS
If your client did not deduct TDS despite payments exceeding the threshold, the Income Tax Department can recover the tax from the client and may also recover it from you. If you know a client should have deducted TDS:
- Send a written request to the client asking them to deduct TDS and issue a Form 16A.
- If the client refuses, you can inform the TDS CPC or the Assessing Officer.
- When filing your ITR, declare the full income without TDS credit — you will pay tax on it as self-assessment tax.
Frequently asked questions
I received Form 16A but the amount does not match what my client said they deducted. What do I do?
Check Form 26AS on the Income Tax portal. If the Form 26AS shows the correct TDS amount, the discrepancy is in the certificate — ask your client to issue a corrected Form 16A. If Form 26AS also does not show the TDS, ask your client to verify their TDS return filing.
I have multiple clients who each deducted TDS below ₹30,000. Can they still deduct TDS?
Each client deducts TDS based on each individual payment. If a single payment from any client exceeds ₹30,000, that specific payment attracts TDS. The ₹30,000 threshold applies per transaction, not per year.
My client says they cannot find my PAN. What should I do?
Provide your correct PAN immediately. If your PAN is incorrect or not quoted, the client must deduct TDS at 20% (the highest slab rate) under Section 206AA. Always verify your PAN is correct on your ITR filings and share it clearly with clients.
Can I claim input tax credit on GST from a client who deducted TDS instead?
TDS and GST are separate obligations. If you are registered for GST, you charge GST on your invoice and claim input tax credit as usual. TDS is deducted from the amount you receive; the GST you charge is on the transaction value before TDS.
Sources
- TRACES portal (TDS CPC) at tdscpc.gov.in (verified 2026-10-08)
- Income Tax portal for Form 26AS at incometax.gov.in (verified 2026-10-08)
- Income Tax Act 2025, Section 194C (TDS on payments to contractors)
- Income Tax Act 2025, Section 194J (TDS on professional fees)
- Income Tax Act 2025, Section 194H (TDS on commission and brokerage)
- Income Tax Act 2025, Section 206AA (TDS on payments without PAN)