TDS on Rent, Professional Fees, and Freelance Income: A Practical Guide

Rent, professional fees, and freelance payments are the three places outside a regular salary where TDS trips people up most often - a landlord isn't sure why the rent credited is short, a freelancer sees 10% vanish from an invoice and wonders if that's fair, and a small business owner isn't sure whether hiring a freelance designer even attracts TDS at all. The rules changed in numbering, and in a few thresholds, with the Income Tax Act, 2025, effective from 1 April 2026, so it's worth getting the current picture straight rather than relying on what a colleague told you a couple of years ago.

TDS on Rent: Rates and Thresholds

Rent paid by a business, a company, or any professional whose accounts get audited is now covered under Section 393 of the Income Tax Act, 2025 - the section that has absorbed what used to be Section 194-I. The rate depends on what's being rented: 10% for land, building, or furniture and fittings, and 2% for plant, machinery, or equipment. Deduction kicks in once rent crosses roughly Rs 50,000 a month, which works out to about Rs 6 lakh over the year, a threshold that was raised sharply in 2025 from the earlier Rs 2,40,000 a year - so plenty of smaller landlords who used to fall outside TDS now sit right on the edge of it. Individuals and HUFs who aren't otherwise required to get their accounts audited have their own simpler version of the same rule, inherited from the erstwhile Section 194-IB: once monthly rent crosses that same Rs 50,000 mark, they deduct TDS at a flat 2% (cut down from 5% in late 2024) without needing a TAN at all - the deduction is reported using the tenant's and landlord's PAN directly.

TDS on Professional Fees and Technical Services

Payments for professional services - to a CA, lawyer, doctor, architect, engineer, management consultant, or similar - attract TDS at 10%, while payments that qualify as technical services (plus a few other specified categories, like call-centre payments) attract 2%. This too now sits within Section 393, replacing the erstwhile Section 194J. The threshold was raised from Rs 30,000 to Rs 50,000 a year for FY 2025-26 onward, and it applies separately to each category of payment made to the same payee, so a company paying one consultant both a technical fee and a separate professional fee tracks the two thresholds independently. Companies, LLPs, firms, and any individual or HUF whose accounts were audited in the preceding year must deduct; a purely personal payment, such as hiring an architect to design your own house, generally falls outside this if you aren't running a business or profession that's itself subject to audit.

Freelance and Contract Payments: Professional Fee or Contract Work?

This is where most freelancers get confused, because freelance income isn't a TDS category by itself - it's taxed depending on what the freelancer actually does. A freelance chartered accountant, company secretary, doctor, engineer, or someone in one of the other specified professions is treated the same way as any other professional fee payment: 10% TDS once payments to them cross Rs 50,000 in the year. A freelancer doing work that's better described as a contract for a defined task - content writing delivered against a brief, data entry, video editing, running ad campaigns, or similar production-style work - is more often treated as a contractor payment instead, taxed at 1% for an individual or HUF payee and 2% for others, applying once a single payment exceeds Rs 30,000 or the year's total to that person crosses Rs 1,00,000. In practice, many clients simply decide which bucket a freelancer falls into based on how the invoice is described, so it's worth checking the certificate you receive to see which rate was actually applied, especially if you do a mix of both kinds of work for the same client.

Who Deducts, and Who Gets the Tax Credit

The party making the payment - the tenant, the client, the business hiring the freelancer - is the one legally responsible for deducting TDS, depositing it with the government, and issuing a certificate, still commonly referred to as Form 16A, to the person they paid. The landlord, professional, or freelancer receiving the net amount doesn't pay anything extra out of pocket; they simply get credit for the tax already deducted on their behalf, which shows up against their PAN and can be claimed while filing their return. That distinction matters, because TDS is only an advance against your final tax bill, not the bill itself - a freelancer whose total income puts them in a lower slab than 10% will usually get a refund of the excess, while one in the 30% bracket will still owe the difference at filing time. Either way, the credit only lands correctly if the deductor has your right PAN on record; get that wrong, or leave it out, and the law allows deduction at a much higher rate instead.

None of this needs to be memorised in detail. What matters practically is knowing which of these three buckets a payment falls into, checking that the rate applied matches it, and confirming the credit actually reaches your PAN before you sit down to file. A quick look at Form 26AS or AIS a couple of times a year catches most problems early, well before they turn into a mismatch at filing time.