TDSonprofessionalfees
The money is not missing. It has been paid to the government on your behalf, and it is credited to you — but only if your PAN was on the invoice.
5 minute read · Updated
Short answer
An Indian business paying professional or technical fees generally deducts tax at source and remits it against your PAN, so the amount that lands is less than the invoice. You should still invoice the gross amount and never deduct it yourself — the deduction is the payer's obligation and doing it for them makes the two sides' records irreconcilable. Put your PAN on the invoice, because a deduction made without one is made at a higher rate, and reconcile against Form 26AS and your annual information statement rather than your bank statement.
What is happening
- 01You invoice the gross amount — say ₹1,00,000.
- 02The client deducts tax at source at the applicable rate for professional or technical services.
- 03They pay you the net amount.
- 04They remit the deducted amount to the government against your PAN.
- 05It appears in your Form 26AS and annual information statement.
- 06You offset it against your own tax liability when you file.
So it is not a cost. It is your own tax, paid early and by somebody else. The only way it becomes a loss is if you never claim it, which is what happens when nobody reconciles.
Rates and thresholds for deduction differ by the nature of the payment and have been revised in recent Finance Acts. Rather than quote a figure that could be stale, ask your accountant which section and rate applies to what you supply.
What to do on the invoice
- Show your PAN. A deduction made without a valid PAN is made at a substantially higher rate, and recovering the difference is your problem, not theirs.
- Invoice the gross amount. Always. Never pre-deduct.
- Do not add a “less TDS” line. The deduction is theirs to compute and theirs to report; a figure of yours that differs from theirs by a rupee creates a reconciliation item that outlives the project.
- Expect the short payment. Do not chase it as an underpayment before checking whether it matches an expected deduction.
Reconciling
The habit worth forming is reconciling against the tax records rather than the bank. Your bank statement shows the net; your 26AS shows what was deducted and by whom, which is what you can actually claim.
Check it periodically rather than at filing time. Deductions appear after a lag, and a client who deducted but never deposited is a problem you want to discover while you are still in contact with them — not in March, when the credit is missing and nobody remembers the engagement.
The reference
Freelance invoice format
How a freelancer or consultant in India should invoice: GST or no GST, TDS on your fee, invoicing overseas clients, and getting paid on time.
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Questions people ask
Almost certainly tax deducted at source. Businesses paying professional or technical fees generally deduct tax and remit it against your PAN, so the amount that lands is the net. It is your own tax paid early, not a discount — check your Form 26AS before treating it as an underpayment.
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