Key Takeaways
- E-commerce platforms deduct TDS at 0.1% on your gross sales under Section 194O (for payments from 1 April 2026, Section 393(1) of the Income-tax Act, 2025, payment code 1035). Individual/HUF sellers who give PAN or Aadhaar are exempt if their gross sales through that platform do not exceed Rs. 5 lakh in the year.
- If your turnover is within Rs. 3 crore (and cash receipts are not more than 5%; otherwise Rs. 2 crore), you can use Section 44AD presumptive taxation and file ITR 4 (total income up to Rs. 50 lakh). Deemed profit: 6% on digital receipts, 8% on cash.
- Above the presumptive limit, or if you want to claim actual (lower) profits, file ITR 3 with books of account.
- Always reconcile your Form 26AS/AIS with platform payment reports before filing. Unclaimed TDS is money left on the table.
- GST TCS of 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) collected by the platform under Section 52 of the CGST Act is a separate credit used in your GST return, not your ITR.
How do Amazon and Flipkart sellers file income tax returns? E-commerce sellers file ITR 4 (Sugam) if using presumptive taxation under Section 44AD with turnover up to Rs. 3 crore, or ITR 3 if maintaining books of account. The platform deducts 0.1% TDS under Section 194O, which appears in your Form 26AS. You claim this TDS credit while filing your return.
You sell on Amazon, Flipkart, or Meesho. Every settlement you receive is already net of TDS. You see entries in your 26AS that you didn't put there. Tax filing season arrives, and you're not sure which form to use, what counts as "income," or how to get back the tax already deducted.
This guide walks through the full process: computing your business income, picking the right ITR form, claiming TDS credit, and avoiding the mistakes that trigger notices.
How Your Income Gets Taxed as an E-Commerce Seller
Your income from selling on e-commerce platforms is business income under the head "Profits and Gains of Business or Profession" (PGBP). It doesn't matter whether you sell physical products, handmade goods, or digital items.
Two paths exist for computing this income:
Path 1: Presumptive taxation (Section 44AD) You declare at least a fixed percentage of turnover as profit. No books of account required. No audit required (unless you declare profit below the prescribed rate and your income exceeds the basic exemption limit).
Path 2: Regular computation You maintain proper books, track every expense, and compute actual profit. Required if turnover exceeds the 44AD limit, or if your actual expenses make regular computation more beneficial.
When Presumptive Taxation Works Against You
Say you sell phone accessories on Amazon. Your turnover is Rs. 20 lakh. You buy inventory at Rs. 16 lakh, pay Rs. 1.5 lakh in platform commissions, and spend Rs. 1 lakh on shipping. Your actual profit is Rs. 1.5 lakh (7.5%).
Under 44AD, your deemed profit would be Rs. 1.2 lakh (6% of Rs. 20 lakh digital receipts). That's lower than actual, so presumptive works here. Our Section 44AD presumptive taxation guide covers the eligibility, deemed-profit rates, and 5-year lock-in in detail.
But change the numbers: turnover Rs. 50 lakh, inventory cost Rs. 44 lakh, commissions Rs. 3 lakh, shipping Rs. 2 lakh. Actual profit: Rs. 1 lakh (2%). Deemed profit under 44AD: Rs. 3 lakh (6%). You'd be declaring Rs. 2 lakh of phantom income. At this income level the tax is nil either way, but once your other income pushes you into a taxable slab, declaring actual profit in ITR 3 with proper books saves money. Declaring below 6% needs books, and a tax audit if total income exceeds the basic exemption limit, and it triggers the 5-year bar on returning to 44AD.
The TDS Trail: Section 194O and Your 26AS
Every time Amazon, Flipkart, or Meesho settles a payment to you, the platform deducts 0.1% TDS under Section 194O (for payments from 1 April 2026, Section 393(1) of the Income-tax Act, 2025).
Key thresholds:
- Rate: 0.1% of the gross amount of sales (from 1 October 2024; earlier 1%)
- Individual or HUF seller with PAN or Aadhaar: no TDS if gross sales through that platform do not exceed Rs. 5 lakh in the year. Once the limit is crossed, TDS applies to the whole amount
- Seller without PAN or Aadhaar: 5%
This TDS shows up in your Form 26AS (Part A) and your Annual Information Statement (AIS) on the income tax portal. The deductor name will be the platform's legal entity (for example, Amazon Seller Services Pvt Ltd).
How to Reconcile
Before filing your ITR, download both:
- Platform payment report (Amazon: Payments Dashboard > Date Range Report; Flipkart: Seller Dashboard > Payment Report; Meesho: Payments section)
- Form 26AS from incometax.gov.in (Login > e-File > Income Tax Returns > View Form 26AS)
Match TDS amounts. Mismatches happen when the platform files a correction return late, or when you have multiple seller accounts. If your 26AS shows less TDS than the platform actually deducted, contact the platform first. They need to fix their quarterly TDS return (Form 26Q for FY 2025-26; Form 140 from 1 April 2026) before the credit shows up.
GST Obligations: Don't Confuse TCS with TDS
E-commerce sellers face two separate deductions by platforms, and mixing them up is the most common mistake:
| Income tax TDS | GST TCS | |
|---|---|---|
| Law | Section 194O, Income-tax Act 1961 | Section 52, CGST Act 2017 |
| Rate | 0.1% of gross sales | 0.5% of net taxable supplies (from 10 July 2024) |
| Where it shows | Form 26AS / AIS | GSTR-2B / electronic cash ledger after acceptance |
| Where you use it | ITR, as tax credit | GST return, to pay GST |
TCS collected by the platform under GST is not claimable in your income tax return. It's a GST credit, offset against your GST liability when you file GSTR-3B.
Do you need GST registration? Since October 1, 2023, sellers of goods through e-commerce platforms whose aggregate turnover is below the registration threshold for their state can sell without GST registration, but only for intra-state supplies and subject to the notified conditions (PAN-based enrolment on the portal). Inter-state sales of goods through a marketplace still require registration. Before this change, all e-commerce goods sellers needed registration regardless of turnover. If your aggregate turnover crosses the threshold, you must register. See our full breakdown of GST TCS for e-commerce operators under Section 52 for how the platform-collected credit flows into your GSTR-3B.
Worked Example: Seller with Rs. 25 Lakh Turnover
Priya sells handmade candles on Amazon and Meesho. Her numbers for FY 2026-27:
- Gross sales: Rs. 25,00,000 (all digital payments)
- TDS deducted by platforms (194O): Rs. 2,500 (0.1% of Rs. 25,00,000; her sales on each platform exceed Rs. 5 lakh, so TDS applies to the full amount)
- Cost of materials: Rs. 8,00,000
- Platform commissions: Rs. 3,75,000
- Shipping and packaging: Rs. 2,50,000
- Other expenses: Rs. 1,00,000
- Actual profit: Rs. 9,75,000
Option A: Presumptive (ITR 4) Deemed profit = 6% of Rs. 25,00,000 = Rs. 1,50,000. Tax on Rs. 1,50,000 under new regime (below Rs. 4 lakh basic exemption) = Rs. 0. TDS refund: Rs. 2,500.
Option B: Regular (ITR 3) Actual profit = Rs. 9,75,000. Tax under new regime before rebate = 5% of Rs. 4,00,000 (Rs. 20,000) + 10% of Rs. 1,75,000 (Rs. 17,500) = Rs. 37,500. Since total income is below Rs. 12 lakh, the Section 87A rebate wipes this out, so tax = Rs. 0 and the Rs. 2,500 TDS is refunded. (There is no standard deduction for business income.)
In this example, both options give nil tax, but presumptive taxation is simpler because Priya needs no books of account, and it keeps her declared profit (Rs. 1.5 lakh) well below actual profit (Rs. 9.75 lakh). That gap matters once her income crosses Rs. 12 lakh. Remember: if Priya opts out of presumptive taxation after using it, she cannot re-enter for the next 5 years.
Common Mistakes That Trigger Notices
1. Not reporting turnover that matches 26AS The IT Department cross-references your declared turnover with TDS deducted. If Amazon deducted TDS on Rs. 25 lakh but you declared only Rs. 18 lakh, expect a Section 143(1)(a) intimation.
2. Declaring net sales instead of gross Section 194O applies on the gross amount. Your ITR turnover should match gross sales before platform commissions and fees, not the net settlement you received.
3. Missing TDS credit If you don't reconcile 26AS, you might miss TDS entries from one platform. That's a direct tax overpayment.
4. Filing ITR 1 or ITR 2 E-commerce selling is business income. You cannot file ITR 1 (salary/pension) or ITR 2 (no business income). It must be ITR 3 or ITR 4.
5. Ignoring advance tax If your tax liability after TDS is Rs. 10,000 or more in a financial year, you must pay advance tax (Section 208). Sellers under Section 44AD can pay it in one instalment by 15 March; others pay in four instalments (15 June, 15 September, 15 December, 15 March). Missing advance tax attracts interest under Section 234B and 234C.
Tax Garden Handles E-Commerce ITR Filing
Reconciling TDS from multiple platforms, picking the right ITR form, and computing business income correctly takes time and attention to detail. Tax Garden does this for you: we pull your 26AS, match it against your platform reports, compute your income under the most tax-efficient method, and file your return. See our pricing plans for flat-fee filing, no surprises.
