You raise a clean invoice for two lakh, the corporate client approves it, and then only one lakh eighty thousand hits your account, and for a second your stomach drops because it looks like they short-paid you. They did not. They deducted TDS, tax deducted at source, and that twenty thousand is sitting with the government under your PAN, waiting for you to claim it. If you work with company clients, builders, or any organisation with a finance department, TDS on your invoices is a fact of life, and the studios that handle it well treat it as a prepaid tax to reclaim, while the ones that handle it badly treat it as money lost. This post is about being in the first group.
Let me walk through what TDS actually is on a design invoice, the two flavours you will meet, how to reconcile it, and how to stop it from quietly messing up your books.
What TDS is, and why it is not lost money
TDS is not an extra tax, it is your own income tax collected in advance by whoever is paying you. When a company pays a professional, it is required to withhold a slice and deposit it with the government against your PAN, so that by the time you file your return, a chunk of your tax is already paid in. The money is not gone, it shows up as a credit you claim, and if your final tax works out lower than what was withheld, you get a refund.
The mistake I see is studios mentally writing off the deducted amount, or worse, not tracking it at all, and then paying full income tax at year-end on top of the TDS that was already deducted, which is double paying yourself into a hole. The whole system is reconciled on the Income Tax portal, where the tax the client deducted appears against your PAN, and that is the record you build your claim on.
The two kinds of TDS a design studio meets
Here is where it pays to know the sections, because the rate depends on how the client's accountant classifies your work.
| TDS type | When it applies | Typical rate | Where you see it |
|---|---|---|---|
| Income tax TDS, section 194J | Professional or technical fees, the usual bucket for design | 10% on the fee | Form 26AS and AIS on the income tax portal |
| Income tax TDS, section 194C | If your work is treated as a contract, common in turnkey execution | 1% or 2% on the payment | Form 26AS and AIS on the income tax portal |
| GST TDS, section 51 | Government, PSU and notified clients, on larger contracts | 2% of the taxable value | Your GST portal cash ledger |
Most pure design consultancy gets deducted under 194J at 10%, because you are providing professional services. The moment your work looks like a works contract, execution, fit-out, the client may deduct under 194C at the lower contract rate instead, which ties directly into whether you are a consultant or an executor, a distinction I unpacked in the context of tax models earlier. Knowing which bucket you are in tells you what deduction to expect, so you are not surprised when the bank credit lands.
The GST TDS twist most studios never see
There is a second, separate TDS that only shows up with certain clients, and it lives in the GST system, not income tax. Under section 51, government departments, public-sector undertakings and some notified bodies deduct 2% GST TDS on the taxable value of larger contracts, and this is entirely different from the income-tax TDS above, it credits to your GST cash ledger, not your income tax account. So a government client can deduct both, income-tax TDS under 194J or 194C, and GST TDS under section 51, on the same invoice.
The reason this matters is that the two credits are claimed in two completely different places, the GST one on the GST portal against your GST liability, the income-tax one on the income tax portal against your income tax. Mix them up in your books and neither reconciles. The definitions and the current thresholds sit with CBIC-GST, which is the source worth checking when a government contract comes in, because the rules for who must deduct have shifted over the years.
Deduct on the base, not on the GST, a small fix that saves real money
Here is a practical detail that quietly saves you cash, and most studios get it wrong. When your invoice shows the GST amount separately from the fee, income-tax TDS is meant to be deducted on the fee alone, not on the GST portion. So if your invoice is one clean line of "two lakh plus 18% GST", show the split clearly, because a lazy client accountant who deducts 10% on the whole GST-inclusive figure is withholding more of your money than they should, and you are the one waiting to reclaim it.
This is one more reason your invoice structure has to be tidy and unambiguous, with the taxable value, the GST split and the correct codes all shown separately, and if you are unsure which SAC rides on the design line, the guide to HSN and SAC codes for interior design has the numbers. A clean invoice is not just about GST compliance, it directly controls how much TDS gets deducted and how easily you reclaim it.
Reconciling TDS, the month-end job you cannot skip
Now the discipline. Every deduction a client makes should be matched against what appears under your PAN in Form 26AS and the AIS, because a client can deduct TDS from your payment and then fail to deposit it correctly, in which case the credit never shows up and you cannot claim it. So the loop is, log the deduction when the short payment lands, chase the client's TDS certificate, and confirm it reflects on the portal before you rely on it at filing.
A TDS reconciliation routine you can run each quarter
- Record the TDS on every invoice where a client short-pays, with the section noted
- Match each deduction against Form 26AS and the AIS under your PAN
- Collect the TDS certificate, Form 16A, from each deducting client
- Separate income-tax TDS from GST TDS, they credit to different accounts
- Flag any deduction that has not reflected, and chase the client before filing
- Carry the confirmed credits into your income tax and GST returns
Doing this across a handful of live projects and a scatter of clients is exactly the kind of tracking that dies in spreadsheets, because the deduction, the invoice, the payment and the certificate all live in different files, and I made the broader case for why that scatter costs you in why Excel quietly costs you margin. When your invoices, milestone payments and the amounts actually received all sit in one connected ledger, the gap between "invoiced" and "received" is visible instantly, and that gap is your TDS to reconcile. This ties straight into keeping GST-ready records through the project and into how milestone invoicing under GST plays out, because TDS is deducted stage by stage on staged bills too.
Key takeaways
- TDS is your own tax paid in advance by the client, not money lost, so track it and claim it
- Know the section, 194J at 10% for professional fees, 194C for contract-style execution
- Government clients may also deduct 2% GST TDS under section 51, credited separately
- Show GST separately on the invoice so TDS is deducted on the fee, not on the tax
- Reconcile every deduction against Form 26AS before you rely on it at filing
Frequently asked questions
Why did my client pay less than my invoice amount?
They almost certainly deducted TDS, your own income tax withheld at source and deposited under your PAN. It is not a short payment, it is a credit you reclaim when you file.
What TDS rate applies to interior design fees?
Professional design fees are usually deducted under section 194J at 10%. Work treated as a contract may fall under 194C at a lower rate, so the classification decides the number.
Is GST TDS the same as income-tax TDS?
No. GST TDS is 2% deducted by government and notified clients under section 51 and credits to your GST cash ledger, while income-tax TDS credits to your income tax account. They are claimed in different places.
Should TDS be deducted on the GST portion of my invoice?
No. When GST is shown separately, income-tax TDS should be deducted on the fee only, so always split the taxable value and the tax clearly on the invoice.
The clean way to think about TDS is that it is not a deduction from your income, it is a deposit into your tax account that you have to go and claim, and the only real risk is failing to track it so it slips away unclaimed. Keep the deductions logged against the invoices, reconcile them each quarter, and TDS becomes a formality instead of a leak.
If you want to see invoices, milestone payments and amounts received sitting in one ledger so the TDS gap is obvious, there is a live demo at demo.designa.work. And if the maths of running the whole studio on one flat rupee price appeals, the founding offer, billed in rupees with unlimited free client logins, is at go.designa.work.