💻 TDS and GST Compliance for Freelancers in Mumbai

Freelancing in Mumbai has seen rapid growth in recent years, with professionals offering services in IT, design, content, consulting, marketing, and more. While freelancing offers flexibility and independence, it also comes with important tax and compliance responsibilities.

Two key areas that freelancers in Mumbai must understand are TDS (Tax Deducted at Source) and GST (Goods and Services Tax) compliance. Managing these correctly ensures smooth financial operations and avoids unnecessary penalties.

1️⃣ Understanding TDS for Freelancers in Mumbai

📝 What is TDS?

TDS is a mechanism where a payer (your client) deducts a certain percentage of your payment as tax before crediting the amount to you. This is applicable under the Income Tax Act, 1961.

📌 When is TDS Applicable for Freelancers?

• If your client is a company, LLP, or business entity, they are required to deduct TDS @ 10% under Section 194J (Professional Fees), provided the total payment in a financial year exceeds ₹30,000.
• For technical services, TDS @ 2% under Section 194C may apply.

📑 TDS Compliance Checklist for Freelancers:

✔ Obtain PAN and share it with clients to avoid higher TDS deduction (20%).
✔ Keep track of Form 26AS and AIS for TDS credits.
✔ File Income Tax Returns (ITR-3 or ITR-4) to claim credit and refunds if excess TDS is deducted.

2️⃣ GST Compliance for Freelancers in Mumbai

🛒 When Does GST Apply?

• GST is applicable if your aggregate turnover exceeds ₹20 lakh per year (₹10 lakh for special category states; Maharashtra is not in this category).
• Even below ₹20 lakh, voluntary GST registration can help you work with corporate clients who prefer GST-compliant vendors.

📊 GST Rates for Freelance Services:

• Most professional services fall under 18% GST (SAC 9983 for IT/consultancy services).

📋 Key GST Compliance Requirements:

• GST Registration – Obtain from GST portal.
• Issue GST Invoices – Include GSTIN, SAC code, and correct tax breakup.

• File GST Returns –

  • GSTR-1 (Monthly/Quarterly) – Details of outward supplies.
  • GSTR-3B (Monthly) – Summary of sales and tax payable.
• Pay GST – By the 20th of the next month.

3️⃣ Special Considerations for Freelancers with Overseas Clients

🌍 Export of Services – If you provide services to clients outside India:

• No GST is charged if payment is received in foreign currency and certain conditions are met.
• File Letter of Undertaking (LUT) to export without paying IGST.
• Declare export turnover in GST returns.

4️⃣ Penalties for Non-Compliance

🚨 For TDS:

• Failure to file ITR means you may lose TDS credit.

🚨 For GST:

• Late fee: ₹50/day (₹20/day for NIL returns) up to ₹5,000.
• Interest: 18% p.a. on tax payable.

5️⃣ Best Practices for Freelancers in Mumbai

✅ Maintain separate bank account for business transactions.
✅ Keep digital records of all invoices and payments.
✅ Track income from both domestic and international clients.
✅ Use accounting software to automate GST and TDS tracking.
✅ Consult a tax professional for quarterly reviews.

✅ Conclusion

For freelancers in Mumbai, understanding TDS and GST compliance is essential to stay on the right side of the law and maintain financial credibility. Timely registrations, proper invoicing, and accurate filings ensure you get your due tax credits and avoid penalties.

Partnering with professionals like TAXAJ Corporate Services LLP can help you manage your tax compliance seamlessly, so you can focus on delivering quality work to your clients while we handle your TDS tracking, GST returns, and advisory needs.

📞 Contact TAXAJ today for a customized compliance plan designed for freelancers in Mumbai.

Created & Posted by Sony Garg

Accounts & Finance Executive at TAXAJ

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ

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