TDS on Your Invoice: What Changed With the Income-tax Act 2025
Tax deducted at source is the reason your client pays you less than you invoiced, and it is one of the most misunderstood parts of Indian freelancing. A recent change makes the confusion worse, because the section numbers everyone quotes have moved.
Key takeaways
- TDS is deduction by the payer against your eventual tax liability, not an additional tax.
- The amount deducted is creditable against what you owe, and refundable if you have overpaid.
- The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the 1961 Act.
- Section numbers changed throughout, so contracts citing the old provisions cite a repealed statute.
- Form 26AS and the annual information statement are how you check what was actually deposited.
What TDS is, and is not
When an Indian business pays a freelancer, it is generally required to deduct tax at source at a prescribed rate and deposit it with the government against the freelancer permanent account number. You receive the net amount, and the deducted portion sits to your credit.
It is not an extra tax. At the end of the year your total liability is computed on your income, and the tax already deducted is set against it. If more was deducted than you owe, the excess is refundable. Freelancers frequently treat deduction as a loss rather than a prepayment, which leads to both frustration and unclaimed refunds.
The renumbering
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961, renumbering provisions throughout. The old section references that everyone in Indian freelancing quotes, and that appear in a great many contracts and invoices, are references to a statute that has been repealed.
Much of the substance carries over, so this is not a change to how deduction works in most ordinary cases. It is a change to what you should be citing. A contract stating that tax will be deducted under a named section of the 1961 Act is now pointing at repealed law, and that is worth updating in your templates.
Why this article does not give you section numbers
It would be easy to list the new equivalents, and it would be unwise. The renumbering is recent, the mapping is detailed, and the applicable provision depends on the nature of the payment, which for freelance work can turn on whether it is characterised as professional services, technical services or contract work.
The honest position is that this is a question for your chartered accountant against your actual engagements, not something to take from a general article. What an article can usefully do is tell you the ground has moved, which is the part most people have not registered.
What to do practically
- Check Form 26AS and your annual information statement to confirm the deduction was actually deposited against your PAN.
- Ask clients for the TDS certificate rather than assuming it will arrive.
- Update contract and invoice templates that cite 1961 Act sections.
- Where deduction has been made at a rate you did not expect, ask which provision the client applied and why.
- Confirm with an accountant how your engagements should be characterised, since that drives the applicable rate.
The clause worth having
Contracts should state whether the fee is inclusive or exclusive of taxes, that the client will deduct tax at source as required by law, and that the client will furnish the certificate within a stated period. That last obligation is the one usually missing, and it is the one that costs freelancers time at filing.
Referring to tax deduction as required under applicable law, rather than naming a section, also insulates your template from exactly the problem the renumbering has created.
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Review your freelance & consultant contractCommon questions
My client deducted TDS. Have I lost that money?
No. It is credited against your tax liability for the year and is refundable to the extent it exceeds what you owe. Check Form 26AS and your annual information statement to confirm it was deposited against your PAN, and claim it when you file.
Which section applies to my invoices now?
That depends on how your work is characterised and on the current Act following the 2026 renumbering. This is a question for a chartered accountant against your actual engagements rather than something to take from a general article.
My contract cites a section of the 1961 Act. Is it invalid?
A stale citation does not void a contract, but it points at a repealed statute. Updating templates to refer to deduction as required under applicable law avoids the problem recurring.
Related guides
This article is general information about Indian law as of 2026-07-26, not legal advice, and reading it does not create an advocate–client relationship. Statutes and rules change, particularly under the Labour Codes where State rules are still being notified. Consult a qualified advocate about your own situation.