What is E-commerce TDS (section 393 of the Income-tax Act, 2025; earlier section 194-O)?
Reviewed by CA Apurav GargLast reviewed
In short
E-commerce TDS is income tax a marketplace deducts from a seller's sales and deposits against the seller's PAN. It is an advance payment of the seller's own tax, claimed back in the income-tax return, not a cost.
What it is
When you sell through an e-commerce operator, such as a marketplace, the operator deducts income tax at source (TDS) on the gross amount of your sales made through it, and deposits it with the government against your PAN. This was section 194-O of the Income-tax Act, 1961, up to 31 March 2026. From 1 April 2026 the same deduction sits in section 393 of the Income-tax Act, 2025.
It is separate from GST TCS, which the same marketplace collects under the GST law and which you claim on the GST portal. A marketplace settlement usually shows both.
How the amount is worked out
- TDS is worked out on the gross amount of sales through the operator. CBDT has clarified that where GST is shown separately on the invoice, the GST is left out.
- When a customer returns an order, the TDS already deducted on it can be adjusted against later sales in the same financial year.
- Small sellers who are individuals or HUFs may be outside the deduction, if their sales through the operator stay within the limit in the law and they have given their PAN or Aadhaar.
- If you do not give your PAN, TDS is deducted at a higher rate.
The TCS & TDS Credit Calculator uses the rate in force.
Why it is not a cost
The TDS is your own income tax, paid in advance. You get it back by:
- booking it as TDS receivable in your books, not as a marketplace fee;
- checking it against your PAN in Form 168 (Form 26AS for years up to 2025-26);
- claiming it in your income-tax return for the year, against your tax for that year.
If your tax for the year is lower than the TDS, the difference comes back as a refund after you file.
What goes wrong
- Booked as a fee. Your costs look higher and you never claim the credit.
- Credit missing in Form 168. The marketplace has not filed its TDS statement, or filed it under the wrong PAN. Raise it with the marketplace before you file your return.
- Timing. TDS on sales in the last quarter may appear only after the marketplace files its statement for that quarter. Check again before filing.
Example in rupees
A seller's sales through one marketplace in May, with GST shown separately on the invoices:
| Line | Amount |
|---|---|
| Gross sales, excluding GST | ₹10,00,000 |
| Income-tax TDS deducted by the marketplace | ₹1,000 |
| GST TCS collected by the marketplace | Shown separately, under GST |
The ₹1,000 is not an expense. The seller books it as TDS receivable, checks that it appears against its PAN in Form 168, and claims it in its income-tax return for the year. If the seller had not given its PAN to the marketplace, TDS would be deducted at a higher rate. The figures are illustrative; the rate is set by law and has changed before.
Legal reference: Income-tax Act, 2025: section 393(1) and (4); Income-tax Act, 1961: section 194-O, up to 31 March 2026; CBDT Circular 20/2023
Related terms
Work it out for your business
Want help applying this to your own accounts?
We handle bookkeeping, reconciliation, GST and TDS for D2C and marketplace sellers, and can walk you through how this works in your business.
General information only, not professional advice. Rules and rates change — check the official source before you act.