Anyone paying a freelancer, consultant, or professional for services rendered is often required to deduct tax at source before actually making the payment, under provisions historically covered by Section 194J. This affects both the payer's compliance obligations and the freelancer's actual cash flow, since a portion of the invoiced amount arrives as tax withheld rather than as cash received.
What Payments This Covers
This TDS provision applies to payments for professional services (legal, medical, engineering, architecture, accountancy, technical consultancy, and similar specified professional categories), technical services, royalty payments, non-compete fees, and director's remuneration. If you're a freelance consultant, designer, developer, or similar service provider being paid by a business (rather than an individual client not otherwise required to deduct), this is very likely the specific provision governing how much tax gets withheld from your invoiced amount.
The Applicable TDS Rates
Professional services and royalty payments generally attract TDS at 10%, while payments specifically for technical services or call centre operations attract a lower 2% rate. If the recipient hasn't provided their PAN to the payer, a considerably higher 20% TDS rate applies instead, a strong incentive to ensure your PAN is properly shared and recorded with anyone regularly paying you for professional services.
The Threshold Below Which No TDS Applies
TDS under this provision is only triggered once payments to a specific recipient exceed ₹50,000 in aggregate during the financial year (raised from an earlier ₹30,000 threshold), this threshold applies per payer, per recipient, meaning if you provide services to multiple clients, each client tracks this threshold independently for their own payments to you.
Who Is Actually Required to Deduct This TDS
Companies, and other entities meeting specified criteria, are generally required to deduct TDS under this provision when paying for professional or technical services. Individuals and HUFs are typically not required to deduct this TDS, unless they were themselves subject to a tax audit in the preceding financial year (reflecting a certain scale of business or professional activity), in which case they too become obligated to deduct TDS on payments to their own service providers.
How This Affects Your Actual Cash Flow as a Freelancer
If you invoice a client ₹1 lakh for professional services and they're required to deduct 10% TDS, you'll actually receive ₹90,000 in cash, with the remaining ₹10,000 deposited by the client directly with the tax department against your PAN. This deducted amount isn't lost, it's available as a tax credit when you file your ITR, reducing your final tax liability (or resulting in a refund if the TDS deducted exceeds your actual computed tax), but it does mean planning your cash flow around receiving invoiced amounts net of this deduction, rather than the full invoiced figure.
Verifying TDS Deducted on Your Behalf
As discussed in our Form 26AS and AIS guide, checking these statements confirms that clients who deducted TDS on your professional fee payments have actually deposited it correctly against your PAN, a mismatch here (TDS deducted per your invoice or payment advice, but not reflected in your Form 26AS) is worth following up on directly with the client, since you can only claim credit for TDS that's actually been properly deposited and reported against your PAN.
What Changes Under the New Income Tax Act 2025
Under the new Act, effective from April 1, 2026, this provision (along with the more than 60 previously separate TDS sections spanning Sections 192 through 194T) has been consolidated, with professional fee TDS now governed under a renumbered section within the new Act's simplified structure. The underlying rates, thresholds, and mechanics discussed above continue to apply in substance, though the specific section reference has changed, worth being aware of if you're reading more recent official guidance or documentation that uses the new numbering.
Frequently Asked Questions
Can I request a client not to deduct TDS on my professional fees?
Generally no, if the client is legally required to deduct TDS under the applicable provision, they cannot simply choose not to on request, in specific cases where you expect your total income to fall below the taxable threshold for the year, you may be able to submit a declaration (like Form 13, for a lower or nil TDS certificate from the tax department) to reduce or eliminate the deduction, but this requires a formal application and approval process, not a simple informal request to the client.
Does this TDS provision apply to GST charged on my invoice as well?
No, TDS under this provision is generally computed on the professional fee amount excluding GST, provided GST is separately indicated on the invoice, worth ensuring your invoicing clearly separates the fee and GST components to avoid TDS being incorrectly computed on the GST-inclusive total.
What if a client deducts TDS but I've opted for presumptive taxation under Section 44ADA?
TDS deducted by clients is still available as a credit against your final computed tax liability under presumptive taxation, the presumptive scheme affects how your taxable profit is computed, it doesn't affect your entitlement to claim credit for tax already deducted at source on your gross receipts.
Is there a different, lower TDS rate for freelancers below a certain income level?
No, the TDS rate itself (10% for professional services) doesn't vary based on the recipient's expected total income level, if your total income is genuinely expected to fall below the taxable threshold, the appropriate route is applying for a lower or nil TDS certificate from the tax department, rather than expecting a reduced standard rate.
