TDS filing for freelancers: What you need to know

Posted In | Finance | Accounting Software | India Accounting Tax

If you are a freelancer, understanding Tax Deducted at Source (TDS) is crucial to managing your finances effectively. This guide will introduce you to the essentials of TDS and how it applies to your freelance business.
 

What is TDS?

Tax Deducted at Source, or TDS, is a method of tax collection where the payer deducts tax at the time of making payment. This deducted amount is then remitted to the government on behalf of the payee. The idea is to ensure that tax is collected at the source of income generation.
 

How Does TDS Apply to Freelancers?

As a freelancer, you are considered a self-employed professional. This means that any payment that is made to you for your services can be subject to TDS. The rate of TDS deduction for freelancers is 10%, as per section 194J of the Income Tax Act. However, if your client does not have your PAN details, the TDS rate can go up to 20%.
 

When is TDS Deducted?

TDS is deducted at the time the client makes the payment. However, if the amount payable to the freelancer exceeds Rs.30,000 in a financial year, the provision of TDS becomes applicable. This means that even if a single payment does not exceed Rs.30,000, but the total payment in a financial year exceeds this limit, TDS will be deducted.
 

How to File TDS Returns?

As a freelancer, you need not file TDS returns. It is the responsibility of the deductor (your client) to file TDS returns. However, you can check the TDS deducted on your income by downloading Form 26AS from the Income Tax Department's website. This form is a consolidated tax statement that provides details of the tax deducted and deposited in your name.
 

Claiming TDS Refund

If excess TDS has been deducted from your income, you can claim a refund while filing your income tax return. You need to provide details of your income and the tax deducted in your return, and if you have paid more tax than you were supposed to, the excess amount will be refunded.
 

Understanding TDS and its implications is important for every freelancer. It helps you manage your taxes effectively and avoid any surprises at the time of filing your income tax return. Remember, being aware of your tax obligations can save you from unnecessary financial stress in the future.