Tax Deducted at Source (TDS) for Indian Freelancers
The government of India has introduced an income tax called Tax Deducted at Source or TDS as part of their Income Tax Act. E-commerce companies operating in India such as ourselves are required to deduct TDS on client payments received by freelancers residing in India.
TDS collection starts from October 1st 2020. Note that this was previously set to April 1st 2020 and was later amended by the Indian government. Those who were charged TDS from April to September 2020 were already refunded on the platform.
How is TDS deducted?
For freelancers and agencies who have not provided a PAN or an Aadhaar number, we will withhold 5% of all your earnings on the platform from when TDS was implemented.
For those freelancers and agencies who have provided a PAN or an Aadhaar number, we will withhold 0.75%* of your earnings if:
- you have earned over 500,000 INR in the current financial year, or
- you declared that you will earn more than the threshold in a financial year.
* The 0.75% discounted rate is bound to increase to 1% starting April 1st 2021.
To manage your TDS setting, follow these steps:
1. Click your profile picture thumbnail from the main menu bar, and choose Settings.
2. Click Payment & Financials.
3. Go to the Tax Information section.
4. Under TDS Identification Number, input your PAN or Aadhaar number in the text field.
5. Click Save TDS Identity to complete.
6. (Optional) Tick Opt-in for TDS if you think you will exceed the threshold of 500,000 INR earning to avoid getting charged a lump sum once you go over the threshold.