The Income Tax Department has clarified that freelancers with high earnings who make payments liable for Tax Deducted at Source (TDS) must now obtain a valid TAN (Tax Deduction and Collection Account Number). This clarification comes amid rising concerns over tax compliance within the gig and freelance economy, where independent professionals often hire subcontractors or vendors. If such payments exceed specified thresholds under Section 194C, 194J, or other relevant provisions, the freelancer becomes a tax deductor by law.

This means that freelancers earning above certain limits and engaging in professional transactions, such as hiring content creators, consultants, developers, or support staff, must deduct TDS at the applicable rate and deposit it with the government using their TAN. Failure to do so could result in penalties, interest on unpaid tax, and disallowance of expenses under the Income Tax Act. The department emphasizes that TAN is not optional for those who are legally responsible for deducting tax, regardless of whether they are individuals or organizations.

To streamline compliance, the department recommends that freelancers apply for TAN through the NSDL e-Gov portal, which now features simplified online processes and real-time status tracking. Tax professionals advise freelancers to review their contracts and payment records to determine if TDS provisions apply, and to seek expert guidance for the proper filing of Form 26Q or 16A issuance. With growing digital transactions and tighter scrutiny, the tax authority’s move is seen as a step toward formalizing financial accountability within India’s rapidly expanding freelance sector.