Lesson 1 of 3 · 6 min
Your client already paid some of your tax
Freelance fees arrive with a slice already missing. That slice is TDS deposited against your PAN — an advance on your own bill, not money the client held back.
Money from editing videos, writing code, designing or tutoring is professional or business income. Nobody runs payroll for you — instead, the tax system reaches you through your clients.
When a business pays a freelancer, it usually deducts TDS before paying and deposits it against your PAN. Your ₹1,00,000 invoice arriving as ₹90,000 is not a client shortchanging you; it is tax paid early, in your name.
TDS your clients typically deduct
- Professional fees — section 194J (now section 393)
- 10%
- Contract work — section 194C (now section 393)
- 1% or 2%
- Selling a Virtual Digital Asset
- 1%
The usual rate on fees for professional work like design, writing, code and consulting.
1% for payments to individuals, 2% for payments to companies and firms. Small payments below the section's thresholds escape TDS entirely.
Deducted on the sale value under section 194S (now section 393).
Myth
“The 10% my client cut is my full tax — freelancers just pay 10%.”
False
The 10% is a flat advance the client is required to deduct; it has nothing to do with your actual slab. At filing, your profit is taxed at the normal slabs, and every rupee of TDS sitting in Form 26AS counts toward that bill. Low earners often get most of it back as a refund; high earners owe more on top.
Quick check
You invoiced a startup ₹1,00,000 for a video edit and ₹90,000 arrived. Where did the ₹10,000 go?
Check yourself
1 / 3
Kabir asks
You invoiced a studio ₹1,00,000 and ₹90,000 arrived. Where is the ₹10,000?
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