If you run an interior design studio in India, you have almost certainly opened a payment from a client and thought, "Wait, they paid me less than the invoice. Where did the rest go?" Nine times out of ten, the answer is TDS. Tax Deducted at Source. The client didn't shortchange you. They deducted a slice, deposited it with the government against your PAN, and expect you to claim it back later.
TDS confuses a lot of studio owners because it feels like money vanishing. It isn't lost. But if you don't understand which section applies, how much gets cut, and how to reconcile it, you can genuinely leave money on the table at year end. Let me break it down the way I wish someone had explained it to me.
What TDS actually is, in plain terms
TDS is the government's way of collecting income tax in advance, at the point money changes hands. Instead of waiting for you to file your return and pay tax on your studio's profit, the government says to your client: when you pay this designer, cut a small percentage first and deposit it with us. That deducted amount sits as a credit against your PAN.
So the flow is simple. Client owes you ₹1,00,000. They deduct, say, ₹10,000 as TDS. They pay you ₹90,000. They deposit that ₹10,000 with the Income Tax Department, tagged to your PAN. When you file your return, that ₹10,000 shows up as tax you've already paid. If your final tax liability is lower than everything that's been deducted across the year, you get a refund.
Key point: TDS is not an extra cost. It's your own tax, paid early, by someone else, on your behalf. The whole game is making sure every rupee deducted actually reaches your PAN and gets claimed.
When does a client deduct TDS from a design studio?
Not every client deducts. The obligation to deduct sits with the payer, and it kicks in mainly when the payer is a business.
- If your client is a company, an LLP, a firm, or any business that gets its accounts audited, they are required to deduct TDS on professional and contract payments.
- If your client is an individual homeowner paying for their flat renovation out of pocket, they usually do not deduct TDS at all. Most residential clients simply pay the full invoice.
- Corporate clients, developers, builders, real estate firms, hotels, offices, retail chains, anyone doing a commercial fit-out will almost always deduct.
So the rule of thumb: the bigger and more corporate the client, the more likely you'll see a deduction. If your studio does mostly homeowner projects, TDS may rarely touch you. If you take on commercial or builder work, it's a monthly reality.
Which section applies to interior design work?
This is where studios get tripped up, because interior design sits in a grey zone between "professional service" and "contract work." Two sections matter.
Section 194J, professional and technical fees
Design is a professional service. When you charge a design fee, a consultation fee, a concept fee, drawings, 3D visualisation, or space planning, that's professional income. Clients typically deduct under Section 194J. The rate is 10 percent.
So on a pure design consultancy fee of ₹2,00,000, the client deducts ₹20,000 and pays you ₹1,80,000.
Section 194C, contracts and turnkey execution
The moment your engagement becomes execution, supplying and installing furniture, doing the civil work, managing the fit-out, delivering a turnkey project, it starts looking like a works contract. That falls under Section 194C. The rate is lower: 1 percent if you're an individual or a sole proprietor (HUF too), and 2 percent if your studio is a company or firm.
So on a ₹10,00,000 turnkey execution bill, a client deducting under 194C at 1 percent cuts ₹10,000. Much smaller than the 10 percent under 194J.
The overlap problem
Most real studio invoices are mixed. Part design fee, part execution, part procurement. This is exactly why clients' accounts teams sometimes deduct at the wrong rate, or apply 10 percent to your entire bill including the furniture cost, which inflates the deduction massively.
The practical fix: split your invoice clearly. Show the design/consultancy component separately from the supply-and-install component. When the line items are clean, the client's accountant deducts 194J on the design portion and 194C on the execution portion, and you don't get over-deducted. Muddy single-line invoices are where money leaks. This is the same discipline that keeps your books clean overall, which I've written about in how to reconcile payments and keep accounts clean.
One more thing that bites studios: if you haven't given the client your PAN, they must deduct at 20 percent instead of 10. Always share your PAN upfront. It's the cheapest mistake to avoid.
TDS and GST are two different animals
Do not confuse the two. GST is a tax you add on top of your invoice and collect from the client to pay the government. TDS is tax the client subtracts from what they owe you.
And here's the detail people get wrong: TDS is deducted on the value of your service before GST, not on the GST-inclusive total. So if your fee is ₹1,00,000 plus 18 percent GST (₹18,000), the invoice total is ₹1,18,000. The client should deduct 10 percent TDS on ₹1,00,000, which is ₹10,000, not on ₹1,18,000. Then they pay you ₹1,08,000 (₹1,18,000 minus ₹10,000 TDS). If your GST is muddled to begin with, all of this gets harder, so it's worth getting the basics right first in GST for interior designers in India.
There's also a separate thing called TDS under GST (Section 51), where certain government bodies and PSUs deduct 2 percent GST-TDS. If you work on government projects you'll see this too, and it reflects in your GST portal, not your income tax credit. Most private studios won't hit it, but know it exists.
How to reconcile TDS so you actually get it back
This is the part that saves you real money. Deducted TDS is only useful if it reaches your PAN and you claim it. Here's how to check.
Form 26AS and the AIS
Log in to the income tax portal and pull your Form 26AS and your Annual Information Statement (AIS). These show every rupee of TDS deposited against your PAN, client by client, quarter by quarter. This is your source of truth.
Match your own records against it. For every corporate client who deducted, there should be a matching entry. If a client deducted ₹20,000 in June but it's not showing in 26AS by the time you file, they either haven't deposited it or filed their TDS return wrong. Chase them. Without the entry in 26AS, you cannot claim the credit, and you'll effectively pay that tax twice.
Form 16A
Ask every deducting client for a Form 16A. It's the TDS certificate they issue quarterly, showing exactly what they cut and deposited for you. Keep a folder. At year end, your total TDS across all Form 16As should tie out to your 26AS. If a client goes quiet, the Form 16A request is your paper trail.
Build a simple TDS tracker
Keep a running list: client name, invoice number, invoice value, TDS section, TDS amount, and whether it's appeared in 26AS yet. Update it every time a payment lands short. When you file your return, this tracker plus your 26AS makes claiming credit a five-minute job instead of a panic. TDS is essentially advance tax you've paid, so it directly reduces what you owe, and often produces a refund if your deductions exceed your final liability.
The reconciliation logic here is the same headache as matching client advances against final bills, which trips up a lot of studios. If you juggle a lot of milestone payments, handling client advances and GST the right way is worth a read alongside this.
A quick worked example
Say you deliver a commercial office project. Your invoice splits into ₹3,00,000 design fee and ₹12,00,000 turnkey execution, plus 18 percent GST.
- Design fee ₹3,00,000, TDS under 194J at 10 percent = ₹30,000
- Execution ₹12,00,000, TDS under 194C at 1 percent = ₹12,000
- Total TDS deducted = ₹42,000
Now imagine the client's accountant lazily deducts 10 percent on the whole ₹15,00,000. That's ₹1,50,000 cut instead of ₹42,000. You'd get ₹1,08,000 less in hand, tied up for months until your refund lands. Clean line items literally protect your cash flow. That's not a small deal when you're paying vendors and site labour every week.
Where a connected system saves you
TDS pain is really a record-keeping pain. It's messy because your invoices, payments received, and the shortfall between them live in different places, and nobody's tracking the gap. This is exactly what a proper studio workflow fixes.
With Designa, your quotes turn into clean GST invoices with the design and execution components split properly, so clients deduct at the right section and rate. Payments collected via Razorpay reconcile against each invoice, so any shortfall (your TDS) is visible instantly instead of discovered at year end. And because your invoices sync to Tally, your accountant has everything mapped when it's time to claim credit. If you run on Tally, syncing your studio invoices with Tally closes the loop end to end.
TDS isn't scary once you see it for what it is: your own tax, paid early, waiting for you to claim it. Split your invoices cleanly, share your PAN, collect your Form 16As, and check 26AS before you file. Do that and TDS becomes a non-event.
If you're tired of chasing shortfalls and reconciling payments by hand, put your whole studio, leads to invoices to collection, in one place. Try Designa live at the demo, and if it fits, grab the founding plan for your whole studio at go.designa.work. One flat price a year, done-for-you migration, and your month-end stops being a guessing game.