TDS on Professional Fees: 194J Rate and Threshold 2026

TDS on professional fees is 10 percent of the fee when a client pays a professional more than 50,000 rupees in a financial year. Technical services are at 2 percent. Until 31 March 2026 this was section 194J; from 1 April 2026 it is section 393 of the Income-tax Act, 2025. TDS is calculated on the fee before GST, and the client deposits it as credit against your tax.

If you are a freelancer or consultant in India, TDS on professional fees affects almost every invoice you send to a business client. Get it right and the deducted amount comes back to you as a tax credit or refund. Get it wrong and you chase clients for missing amounts and certificates. This guide covers rates, thresholds, the move from 194J to section 393, how to show TDS on your invoice, and how to check the credit in your tax statement.

What is TDS on professional fees?

TDS stands for tax deducted at source. When a business pays you for professional services, the law requires it to withhold part of the payment and deposit it with the government against your PAN. You receive the balance. The deducted amount is not lost; it is an advance payment of your income tax, credited when you file your return.

India's version is one example of withholding tax, which many countries use. Our general guide to withholding tax on invoices compares how it works elsewhere.

Section 194J becomes section 393

Under the Income-tax Act, 1961, TDS on professional and technical fees sat in section 194J. The Income-tax Act, 2025, effective 1 April 2026, consolidates most non-salary TDS provisions into section 393, with a table listing each type of payment, its rate and threshold. Professional and technical fees now appear in that table under section 393(1).

The timing rule decides which law applies. According to commentary on the transition, if the client credited your fee in its books or paid it on or before 31 March 2026, section 194J applies. If the earlier of credit or payment happened on or after 1 April 2026, section 393 applies. For the full picture of the rewrite, see our guide to the Income Tax Act 2025.

TDS rates and thresholds for 2026

The table below shows the main categories as reported by professional commentary on section 393. The rates carry over from 194J. Check the official Act text and the income tax department's TDS rate chart before relying on them.

Payment type	TDS rate	Annual threshold per payee
Fees for professional services	10 percent	Above 50,000 rupees
Fees for technical services	2 percent	Above 50,000 rupees
Payments to call centres	2 percent	Above 50,000 rupees
Royalty for sale, distribution or exhibition of films	2 percent	Above 50,000 rupees
Other royalty	10 percent	Above 50,000 rupees
Director remuneration other than salary	10 percent	No threshold
Any of the above where PAN is not provided	20 percent	As above

A few points to note:

• The 50,000 rupee threshold applies per payee, per financial year, and separately for professional and technical fees. It was raised from 30,000 rupees from 1 April 2025.
• Once total fees to you cross the threshold in the year, TDS applies to the whole amount, including earlier payments that year, in the usual practice under 194J.
• The distinction between "professional" and "technical" services matters: 10 percent versus 2 percent. Software development and consulting are often treated as professional, but contracts and facts vary.

Who deducts TDS on professional fees

Not every client has to deduct TDS on professional fees, so do not be surprised if some pay you in full.

Companies, firms, LLPs and other businesses that pay professional fees must deduct TDS. Individuals and Hindu undivided families are excluded if they were not required to get a tax audit (now under section 63 of the new Act) in the preceding financial year. A family paying a lawyer for a personal matter, for example, usually does not deduct.

Under the old Act, a separate section required certain individuals not liable to audit to deduct TDS on large contract and professional payments. Commentaries say section 393 absorbs that too. If you are the one paying professionals, check the current rules with your accountant.

How freelancers show TDS on an invoice

This is where most confusion happens. The key principle: invoice the full amount. TDS is deducted by the client from the payment, not by you from the invoice. You add a clear note so both sides agree on the net amount you will receive.

Worked example: consulting fee with GST

Meera is a GST-registered architect. She invoices a company for a monthly design retainer. The company has already paid her more than 50,000 rupees this year, so TDS applies.

Line	Amount (rupees)
Professional fee	1,00,000
GST at 18 percent	18,000
Invoice total	1,18,000
Less TDS at 10 percent on the fee (not on GST)	10,000
Net amount payable to Meera	1,08,000

Because GST is shown separately on the invoice, the client deducts TDS on 1,00,000 rupees, not 1,18,000. A CBDT circular under the old Act confirmed this treatment when GST is shown separately; confirm it remains the position under the new Act. Meera receives 1,08,000 rupees, and 10,000 rupees appears as a tax credit against her PAN.

Suggested invoice note

A simple note at the bottom of the invoice works well: "TDS at 10 percent on the professional fee of 1,00,000 rupees (10,000 rupees) to be deducted under section 393 of the Income-tax Act, 2025 (formerly section 194J). Net payable: 1,08,000 rupees. Please share the TDS certificate after filing your quarterly return."

In our free invoice generator, you would enter the fee as a line item, set the tax rate to 18 percent for GST, and put the TDS wording in the notes field. The tool does not calculate TDS automatically. When the client pays 1,08,000 rupees, you can record that as the amount paid on an updated copy, and note that the 10,000 rupee balance is covered by TDS. Our guides to GST invoices and SAC codes cover the other fields Indian clients expect.

Reading your tax credit statement (Form 26AS / Form 168)

Your tax credit statement shows every TDS amount clients have reported against your PAN. Under the old rules it was Form 26AS; under the Income-tax Rules, 2026 it has been renumbered as Form 168, the annual information statement. You view it through the income tax e-filing portal.

Check it at least once a quarter:

1. Download the statement and list every client and amount.
2. Match each entry to your invoices and bank receipts for the same period.
3. Look for missing clients, wrong amounts or entries under the wrong section.
4. Ask the client for their TDS certificate (Form 16A under the old rules, Form 131 under the new rules) and challan details for anything missing.
5. If the client made a mistake, ask them to file a correction to their quarterly TDS return.

Clients deposit TDS monthly and file quarterly TDS returns, so a payment made in April may not appear until after the quarter's return is processed. Do not panic if a recent entry is missing; chase it if it is still missing after the filing deadline.

Claiming TDS credit or a refund

When you file your return, total TDS credits are set against your tax. Many freelancers who use presumptive taxation end up with a refund, because 10 percent of gross fees is often more than the tax due on 50 percent deemed income. Our guide to section 44ADA and section 58 includes a worked example where TDS of 2,50,000 rupees against a tax bill of 2,08,000 rupees produces a 42,000 rupee refund.

To make sure you can claim every rupee:

• Give every client your correct PAN before the first payment.
• Invoice in the right financial year and keep dates accurate.
• Treat the gross fee, not the net receipt, as your income; the TDS is credited separately.
• Keep invoices, payment records and certificates for each year.

Special cases freelancers run into

Advance payments and retainers

TDS applies at the earlier of crediting the fee in the client's books or paying it. So if a client pays you an advance before the work starts, TDS is usually deducted on the advance itself. For monthly retainer invoices, each month's fee counts toward the 50,000 rupee annual threshold, and once it is crossed, deductions continue on every invoice.

Reimbursed expenses

If you bill a client for travel, software or other costs on top of your fee, the TDS treatment depends on how you bill them and on current guidance. In practice, many clients deduct TDS on the full amount unless expenses are clearly separate and supported by bills. Show expenses as separate lines with receipts attached, as explained in our guide to reimbursable expenses on invoices, and agree the treatment with the client before you invoice.

Lower deduction certificates

If your actual tax liability is much lower than the TDS deducted, you may be able to apply for a certificate allowing clients to deduct at a lower rate or not at all. This existed under the old Act, and the new Act is reported to carry a corresponding provision. It is worth considering if large refunds are a recurring cash flow problem for you, but it adds paperwork, so discuss it with your accountant.

Payments that cross 31 March 2026

An invoice issued in March 2026 but paid in April 2026 may still fall under section 194J if the client credited it in its books in March. Ask clients which section they used, and match it to your tax credit statement.

Common TDS mistakes on invoices

• Reducing the invoice total by TDS. This understates your income and confuses the client's GST records. Invoice the full amount.
• Calculating TDS on the GST-inclusive total. Show GST separately so TDS is calculated on the fee only.
• Treating the short payment as a dispute. A payment of 1,08,000 rupees against a 1,18,000 rupee invoice is not underpayment if TDS was deducted correctly. Record it as settled once the credit appears. See our guide to short payments and deductions for genuine shortfalls.
• Wrong section or rate. If a client treats your professional fee as technical (2 percent) or as a contract payment, the amounts and your records will not match. Clarify at the start.
• Ignoring foreign withholding. Overseas clients do not deduct Indian TDS, but their country may withhold tax. Keep records to claim foreign tax credit.

Conclusion

TDS on professional fees is simple once you know the rules: 10 percent on professional fees above 50,000 rupees a year, calculated before GST, now under section 393 rather than 194J. Invoice the full amount, add a clear TDS note, and reconcile your tax credit statement every quarter. This article is general information, not tax advice; check incometaxindia.gov.in and speak to a chartered accountant about your situation. Build a clean GST invoice with a TDS note in minutes using our free invoice generator, or start from a minimal invoice template.