My PAN is inoperative. What TDS rate applies?

20% under Section 206AA — applies regardless of the underlying section's normal rate. Link PAN-Aadhaar immediately to restore the lower rate.

I haven't filed ITR for 2 years. What changes?

Section 206AB applies: TDS at *double* the normal rate (or 5%, whichever is higher) on every payment, provided TDS / TCS in each of those years exceeded Rs. 50,000. The deductor checks via the IT department's compliance utility — you can't opt out. File the missing returns to restore normal rates.

TDS · Glossary

TDS (Tax Deducted at Source)

Mechanism where the payer withholds and deposits income tax on the payee's behalf.

TDS, governed by Chapter XVII-B of the Income Tax Act, 1961, is the system where the person making a payment (deductor) withholds a specified percentage as income tax and deposits it with the government on the recipient's (deductee's) behalf. The deductee gets credit for the TDS while filing their ITR.

For freelancers, TDS sections most commonly encountered: 194J (10% on professional fees), 194C (1-2% on contractual work), 194O (1% by e-commerce platforms), 195 (on payments to non-residents). TDS is computed on the service value EXCLUDING GST per CBDT Circular 23/2017 when GST is shown separately on the invoice.

Worked example

On a Rs. 1,18,000 invoice (Rs. 1L + 18% GST), the 194J TDS @ 10% is Rs. 10,000 (on the Rs. 1L pre-GST value), not Rs. 11,800. Net wire to the freelancer: Rs. 1,08,000.

Practitioner tip

Apply for a Section 197 Lower Deduction Certificate via TRACES if your final tax (under 44ADA + 87A) will be well below the standard 10% — eliminates the year-long refund chase.

Frequently asked

My PAN is inoperative. What TDS rate applies?: 20% under Section 206AA — applies regardless of the underlying section's normal rate. Link PAN-Aadhaar immediately to restore the lower rate.
I haven't filed ITR for 2 years. What changes?: Section 206AB applies: TDS at *double* the normal rate (or 5%, whichever is higher) on every payment, provided TDS / TCS in each of those years exceeded Rs. 50,000. The deductor checks via the IT department's compliance utility — you can't opt out. File the missing returns to restore normal rates.

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TDS rates & sections

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Form 16A — TDS certificate issued by deductors for non-salary TDS (e.g., 194J, 194C).
Form 26AS — Consolidated annual tax statement showing all TDS, advance tax, and refunds.
Section 194J — TDS on professional and technical service fees — 10% / 2% with Rs. 50K threshold.

Sources

Frequently asked

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