You send a client an invoice for ₹50,000. A few days later, ₹45,000 lands in your account. You didn’t get shortchanged — you almost certainly got TDS’d.
What’s Actually Happening
Tax Deducted at Source (TDS) means your client, before paying you, is legally required to deduct a percentage of the invoice amount and deposit it directly with the Income Tax Department on your behalf. You still owe tax on the full income — the deduction is an advance against your eventual tax liability, not an extra charge.
For most professional and technical services, this falls under Section 194J, typically deducted at 10% (2% for certain technical services). If your client is a company paying you as a contractor, freelancer, or consultant, TDS almost always applies once payments cross the threshold for the financial year.
Why This Trips People Up
- The invoice total and the amount received don’t match — if you’re tracking payments manually, this looks like an error until you dig in
- You need the deduction on record — amount and reason — to reconcile your books and later claim credit for it against your tax liability using Form 26AS / AIS
- It’s easy to confuse with GST — TDS is an income tax mechanism, entirely separate from GST. You can have TDS deducted and GST charged on the same invoice; they don’t offset each other
What Good Practice Looks Like
- Note the gross invoice amount, the TDS deducted, and the net amount received as three separate figures — not just the number that hit your bank
- Check the TDS certificate (Form 16A) your client issues quarterly against what actually shows in your Form 26AS
- Reconcile this invoice-by-invoice, not at year-end when it’s much harder to trace which deduction belongs to which invoice
A Quick Reference
| Term | What it means |
|---|---|
| Gross invoice amount | What you billed |
| TDS deducted | Withheld by client, deposited with the IT Department on your behalf |
| Net amount received | What actually lands in your account |
| Form 16A | Certificate your client issues for the TDS they deducted |
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