Client Deducted TDS on Your Invoice? Here's How to Record It

You invoice a client ₹1,18,000 — ₹1,00,000 for the work, ₹18,000 of GST on top. When the payment lands, it's ₹1,08,000. The client hasn't underpaid you. They've deducted ₹10,000 as TDS and will deposit it against your PAN, where it shows up in your Form 26AS and comes off your income tax.

The money is accounted for. The problem is that most invoicing tools can't say so. Mark the invoice paid and your books show ₹1,18,000 received when ₹1,08,000 arrived. Leave it unpaid and you'll chase a client who has already settled in full.

That invoice isn't short-paid — it's settled

The cleanest way to think about TDS is that it's a second way the same invoice gets paid. Your client discharges a ₹1,18,000 invoice through two routes at once:

Route	Amount
Cash into your bank	₹1,08,000
TDS withheld and deposited against your PAN	₹10,000
Total settled	₹1,18,000

Nothing is outstanding. The invoice is closed. It just wasn't closed entirely in cash.

That framing matters because the alternative — treating TDS as a discount, or editing the invoice down to ₹1,08,000 — breaks your GST. The invoice total and the ₹18,000 of GST on it are what you reported in GSTR-1 and what your buyer claimed input tax credit on. Those numbers cannot move because of how the payment happened to arrive.

TDS is never deducted on the GST

This is the part people get wrong most often, and it's worth being precise about.

TDS applies to the taxable value of the invoice, not the invoice total. Where GST is shown separately on the invoice, the GST component is excluded from the base — CBDT Circular 23/2017 says so directly, and it applies to both new and existing contracts.

So on our ₹1,18,000 invoice, a 10% deduction works out like this:

	Amount
Taxable value	₹1,00,000
GST at 18%	₹18,000
Invoice total	₹1,18,000
TDS at 10% — on ₹1,00,000, not ₹1,18,000	₹10,000

Deduct on the total instead and you get ₹11,800 — ₹1,800 too much, withheld from you for no reason. It's a common enough error that it's worth checking the arithmetic when a payment looks short by an odd amount.

The logic is straightforward once you see it: GST isn't your income. You collected it on the government's behalf and you'll pay it onward. Deducting tax on money that was never yours would be taxing the same rupee twice.

Recording it in CredHill

Open View Invoices, find the invoice and click Payments. Enter the cash you actually received — ₹1,08,000 — then tick Client deducted TDS on this payment and enter the ₹10,000.

There's a % toggle next to the TDS field if you'd rather enter a rate than an amount. Switch it and type 10, and it works the figure out for you — applied to the taxable value, not the total, so you get ₹10,000 rather than ₹11,800. The line underneath spells out exactly what it used, so there's nothing to take on trust.

You can also pick the section it was deducted under, which becomes a plain label on the receipt. It's there so that when you sit down with Form 26AS at filing time, each deduction is identifiable rather than being an unexplained gap.

Save, and the invoice closes. Settled: ₹1,18,000. Balance: nil.

When TDS comes with a part payment

TDS isn't tied to settling an invoice in full. A client paying you in instalments may deduct on each one, and each receipt records its own cash and its own TDS. The invoice stays partially paid with a correct balance until the receipts add up to the total.

What never changes

Worth stating plainly, because it's the whole point of handling TDS this way: recording TDS does not touch the invoice total, the taxable value, the GST, or anything you've filed. It changes only the record of how the invoice was settled.

Your GSTR-1 summary after recording TDS is identical to before. It has to be — TDS is income tax, GST is GST, and the two don't meet on the invoice.

The short version

• A client deducting TDS hasn't underpaid you. Cash plus TDS settles the invoice.
• TDS applies to the taxable value, never the GST component (CBDT Circular 23/2017). On ₹1,00,000 plus 18% GST, 10% TDS is ₹10,000 — not ₹11,800.
• Record the cash and the TDS on the same receipt, and the invoice closes at the right figure.
• Never edit the invoice down to match the cash received — that breaks the GST you've already filed.

Not tax advice. Rates, sections and thresholds change, and this post deliberately doesn't list them. Whatever your client actually withheld is what you record — and for anything unusual, ask your chartered accountant.