We pay a freelance developer ₹40,000 a month. Is TDS under 194J or 194C, and does GST apply?

Information technology is a notified profession under section 44AA, so fees for it are "fees for professional services" under 194J(1)(a), deductible at 10%. The 2% rate in 194J is for fees for technical services and royalty, and section 194C covers "work" contracts such as printing, catering or manpower supply, not skilled services rendered personally. The threshold is ₹50,000 a year (raised from ₹30,000 on 1 April 2025), and at ₹4.8 lakh a year you are well past it. Deduct 10% on each invoice, deposit by the 7th of the next month, report in Form 26Q and issue Form 16A quarterly. If he has not given you a PAN, the rate is 20%.

The short deduction so far should be corrected: deduct the shortfall from the next payments and deposit it with interest at 1% a month from the month it was deductible; the expense itself is not disallowed as long as the tax is paid before your return due date.

GST: he must register and charge 18% once his total receipts from all clients cross ₹20 lakh in a financial year. If he is registered, deduct TDS on the fee excluding GST shown separately (CBDT Circular 23/2017), and you claim the 18% as input credit.