Understanding TDS and TCS as an Indian Freelancer

If you freelance through an Indian marketplace, two things may be withheld from your earnings. Neither is a platform fee, and both are your money being paid to the government in your name. Understanding which applies to you takes about five minutes.

This is general information, not tax advice. For your own situation, talk to a chartered accountant.

TCS, or Tax Collected at Source

TCS comes from section 52 of the CGST Act. It is 0.5 percent of the value of taxable supplies you make through a marketplace.

The important part: it applies only if you are GST-registered. A service supplier below the registration threshold, currently around twenty lakh of annual turnover, is not required to register merely because they sell through a marketplace, and since October 2023 no TCS is collectible on supplies by unregistered persons.

So a student or a moonlighter with no GSTIN has no TCS deducted at all.

TDS, or Tax Deducted at Source

TDS here comes from section 194-O of the Income Tax Act. It is 0.1 percent of the gross amount paid to an e-commerce participant.

There is a meaningful exemption. An individual or HUF whose gross through the platform stays at or under five lakh rupees in a financial year has no TDS deducted, provided a PAN has been given.

Without a PAN, section 206AA raises the rate to five percent and the exemption disappears. That is a fiftyfold difference on your own money, which is why giving your PAN is the single highest-value five minutes of admin you can do.

What you get back

Neither deduction is lost.

• TCS appears in your GST portal as credit you can claim, if you are registered
• TDS is set against the income tax you owe, and shows in your Form 26AS

Neither of these is a commission. A platform that takes zero percent still has to withhold what the law requires. The difference is that it goes to the government, not to the platform.

What to do

1. Add your PAN before you earn anything
2. Add your GSTIN if you are registered
3. Keep every invoice, since the platform issues one per completed order
4. Check your 26AS at the end of the year against your own records