14 Sept 2026 · ECOMCA Team
Section 194O TDS on E-commerce Sales at 0.1% Explained
If you sell on Amazon, Flipkart, Myntra or any similar platform, the amount that lands in your bank account is already net of a small tax deduction. That deduction is TDS under Section 194O, and as on 14 September 2026 the rate is 0.1% on the gross value of what the platform settles to you, not on what it actually pays after commission.
This provision was introduced by the Finance Act, 2020 with effect from 1 October 2020, under the Income-tax Act, 1961. It brought marketplace sellers into the TDS net for the first time, because before this the department had almost no visibility into what individual sellers on Amazon or Flipkart were actually earning. The rate itself changed later: the Finance (No. 2) Act, 2024 cut it from 1% to 0.1%, effective 1 October 2024, and that 0.1% rate is the one in force today.
Key takeaways
- E-commerce operators deduct TDS at 0.1% on gross sales or service value paid to resident sellers through their platform.
- Individual and HUF sellers get a ₹5 lakh annual threshold (if PAN or Aadhaar is on file); companies, firms and LLPs get no threshold at all.
- Missing PAN or Aadhaar pushes the rate to 5%, applied from the first rupee, under the specific carve-out in Section 194O itself.
- TDS is calculated on the gross sale amount excluding GST, where GST is shown separately on the invoice.
- This is a withholding, not a final tax. Sellers claim it as credit against their actual tax liability when they file their return.
- From 1 April 2026, the Income-tax Act, 2025 governs this deduction for Tax Year 2026-27 onward; the provision has been renumbered and consolidated, and sellers should confirm the exact section reference against the Act text rather than rely on older commentary.
Who actually deducts this TDS
The deductor is the "e-commerce operator" — the entity that owns, operates or manages the digital platform facilitating the sale. Amazon, Flipkart, Myntra, Nykaa and quick-commerce platforms such as Blinkit and Zepto fall squarely within this description when they facilitate a transaction between a seller and a buyer on their platform and route the payment. A site that merely carries classified-style listings without touching the payment flow is a different fact pattern and may not attract the same obligation — this distinction has been litigated in specific facts, so do not assume a platform is outside 194O purely because it calls itself a "marketplace" in name.
The deductee — called the "e-commerce participant" in the provision — is the seller or service provider transacting through that platform. Section 194O applies only where the participant is a resident of India. Payments to non-resident sellers fall under the separate withholding framework for non-residents, not under this section.
The rate, in one table
| Category of seller | Condition | TDS rate |
|---|---|---|
| Individual / HUF | Gross sales/services up to ₹5 lakh in the year, PAN or Aadhaar on file | Nil |
| Individual / HUF | Gross sales/services above ₹5 lakh in the year, PAN or Aadhaar on file | 0.1% on the full gross amount |
| Individual / HUF | PAN and Aadhaar both not furnished | 5%, from the first rupee |
| Company, firm, LLP, trust and other entities | No threshold exemption | 0.1% from the first rupee |
Source: Section 194O and Section 206AA of the Income-tax Act, 1961, as amended by the Finance (No. 2) Act, 2024 (rate reduced from 1% to 0.1% effective 1 October 2024). Position stated as on 14 September 2026.
Two things trip people up here. First, the ₹5 lakh threshold applies only to individuals and HUFs. A private limited company or an LLP selling ₹50,000 worth of goods in its first month on Flipkart will already see 0.1% deducted — there is no grace period for small companies. Second, once an individual or HUF crosses ₹5 lakh in cumulative sales for the year, TDS applies going forward on the excess and on everything after, not retroactively on the first ₹5 lakh.
Worked example: an individual seller crossing the threshold
Consider an individual selling handmade goods on Amazon in Tax Year 2026-27, with PAN on file. Cumulative gross sales through the platform:
- April to July: ₹4,60,000 — no TDS, still under ₹5 lakh
- August: ₹80,000, taking cumulative sales to ₹5,40,000 — TDS applies on the amount above ₹5 lakh, so 0.1% on ₹40,000 = ₹40
- September onward: TDS at 0.1% on every subsequent gross payment, since the threshold has already been crossed for the year
If this same seller had never updated PAN or Aadhaar on the Amazon seller dashboard, the rate would be 5% from the very first rupee of sale, regardless of the ₹5 lakh threshold. On ₹20 lakh of annual sales, that is the difference between roughly ₹2,000 of TDS and ₹1,00,000 of TDS locked up until refund. Keeping PAN verified on every platform is not a paperwork formality; it is a cash flow decision.
What counts as the "gross amount"
TDS is computed on the gross value of the sale or service facilitated, not on what actually reaches the seller's bank account after the platform deducts commission, logistics fees, payment gateway charges or advertising spend. The platform's commission is its own service income, separately subject to GST under the reverse or forward charge mechanism as applicable; it has no bearing on how 194O TDS is computed on the seller's side. A seller who sees a settlement figure that looks far lower than expected should reconcile it against the gross sale value shown in the settlement report before assuming TDS was miscalculated — in most cases the gap is commission and fees, not tax.
On GST treatment, where the invoice shows GST separately from the sale price, TDS is computed on the amount excluding GST. Where the two are not separately indicated, TDS applies on the consolidated figure including GST. Most organised marketplaces already separate GST in their settlement reports, so in practice this rarely causes disputes, but it is worth checking your settlement report format if the numbers do not tie out.
Where 194O overrides other TDS sections
A seller transaction routed through an e-commerce operator can, in principle, also look like it attracts TDS under other provisions — commission-type payments under Section 194H, or professional or technical fees under Section 194J, for instance. Section 194O contains an express override: where the payment is facilitated through the e-commerce operator and 194O applies, TDS is deducted only under 194O, not additionally under the other section. This override is limited to the portion of the transaction actually routed through the platform. Any part of the arrangement settled directly between buyer and seller, outside the platform's payment flow, reverts to the ordinary TDS provision that would otherwise apply to that payment.
The move to the Income-tax Act, 2025
The Income-tax Act, 1961 stood repealed with effect from 1 April 2026, replaced by the Income-tax Act, 2025 and the Income-tax Rules, 2026. Income earned up to 31 March 2026 continues to be governed by the 1961 Act; income and deductions from 1 April 2026 fall under Tax Year 2026-27 and are governed by the 2025 Act.
The substance of Section 194O — 0.1% TDS on marketplace payouts, the ₹5 lakh threshold for individuals and HUFs, and the higher rate for missing PAN — has not changed as a matter of policy; the 2025 Act is largely a consolidation and renumbering exercise rather than a rate change. What has changed is the section numbering itself, and at the time of writing this cannot be confirmed with certainty against a primary government text (the Act, the egazette notification, or incometaxindia.gov.in). Several secondary sources refer to a consolidated TDS table replacing the old 194-series sections, but until the exact cross-reference is verified against the official Act text, sellers and finance teams should treat any specific section number quoted for the post-2026 provision as provisional and confirm it directly with the platform's tax team or against the official Act before citing it in any filing or dispute.
What sellers should actually do
A seller does not file the TDS return; the operator does. The seller's job is reconciliation and reporting. Check the seller dashboard's settlement and TDS report every month against Form 26AS and the Annual Information Statement on the income tax portal. If a platform has not yet filed its quarterly TDS statement for a period, the deduction will not show up in Form 26AS, and credit cannot be claimed until it does — this is a common source of mismatch, not necessarily an error.
Report full gross sales income in the income tax return, not the net amount credited after commission, and claim TDS credit against the actual tax computed on total income. For a large share of small sellers, particularly those below the taxable threshold or in a lower slab, the 0.1% TDS deducted through the year exceeds the tax actually owed — that excess is refundable, but only if the return is filed. Sellers whose total tax liability is consistently and significantly lower than the TDS being deducted can also examine whether a certificate for lower or nil deduction is appropriate for their facts, though this requires an application to the assessing officer and is not something every seller will need.
Sellers running multiple channels — say Amazon plus their own Shopify store plus Myntra — should maintain one consolidated register of gross sales and TDS by platform. Each operator deducts and reports independently; missing one platform's TDS in the return either understates income (inviting a query from the AIS-driven notice process) or forfeits a legitimate credit.
Where this remains unsettled
Two things are worth flagging honestly. The exact section number under the Income-tax Act, 2025 corresponding to erstwhile Section 194O has not been independently verified from a primary government source as on the date of this post, and readers should treat any number quoted elsewhere with caution until confirmed against the Act text. Separately, whether a given digital platform counts as an "e-commerce operator" for a specific business model — particularly hybrid listing-plus-payment-facilitation models — depends on facts and has been the subject of differing positions in practice; a blanket answer is not safe to rely on for an unusual platform structure.
For related reading on how marketplace settlement reports reconcile against GST returns, see our post on GST TCS for marketplace sellers, and for the interaction between 194O and commission-type deductions, see our note on TDS on marketplace sales under 194O and 194H.
Frequently asked questions
Does 194O apply to my own D2C website, or only to marketplaces like Amazon? Section 194O applies where an e-commerce operator facilitates the sale, meaning a third-party platform. A brand's own Shopify or WooCommerce store, where the brand itself collects payment directly from the customer without a facilitating operator in between, does not attract this TDS the same way, though the specific payment gateway arrangement matters and should be checked case by case.
Is the TDS deducted at 0.1% my final tax liability on that income? No. It is a withholding credited against your total tax liability for the year. Your actual tax depends on total income, applicable deductions and slab rate. If your total income is taxable at a higher rate, you owe the difference; if your liability is lower than the TDS deducted, you get a refund on filing your return.
What happens if the platform deducts TDS but never deposits it with the government? If the operator does not deposit and file its quarterly TDS statement, the deduction will not appear in your Form 26AS, and you cannot claim credit for it until it does. The seller is not penalised for the operator's default, but the practical effect is a delayed or blocked credit until the mismatch is resolved with the platform.
Do I need a separate PAN update for every platform I sell on? Yes. PAN or Aadhaar verification is platform-specific. A seller active on Amazon, Flipkart and Meesho must ensure PAN is verified on each seller dashboard separately; a valid PAN on one platform does not carry over automatically to another.
Does the ₹5 lakh threshold apply separately to each platform, or is it combined across all platforms I sell on? The threshold is applied by each e-commerce operator independently, based on the sales it facilitates for that participant. If you sell ₹4 lakh on Amazon and ₹4 lakh on Flipkart in the same year, neither individually crosses ₹5 lakh, so neither may deduct TDS, even though your combined marketplace income is ₹8 lakh. You are still required to report the full ₹8 lakh as income in your return regardless of what was deducted at source.
Law stated as on: 14 September 2026.
This post is for general information and does not constitute professional advice. It reflects the position of law as on 14 September 2026 and may not account for subsequent amendments, notifications or judicial developments. Tax and regulatory outcomes depend on the specific facts of each case. Readers should obtain advice appropriate to their own circumstances before acting on anything stated here.