Indian Tax Deducted at Source (TDS) or Withholding Tax

While Upwork is your home for work, your physical home could be anywhere in the 180+ countries where we operate. Because each country has its own rules and regulations, some users have taxes that are specific to their location. In India, this includes a number of unique taxes. One of these is Tax Deducted at Source (TDS).

What is Indian TDS?

In India, TDS is a means of collecting an income tax from you when you charge clients. Businesses are required to set aside a government portion for every payment they make in India, which is sent directly to the Indian government.

A law made effective on October 1, 2020, requires e-commerce operators outside of India (such as Upwork) to begin collecting TDS on payments made to service providers (such as the talent and talent agencies that use Upwork) based in India.

This means that if you are based in India, we are required to withhold this tax from your earnings. We then remit what we collect to the Indian government.

Does Upwork collect TDS?

Effective October 1, 2020, Upwork is collecting TDS on your payments. 

How much is TDS?

In general, TDS applies to all client payments sent to Indian freelancers and agencies. The amount collected is determined by whether or not you provided a PAN to Upwork.

  • We withhold a 1% tax from your earnings if you have provided a valid PAN to Upwork and after it has been verified by Upwork.
  • We withhold a 5% tax if you have not provided a valid PAN.

Claim a credit or refund

You’ll be able to claim a credit for the tax withheld against your tax liability for the financial year, or seek a refund if tax withheld exceeds your tax liability for the year. You may wish to consult with a trusted tax expert or advisor for specific advice.

You will need to add a PAN in order to keep the withholding tax at 1% of your earnings. To enter your PAN, go here.

Frequently Asked Questions

What is TDS and how does this affect me?

Tax Deducted at Source (TDS) is an effort by the Indian government to record transactions and collect income taxes. Certain Indian businesses have long been required to withhold TDS on payments in India, and the 2020 Union Budget required foreign e-commerce operators (like Upwork) do the same. This law became effective on October 1, 2020. The tax amount to be collected is dependent on whether you have provided Upwork with your Permanent Account Number (PAN).

How much will I be charged?

The amount of TDS we are required to withhold depends on whether you have a valid PAN on file with Upwork:

  • If you have a PAN on file, we are required to withhold 1% of client payments.
  • If you do not have a PAN on file, we are required to withhold 5.0% of client payments.

The withholding tax is calculated based on the gross amount that you invoice your client, so it is calculated prior to freelancer service fees or any other fees that may reduce the amount credited to your account.

What does Upwork do with the money you withhold? Is this just a way for Upwork to make more money?

No, we are required to forward any tax we collect from our users to the Indian government.

I don’t have a PAN, what should I do?

If you do not currently have a PAN, you may wish to talk with your trusted tax expert or advisor. Upwork cannot provide specific tax advice.

How/where do I enter my PAN on Upwork?

You may enter your PAN in the Tax Info section under Settings.

I tried entering my PAN but got an error message. How do I correct this?

Double check the format you used. As defined by the Indian government, the proper format is:

  • 10-digit alphanumeric entry, i.e., A A A A A # # # # A
  • # = Numeric A = Alphabetic
I don’t think I'm required to pay the TDS. What should I do?

Since we cannot offer specific tax advice, we suggest you reach out to a trusted tax expert or advisor to learn more about Indian TDS and your tax obligations.

How is this different from the Goods and Service Tax (GST)?

The GST only applies when both you and your client live in India. The Tax Deducted at Source (TDS) applies to all your earnings, including those from clients in India and around the world.

My PAN was rejected. Why?

We verify your PAN against government records to make sure it is accurate and valid. Make sure that the name on your PAN matches your legal name on your Upwork account. If you’ve made a mistake, you can always resubmit. You can check your PAN records here.

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