With the growing gig economy in Mumbai, many freelancers and independent professionals are now offering services across sectors like IT, content creation, design, consulting, and more. While the freedom of freelancing is attractive, TDS (Tax Deducted at Source) compliance can often be confusing—especially with the new updates applicable from 1st April 2025.

This article explains TDS compliance for freelancers and professionals in Mumbai, incorporating all the latest amendments announced in Budget 2024, including the revised TDS threshold under Section 194J.

What Has Changed from 1st April 2025?

As per the Union Budget 2024, the threshold for TDS deduction under Section 194J has been increased from ₹30,000 to ₹50,000 per financial year. This means:

• If a freelancer receives less than ₹50,000 from a single client in a financial year, TDS is not applicable.

• This change aims to ease compliance for small and mid-sized freelancers and professionals.

TDS Applicability – Who Needs to Deduct and When?

1. TDS Deducted on Freelancers' Income (by Clients)

• Applicable Section: 194J (for professional and technical services).

• Who deducts: Companies, LLPs, Firms, or Individuals subject to audit under Section 44AB.

• Rate of TDS:

  • 10% if PAN is provided

  • 20% if PAN is not furnished

• Threshold (from 1.4.2025): TDS applicable only if the payment exceeds ₹50,000 per annum per client.

2. TDS Deducted by Freelancers (on payments to subcontractors/other professionals)

If you're a freelancer running a team or subcontracting work and paying:

• Another professional or consultant over ₹50,000 in a year,

• Then you are liable to deduct TDS @10% under Section 194J.

Important: You must obtain TAN to deduct and deposit TDS.

TDS Compliance Process for Freelancers in Mumbai

A. If You’re Receiving Payments (and TDS is Deducted)

1. Share your PAN and GSTIN (if applicable) on invoice.

2. Collect Form 16A quarterly from the client.

3. Match TDS with your Form 26AS / AIS on the Income Tax Portal.

4. Claim credit of deducted TDS while filing ITR.

B. If You’re Deducting TDS

1. Apply for TAN through NSDL portal.

2. Deduct TDS at 10% on professional services exceeding ₹50,000.

3. Deposit TDS via Challan 281 within 7th of next month.

4. File quarterly TDS returns in Form 26Q.

5. Issue Form 16A to the payee.

Penalties for Non-Compliance

Failing to comply with TDS provisions can result in:

• Interest @1% to 1.5% per month

• Late filing fee under Section 234E

• Penalty under Section 271H

• Disallowance of expense under Section 40(a)(ia) in income tax return

How TAXAJ Helps Freelancers & Professionals in Mumbai

At TAXAJ, we offer end-to-end support for freelancers to manage their tax & TDS obligations:

✅ TAN Registration
✅ TDS Deduction & Challan Filing
✅ Form 26Q Filing
✅ Form 16A Generation
✅ Income Tax Return Filing
✅ Reconciliation with Form 26AS & AIS
✅ Advisory on Advance Tax & Deductions

Key Tips to Stay TDS-Compliant

• Always raise GST-compliant invoices and mention PAN clearly.

• Track client payments exceeding ₹50,000 to monitor TDS applicability.

• If you subcontract, keep records of vendor payments and their PAN details.

• Reconcile Form 26AS/AIS regularly for accuracy.

• Don’t miss the quarterly TDS return due dates.

Conclusion

As a freelancer or professional in Mumbai, staying compliant with TDS rules—especially with the revised ₹50,000 threshold effective from April 2025—is crucial to avoid tax complications and penalties. With a little discipline and the right support, you can manage your compliance easily while focusing on your core work.

Need help? Team TAXAJ is your trusted partner for freelance tax compliance in Mumbai and across India.