Accounting for an agency or studio
An agency's books go wrong in predictable places. You pay freelancers and contractors, which means TDS at different rates depending on what they did. You bill clients for costs you paid on their behalf, which inflates your revenue and your tax if it is recorded as your own income. And you invoice retainers ahead of the work, which makes a good month look better than it was. We keep all three straight.
Where this gets specific
The things a general accounting page will not tell you.
Every freelancer payment carries TDS. At different rates depending on whether it is contract work or professional work. Getting the section wrong is the most common agency error.
Pass-through costs are not your revenue. Ad spend, print, media and licences billed on to a client should not sit in your income. Recorded wrongly, you pay tax on money that was never yours.
Retainers are billed before they are earned. A quarter invoiced upfront is not one month's revenue. Books that say otherwise are the reason agency profit looks like a rollercoaster.
Foreign clients change the GST position. Work for a client outside India is an export of services and zero-rated, subject to the same conditions and paperwork as any exporter.
Services bought from abroad can attract reverse charge. Some overseas services make you liable to pay the GST yourself rather than the supplier. It is easy to miss because there is no tax on the invoice.
Unbilled work is real work. Delivered and not yet invoiced is an asset. Agencies that ignore it cannot tell a cash problem from a profit problem.
What we do about it
What we take over.
Contractor TDS, at the right rate. Deducted, paid monthly, returned quarterly, with Form 16A issued so your freelancers can claim it.
Pass-through costs kept out of your income. So your revenue is what you earned and your tax is on what you kept.
Retainers spread across the period they cover. Your profit and loss statement shows the month it describes.
Export treatment for foreign clients. Including the letter of undertaking and the documentation behind it.
The rest of it. Books, GST, income tax, ROC where it applies, and notices. One fixed fee.
Billing a client for ad spend and calling it revenue is the fastest way to pay tax on somebody else's money.
Questions
What people in your position ask.
What TDS do I deduct on a freelancer?
It depends on what the work was. Professional work and contract work fall under different sections with different rates and different thresholds, and a designer, a developer and a videographer will not always sit in the same one. Deducting under the wrong section leaves a mismatch that shows up as a default later. We classify each vendor once and then it is automatic.
I bill clients for ad spend. Is that my revenue?
It should not be, if it is genuinely a cost incurred on the client's behalf and billed on. Recorded as your own income it inflates your turnover, can push you over thresholds you should be under, and has you paying tax on money that only passed through you. How it is invoiced matters as much as how it is recorded, so it is worth setting up correctly.
Do I charge GST to a client outside India?
Work delivered to a client outside India is an export of services and is zero-rated, provided the export conditions are met and you have a letter of undertaking in place. Without the paperwork it is treated as a normal taxable supply and the tax is yours.
My revenue is lumpy. Can you tell me whether I am actually profitable?
That is exactly what monthly books are for. Once retainers are spread across the periods they cover and pass-through costs are out of your income, the monthly profit and loss statement becomes a number you can act on rather than a number you argue with.
By kind of business
Not quite you?
- D2C and ecommerce
Marketplace TCS, returns, and settlements that never match your sales.
- SaaS and software
Export paperwork, the LUT, and revenue that is collected before it is earned.
- Consultants and professionals
Presumptive taxation, and the TDS your clients already deducted.
- Creators and influencers
Gifted products are income. Barter is taxable. Platform income is an export.