Your Client Deducted TDS — What Do You Do Now? (Freelancer Guide)

You sent your client an invoice for Rs. 1,00,000. They paid you Rs. 90,000. The remaining Rs. 10,000? They deducted it as TDS — Tax Deducted at Source — and deposited it with the government on your behalf. If this has happened to you and you are not sure what it means, how to verify it, or how to claim it back, this guide is for you.

TDS is not a separate tax. It is your income tax, paid in advance by your client. Think of it as a forced prepayment — the government collects it during the year instead of waiting for you to file your ITR. The good news: every rupee of TDS deducted reduces your final tax liability. The bad news: if your client does not deposit it properly, you have a problem.

What is TDS?

Tax Deducted at Source (TDS) is a mechanism where the person making a payment (the "deductor" — your client) deducts tax at a prescribed rate before paying you (the "deductee"). The deducted amount is deposited with the government using a TDS challan, and the client files a quarterly TDS return (Form 26Q) reporting the deduction.

For freelancers, TDS is most commonly deducted under two sections:

The distinction between 194J and 194C matters. If you are a software developer, UI designer, or consultant, your services are typically classified as "professional services" under 194J (10% TDS). If you are doing contract work that is more operational (data processing, transcription, assembly), it may fall under 194C (1-2% TDS). The classification depends on the nature of the service, not your job title.

Why Clients Deduct TDS

Clients do not deduct TDS out of generosity or choice — it is a legal obligation. Under the Income Tax Act, any person (other than an individual or HUF not subject to audit) making payments exceeding the threshold must deduct TDS. This means:

• Companies (Pvt Ltd, LLP, etc.) — always required to deduct TDS
• Partnership firms — required to deduct TDS
• Individuals/HUFs whose turnover exceeded Rs. 1 crore (business) or Rs. 50 lakh (profession) in the previous year — required to deduct TDS
• Individual clients with no business/profession — not required to deduct TDS

If your client is a startup, agency, or any registered company, they will deduct TDS. If your client is an individual person hiring you for personal work, they typically will not. Freelance platforms like Upwork and Fiverr do not deduct Indian TDS — the income comes from outside India, and TDS under 194J/194C does not apply to foreign entities.

TDS is not money lost — it is tax prepaid. Every rupee deducted as TDS reduces your final tax bill when you file your ITR. The key is making sure it actually reaches the government.

How to Check Form 26AS

Form 26AS is your consolidated tax statement — it shows all TDS deducted by all your clients, advance tax paid, self-assessment tax paid, and refunds received. This is the government's record of what has been paid on your behalf.

To check Form 26AS:

1. Log in to the Income Tax e-filing portal (eportal.incometax.gov.in)
2. Go to e-File → Income Tax Returns → View Form 26AS
3. You will be redirected to the TRACES portal. Select the Assessment Year (e.g., 2026-27 for FY 2025-26)
4. View Part A — this shows TDS deducted by deductors (your clients)

Each entry in Part A shows: deductor name, TAN (Tax Account Number) of the deductor, section under which TDS was deducted, transaction date, amount paid/credited, and TDS deducted. Cross-check each entry against your invoices and payments received.

When to Ask for Form 16A

Form 16A is a TDS certificate issued by the deductor (your client) to you. It is proof that TDS was deducted from your payment and deposited with the government. Unlike Form 26AS (which is issued by the IT department), Form 16A is issued by the client.

Clients are legally required to issue Form 16A within 15 days of the due date for filing their TDS return. In practice, many clients — especially smaller companies — do not proactively send it. You may need to request it.

When to ask:

• If TDS was deducted but does not appear in your Form 26AS after the expected quarter
• If there is a discrepancy between the TDS amount you expected and what appears in 26AS
• If you need to file your ITR and want documentary proof of TDS before the 26AS updates
• If the TDS amount in 26AS is less than what was actually deducted from your payment

How to Claim TDS Credit in ITR

When filing your Income Tax Return (typically ITR-4 for freelancers under presumptive taxation), TDS credit is claimed in Schedule TDS. Here is how:

1. Go to Schedule TDS1 (TDS on salary) or Schedule TDS2 (TDS on income other than salary). As a freelancer, your TDS falls under Schedule TDS2.
2. Enter each deductor's details: TAN of the deductor, name of the deductor, gross amount paid, and TDS deducted. If using the pre-filled ITR on the e-filing portal, this data is usually auto-populated from Form 26AS.
3. Verify that the total TDS claimed matches the total in your Form 26AS. Any discrepancy may trigger a notice from the IT department.
4. The TDS credit is automatically set off against your total tax liability. If TDS exceeds your total tax, you are eligible for a refund.

What If TDS is Not Deposited?

This is one of the most frustrating situations for freelancers. Your client deducted Rs. 10,000 as TDS from your payment of Rs. 1,00,000 — but they never deposited it with the government. It does not appear in your Form 26AS. You received only Rs. 90,000, and you cannot claim the Rs. 10,000 TDS credit.

Here is what you can do:

1. Contact the client. Send a formal email pointing out the discrepancy and requesting they deposit the TDS and file their TDS return. Most of the time, it is an oversight or delay — not intentional.
2. File a complaint with the IT department. If the client does not respond, you can raise a grievance on the e-filing portal. Under Section 205 of the Income Tax Act, once TDS has been deducted, the deductee (you) shall not be called upon to pay the tax — the liability shifts entirely to the deductor (client).
3. Document everything. Keep the invoice, payment receipt (bank statement showing Rs. 90,000 received), and any communication about TDS deduction. This evidence supports your claim that TDS was deducted but not deposited.

The legal position is clear: under Section 205, you are not liable for tax that has been deducted at source. The default is on the deductor, not you. However, the practical reality is that you may need to follow up and escalate before the credit appears in your 26AS.