TDS on invoices: why clients pay less, and how to record it
You invoice ₹1,18,000 and receive ₹1,08,000. Nothing went wrong: your client deducted TDS (tax deducted at source) and paid it to the government on your behalf. You get credit for it against your own income tax. The work is in recording it so the invoice shows as settled, not ₹10,000 overdue.
Common TDS sections for service businesses
| Section | Applies to | Usual rate |
|---|---|---|
| 194J | Fees for professional services (accounting, legal, consulting, architecture) | 10% |
| 194J | Fees for technical services, royalty for certain cases | 2% |
| 194C | Contract work (for example some advertising, production and agency work) | 1% (individual/HUF) or 2% (others) |
Thresholds apply: clients deduct only when payments to you cross the annual limit for that section. Thresholds and rates change in Budgets, so confirm the current figures for the financial year.
TDS is calculated on the value before GST
Where GST is shown separately on the invoice, TDS is deducted on the taxable value, not on the GST amount. On a ₹1,00,000 fee with 18% GST:
| Taxable value | ₹1,00,000 |
| GST 18% | ₹18,000 |
| Invoice total | ₹1,18,000 |
| TDS under 194J at 10% of ₹1,00,000 | − ₹10,000 |
| Client pays you | ₹1,08,000 |
How to record it
- Record the payment you received (₹1,08,000).
- Record the TDS separately (₹10,000) against the same invoice, with the section.
- The invoice is now fully settled.
- Each quarter, check that the TDS appears in your Form 26AS / AIS against the client's TAN, and collect Form 16A from the client.
If the TDS doesn't show up in 26AS, follow up with the client: they may not have filed their TDS return or may have used the wrong PAN.
Don't let TDS break your payment links
If your invoice has a payment link or QR for the full ₹1,18,000, a client who deducts TDS can't use it, or worse, pays the full amount and then deducts TDS on the next invoice. Record the expected TDS before the client pays, so the link asks for ₹1,08,000.
Common questions
Is TDS deducted on GST?
Where GST is shown separately on the invoice, TDS is deducted on the amount excluding GST.
Do I get the TDS money back?
TDS is credited against your income tax for the year. If the TDS exceeds your tax liability, you can claim the excess as a refund when you file your return.
What if a client deducts TDS below the threshold?
You still get credit for it if it is deposited against your PAN. Check it appears in Form 26AS.
This guide explains common practice and is not tax or legal advice. Rules change; confirm anything that affects your filings with your CA.
In EasyInvoices, record TDS against any invoice in one step. The balance, payment link and UPI QR update to the amount actually due.
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