TDS Deducted by Your Client: Why Your Invoice Still Shows "Partially Paid"
An invoice for ₹60,000. A payment of ₹58,800 lands in your account. Nothing is wrong — your client deducted 2% income tax TDS before paying, exactly as they're required to. But most invoicing software still shows ₹1,200 as outstanding, because it has no way to know that money was never coming as cash — it was deposited with the government on your behalf instead.
Why this happens
Invoicing software generally tracks one thing per payment: cash received. When a client subject to TDS pays you, the amount that actually lands in your bank is the invoice value minus whatever they were required to withhold under Section 194J, 194C, or another applicable TDS section. Software that only understands "cash in" treats that gap as a shortfall — a partial payment — when it's actually a full settlement, split between cash and tax already paid to the government on your PAN.
What the TDS amount actually represents
It isn't lost money. It's tax paid in advance, on your behalf, against your PAN — it shows up on your Form 26AS, and you claim it as credit when you file your own income tax return. The invoice is genuinely settled; the ₹1,200 just took a different path to the government than the rest.
What correct tracking actually looks like
The fix isn't accepting an invoice as "partially paid forever" — it's recording the TDS amount as its own line, separate from cash received, so both add up to the full invoice value:
- Cash received: ₹58,800 — what actually hit your bank.
- TDS deducted: ₹1,200 — tracked against the same invoice, settling it just as legitimately as cash would.
- Invoice status: fully paid, because ₹58,800 + ₹1,200 = ₹60,000.
This is exactly what Settle's payment recording does — a dedicated TDS field alongside the cash amount, so the invoice reflects reality instead of sitting permanently "partial." See what a party ledger tracks for why this distinction matters beyond just one invoice — an unresolved "partial" status on every TDS-affected invoice quietly inflates how much your books think clients still owe you.