How TDS and GST Apply to Freelance Work in India

TDS and GST apply to freelance work in India in different ways, and mixing them up is the usual cause of short payments, wrong invoices and notices. TDS is tax held back by the client from the fee, and GST is tax charged on the service by the freelancer once turnover crosses a limit. A company that engages freelancers needs to deduct correctly, and a freelancer needs to register and file on time.

TDS and GST Side by Side

Point	TDS	GST
What it is	Income tax held back from the fee at payment	Indirect tax charged on the service
Who pays it to the government	The client, on the freelancer’s behalf	The freelancer, after collecting it on invoices
Who it affects	Freelancer’s net receipt and income tax credit	Invoice value and the client’s input credit
Trigger	Payments above ₹50,000 in a tax year to one payee	Aggregate turnover above ₹20 lakh (₹10 lakh in special category states)

Both rules apply to independent freelancers. They do not apply to employees on payroll, whose tax is deducted as salary TDS. The difference is explained further in how to hire remote employees in India.

TDS on Freelance Fees

From 1 April 2026 the Income-tax Act, 2025 applies, and TDS on professional and technical fees falls under Section 393 in place of the old Section 194J. The rates and the ₹50,000 annual threshold are carried over (source: PKC Management Consulting).

Type of fee	TDS rate
Professional services (for example consultants, engineers, architects, lawyers, chartered accountants)	10%
Technical services, including call centres	2%
Payee has not given a PAN	20%

Once total payments to one payee cross ₹50,000 in the tax year, TDS applies to the full amount and not only the excess. Which category a freelancer’s work falls into depends on the nature of the service, so the client’s accountant should confirm it. Rates are verified against one secondary source, and the Income Tax Department’s current notifications should be checked before filing.

What Each Side Should Do on TDS

Party	Actions
Client	Collect the freelancer’s PAN, deduct at the right rate, deposit the tax, file the TDS return and issue the TDS certificate
Freelancer	Share a valid PAN, compare the certificate with the tax credit statement on the income tax portal, and claim the credit when filing the return

A client that fails to deduct or deposit TDS faces penalties and interest. A freelancer who leaves TDS income out of the return can face interest and notices as well.

GST for Freelancers

Topic	Rule
Registration threshold for services	Aggregate turnover above ₹20 lakh in a year; ₹10 lakh in special category states
Charging GST	Registered freelancers add GST to invoices at the rate that applies to the service
Input tax credit	Registered freelancers can claim credit on GST paid for business purchases, backed by valid invoices
Composition option	A scheme for service providers with turnover up to ₹50 lakh at a 6% rate has been reported; eligibility should be checked with the GST portal or a tax professional
Returns	Outward supplies and the summary return are filed monthly or quarterly depending on the scheme; an annual return follows

Threshold details are from Kanakkupillai, which also warns that the composition figures should be checked against official sources. A freelancer supplying services outside India or to clients in other states may have different rules, so advice should be taken before registering.

Pricing and Invoicing With GST

Practice	Why it helps
State clearly whether a quote includes or excludes GST	Avoids disputes when the invoice arrives
Show GST as a separate line on every invoice	Lets the client claim input credit
Show the PAN and, if registered, the GSTIN	Needed for correct TDS and credit
Keep invoices, TDS certificates and bank records together	Supports returns and any later query

When Freelancers Should Become Employees

A freelancer who works full time for one company, at set hours and under daily direction, may be an employee in practice. In that case TDS on fees and GST invoices do not fix the problem. The worker should move onto payroll, and a foreign company without an Indian entity can do that through an Employer of Record in India. For payroll rules see payroll services in India, and for common hiring questions the hiring in India FAQ.

Questions About TDS and GST for Freelance Work

Is TDS deducted on every freelance payment?
It applies once total payments to one payee cross ₹50,000 in the tax year, at 10% for professional services and 2% for technical services.

What if the freelancer has no PAN?
TDS is deducted at 20%, so a PAN should be shared before the first payment.

When must a freelancer register for GST?
When aggregate turnover from services exceeds ₹20 lakh in a year, or ₹10 lakh in special category states.

Can both TDS and GST apply to the same invoice?
Yes. GST is added to the invoice, and TDS is held back from the fee as the law requires. The client should confirm how the base for TDS is calculated.

Do these rules apply to employees?
No. Employees pay income tax through salary TDS, and employers do not charge GST on salary.