TDS on E-commerce Payments: Section 194O / 393 Guide for FY 2026-27
Key Takeaways
- E-commerce operators must deduct TDS at 0.1% of the gross amount of sales or services facilitated through their platform (rate reduced from 1%, effective October 1, 2024).
- For individual or HUF sellers, no TDS is required if the gross amount of sales or services does not exceed Rs 5 lakh in the financial year, provided the seller has furnished PAN or Aadhaar.
- For companies, firms, LLPs, and other entities, TDS applies from the first rupee. There is no threshold.
- If the seller does not furnish PAN or Aadhaar, the TDS rate increases to 5%.
- Under the Income Tax Act 2025 (effective April 1, 2026), Section 194O is now part of the consolidated Section 393(1) framework.
- The e-commerce operator (Amazon, Flipkart, Meesho, Swiggy, Zomato, etc.) is the deductor. The seller or service provider on the platform is the deductee.
- TDS is deducted on the gross amount of sales or services. GST is excluded if separately indicated in the invoice.
If you sell goods or provide services through an e-commerce platform, the platform deducts TDS before crediting your payment. Section 194O of the Income Tax Act 1961 (now consolidated into Section 393(1) of the Income Tax Act 2025) governs this obligation.
This section was introduced by the Finance Act 2020 (effective October 1, 2020) to bring the large and growing e-commerce economy into the tax net. Before 194O, most small sellers on Amazon, Flipkart, and Meesho had no TDS deducted on their sales income. The government could not track their earnings. Section 194O fixed this by making the platform responsible for deducting and depositing TDS on behalf of sellers.
For sellers, the practical impact is a direct hit to cash flow. Every payment you receive from the platform is net of TDS. Understanding the rate, threshold, and how to claim credit for the TDS deducted is essential for managing your working capital and filing accurate income tax returns.
Looking for expert help with TDS on e-commerce payments Section 194O rates thresholds India FY 2026-27? The team at Tax Garden helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
Who Deducts TDS: The E-commerce Operator
The e-commerce operator is the person responsible for deducting TDS under Section 194O. The Act defines an e-commerce operator as a person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce.
Examples of E-commerce Operators
| Platform Type | Examples |
|---|---|
| Product marketplaces | Amazon India, Flipkart, Meesho, Myntra, Ajio, Snapdeal, JioMart |
| Food delivery platforms | Swiggy, Zomato |
| Ride-hailing platforms | Uber, Ola |
| Service marketplaces | UrbanCompany, Practo |
| Hotel and travel booking | MakeMyTrip, Goibibo, OYO |
| Freelance and gig platforms | Freelancer.in, any platform facilitating service transactions |
The key test is whether the platform facilitates the sale of goods or provision of services between the seller/service provider and the buyer. If the platform merely provides advertising space (like a classified listing) without facilitating the transaction or payment, it may not be an e-commerce operator under this section.
Who Is the Deductee: The E-commerce Participant
The e-commerce participant is the person who sells goods or provides services (or both, including digital products) through the e-commerce platform. The participant must be a resident of India.
Important: TDS under Section 194O applies only to resident participants. Payments to non-resident sellers are covered under Section 195 (now Section 393(2)).
TDS Rate
| Scenario | TDS Rate |
|---|---|
| Seller/participant has furnished PAN or Aadhaar | 0.1% |
| No PAN or Aadhaar furnished by the seller | 5% |
The rate was reduced from 1% to 0.1% by the Finance (No. 2) Act, 2024, effective October 1, 2024. This 0.1% rate continues under the Income Tax Act 2025 framework.
The rate reduction from 1% to 0.1% was a significant relief for e-commerce sellers. On annual sales of Rs 50 lakh, the TDS dropped from Rs 50,000 to Rs 5,000. This improved working capital for sellers who previously had to wait months to claim a refund during ITR filing.
Higher TDS for Non-PAN Sellers
If the seller has not furnished PAN or Aadhaar to the e-commerce operator, the TDS rate jumps to 5% under Section 206AA. On Rs 50 lakh in annual sales, this means Rs 2,50,000 locked up as TDS. Every seller must ensure their PAN or Aadhaar is updated on the platform.
Threshold: When TDS Is Not Required
| Seller Type | Threshold | Condition |
|---|---|---|
| Individual or HUF | Rs 5,00,000 gross sales/services in the financial year | PAN or Aadhaar must be furnished to the operator |
| Company, Firm, LLP, AOP, BOI, Trust | No threshold (TDS from first rupee) | None |
For individual and HUF sellers:
- If gross sales or services through the platform do not exceed Rs 5 lakh in the financial year and PAN or Aadhaar has been furnished, no TDS is deducted.
- If PAN or Aadhaar has not been furnished, TDS at 5% applies from the first rupee, regardless of the Rs 5 lakh threshold.
- Once the Rs 5 lakh threshold is crossed, TDS at 0.1% applies on subsequent payments.
For all other entity types (companies, firms, LLPs), TDS at 0.1% applies from the very first payment, with no threshold exemption.
Worked Example: Individual Seller on Amazon
An individual seller sells products on Amazon during FY 2026-27:
| Month | Monthly Sales | Cumulative Sales | TDS Deducted? |
|---|---|---|---|
| April | Rs 80,000 | Rs 80,000 | No (individual with PAN, cumulative below Rs 5 lakh) |
| May | Rs 90,000 | Rs 1,70,000 | No |
| June | Rs 1,00,000 | Rs 2,70,000 | No |
| July | Rs 1,10,000 | Rs 3,80,000 | No |
| August | Rs 1,30,000 | Rs 5,10,000 | Yes (cumulative exceeds Rs 5 lakh; TDS on Rs 1,30,000 at 0.1% = Rs 130) |
| September | Rs 1,00,000 | Rs 6,10,000 | Yes (TDS on Rs 1,00,000 at 0.1% = Rs 100) |
Worked Example: Private Limited Company on Flipkart
A Pvt Ltd company sells products on Flipkart during FY 2026-27:
| Month | Monthly Sales | TDS Deducted? |
|---|---|---|
| April | Rs 2,00,000 | Yes (no threshold for companies; TDS at 0.1% = Rs 200) |
| May | Rs 3,50,000 | Yes (TDS at 0.1% = Rs 350) |
What Is "Gross Amount" for TDS Calculation
TDS under Section 194O is calculated on the gross amount of sale or service or the gross amount of such consideration credited or paid to the e-commerce participant.
GST Treatment
- If GST is separately indicated in the invoice or transaction, TDS is calculated on the amount excluding GST.
- If GST is not separately shown (consolidated amount), TDS applies on the full amount including GST.
In practice, most e-commerce platforms separate GST from the sale price in their settlement reports. TDS is computed on the pre-GST sale amount.
Commission, Fees, and Deductions by the Platform
A common question: does the e-commerce operator deduct TDS on the gross sale amount or the net amount after deducting its commission?
The answer is: TDS is on the gross amount of the sale, not the net amount credited to the seller after deducting platform commission, logistics fees, or other charges.
| Component | Amount |
|---|---|
| Sale price of goods (excluding GST) | Rs 1,00,000 |
| Platform commission (15%) | Rs 15,000 |
| Logistics charges | Rs 3,000 |
| Amount credited to seller | Rs 82,000 |
| TDS calculated on | Rs 1,00,000 (gross sale amount, not Rs 82,000) |
| TDS at 0.1% | Rs 100 |
The platform commission and other deductions are the operator's income, on which the seller may need to claim ITC for GST. The TDS obligation is on the gross sale or service facilitated by the platform.
Interaction with Other TDS Sections
Section 194O has a specific override rule. If a transaction is liable for TDS under both Section 194O and another section (such as 194C, 194H, or 194J), TDS must be deducted under Section 194O. The e-commerce-specific provision takes precedence.
However, there are important exceptions:
| Scenario | Which Section Applies |
|---|---|
| E-commerce operator makes payment to an e-commerce participant for sale of goods or services | Section 194O (0.1%) |
| E-commerce operator pays commission or referral fees to affiliates (not facilitated sale) | Section 194H (2%) |
| E-commerce operator pays professional fees to a consultant | Section 194J (10%) |
| Individual buyer purchases goods from a seller exceeding Rs 50 lakh (Section 194Q) and the transaction is on an e-commerce platform | Section 194O overrides 194Q |
The override applies only to the extent the transaction is facilitated through the e-commerce platform. Direct payments outside the platform follow the regular TDS sections.
Section 393 Under the Income Tax Act 2025: What Changed
From April 1, 2026, the Income Tax Act 2025 is in force. Section 194O (along with all other 194-series sections) is now consolidated into the table-driven Section 393 framework.
| What Changed | Detail |
|---|---|
| Section number | Old: 194O. New: Section 393(1) |
| TDS rate | Unchanged. 0.1% (this rate was already effective from October 1, 2024) |
| Threshold | Unchanged. Rs 5 lakh for individual/HUF sellers with PAN/Aadhaar |
| Return form | Old Form 26Q replaced by Form 140 for Q1 FY 2026-27 onward |
| Definition | Substantially unchanged. E-commerce operator and participant retain the same meaning |
For the full section mapping, see our Income Tax Act 2025 section mapping guide.
Filing Requirements
For E-commerce Operators
| Form | Purpose | Filing Frequency |
|---|---|---|
| Form 140 (replaces Form 26Q) | Quarterly TDS return covering Section 393(1) e-commerce TDS | Quarterly |
| Form 16A | TDS certificate issued to each e-commerce participant | After each quarter's return is processed |
Quarterly Due Dates for Form 140
| Quarter | Period | Due Date |
|---|---|---|
| Q1 | April to June | July 31 |
| Q2 | July to September | October 31 |
| Q3 | October to December | January 31 |
| Q4 | January to March | May 31 |
For E-commerce Sellers (Participants)
As a seller, you do not file the TDS return. The platform files it. Your responsibilities are:
- Verify TDS in Form 26AS / Annual Information Statement (AIS). Log in to the income tax portal and confirm that the TDS deducted by the platform is reflected correctly. Mismatches can delay refunds.
- Claim TDS credit in your ITR. Report the gross sales income and claim credit for the TDS deducted by the platform. The TDS is adjusted against your total tax liability.
- File ITR by the due date. If TDS deducted exceeds your actual tax liability (common for small sellers), you receive a refund after filing.
How to Check TDS Deducted by E-commerce Platforms
Every e-commerce seller should regularly verify TDS deductions:
- Platform seller dashboard. Amazon Seller Central, Flipkart Seller Hub, and Meesho Supplier Panel each show TDS deducted in the payment or settlement reports. Download and reconcile monthly.
- Form 26AS on the income tax portal. Go to incometax.gov.in, log in with PAN, and check Form 26AS under "View Filed TDS." The TDS deducted by the platform appears under the operator's TAN.
- Annual Information Statement (AIS). The AIS provides a consolidated view of all income and TDS information. Cross-check TDS from e-commerce platforms against your own records.
If there is a mismatch between the platform's settlement report and Form 26AS:
- Contact the platform's seller support to confirm the TDS amount and quarter of deposit.
- If the platform has not filed its quarterly return (Form 140), your TDS will not appear in Form 26AS. You cannot claim credit for undeposited TDS.
- Raise a dispute on the AIS/TIS portal if the mismatch persists after the platform has filed its return.
Consequences of Non-Compliance
For E-commerce Operators
| Violation | Consequence |
|---|---|
| TDS not deducted | Interest at 1% per month from the date of deductibility to the actual date of deduction |
| TDS deducted but not deposited | Interest at 1.5% per month from the date of deduction to the date of actual deposit |
| Quarterly return not filed | Late fee of Rs 200 per day under Section 234E (capped at the TDS amount) |
| Failure to deduct TDS | Penalty equal to the TDS amount under Section 271C |
For E-commerce Sellers
Sellers do not face penalties for the operator's non-compliance. However:
- If the operator does not deposit TDS, the seller cannot claim TDS credit. The seller's tax liability increases.
- If the seller does not report e-commerce income in their ITR, the AIS data triggers a notice from the CPC.
Common Mistakes to Avoid
-
Not furnishing PAN or Aadhaar to the platform. Without PAN or Aadhaar, TDS jumps from 0.1% to 5%. On annual sales of Rs 20 lakh, this means Rs 1,00,000 locked up as TDS instead of Rs 2,000. Update your PAN on every platform where you sell.
-
Confusing platform commission with TDS. Platform commission (typically 5% to 20%) is the operator's service fee. TDS (0.1%) is a tax deduction credited to the government on your behalf. Both are deducted from your settlement, but they are completely different items. Only TDS appears in Form 26AS and can be claimed as tax credit.
-
Not reconciling TDS across multiple platforms. If you sell on Amazon, Flipkart, and Meesho simultaneously, each platform deducts TDS independently. You must aggregate all TDS deductions and report them in your ITR. Missing TDS from one platform means either overpaying tax (if TDS credit is not claimed) or getting a notice (if income from that platform is not reported).
-
Ignoring the Rs 5 lakh threshold reset. The Rs 5 lakh threshold resets each financial year. A seller who earned Rs 8 lakh in FY 2025-26 starts fresh on April 1, 2026. TDS will not be deducted on the first Rs 5 lakh of sales in FY 2026-27 (for individuals/HUFs with PAN).
-
Not claiming TDS refund when tax liability is nil. Many small sellers on Meesho or individual hobbyists have total income below the taxable threshold. The TDS deducted by the platform is fully refundable. But the refund only comes after filing an ITR. Not filing the return means forfeiting the TDS amount.
-
Sellers treating TDS as a final tax. TDS at 0.1% is not the final tax on your income. It is only a withholding. Your actual tax liability depends on your total income, applicable deductions, and slab rate. If your total income is Rs 15 lakh, you owe tax at your slab rate. The 0.1% TDS is merely an advance credit.
Practical Checklist for E-commerce Sellers
- Confirm that your PAN (or Aadhaar) is updated and verified on every e-commerce platform where you sell. Check the seller dashboard for PAN verification status.
- Download and reconcile monthly settlement reports from each platform. Track gross sales, platform commission, TDS deducted, and net amount credited.
- Monitor your cumulative sales per platform. If you are an individual or HUF, TDS will begin once your cumulative sales exceed Rs 5 lakh.
- Check Form 26AS and AIS quarterly. Verify that TDS deducted by each platform matches your records.
- Report full gross sales income in your ITR (not the net amount after commission). Claim TDS credit from each platform.
- If your total tax liability is nil or lower than TDS deducted, file your ITR by the due date to get the refund.
- If you sell on multiple platforms, maintain a consolidated register of all e-commerce income and TDS for accurate ITR filing.
- Consider applying for a lower or nil TDS certificate under Section 197 if your actual tax liability is significantly below the TDS amount being deducted.
Tax Garden Handles Your E-commerce TDS Compliance
Tax Garden's compliance plans reconcile TDS deducted by Amazon, Flipkart, Meesho, and other e-commerce platforms with your Form 26AS data. We file your income tax return with accurate TDS credit claims, track refunds, and resolve mismatches before they become notices.
For related topics, see our guides on TDS rate chart for FY 2026-27, TDS on commission and brokerage (Section 194H), GST compliance for quick commerce sellers, ITR filing guide for AY 2026-27, new TDS payment codes under the Income Tax Act 2025, and the Income Tax Act 2025 section mapping guide.
Frequently Asked Questions
Does TDS under Section 194O apply to sellers on social media platforms like Instagram or WhatsApp?
Only if the platform facilitates the transaction (payment collection, order processing). If you sell on Instagram through DMs and receive payment directly via UPI or bank transfer, Section 194O does not apply because there is no e-commerce operator facilitating the payment. However, if you use Instagram's shop feature with integrated checkout and payment processing, the payment facilitator may qualify as an e-commerce operator.
I sell on Amazon and Flipkart. Does the Rs 5 lakh threshold apply per platform or in aggregate?
The Rs 5 lakh threshold applies per e-commerce operator, not in aggregate across all platforms. If you earn Rs 4 lakh on Amazon and Rs 4 lakh on Flipkart, neither platform will deduct TDS (both are below Rs 5 lakh individually). However, your total income of Rs 8 lakh from e-commerce is still taxable at your applicable slab rate.
Does Section 194O apply to food delivery partners on Swiggy or Zomato?
Yes. Swiggy and Zomato are e-commerce operators under the definition. If you are a delivery partner or a restaurant listed on these platforms, TDS at 0.1% applies on the gross amount of your earnings facilitated through the platform, subject to the Rs 5 lakh threshold for individuals.
Can I get a lower TDS certificate to reduce the 0.1% deduction?
Yes. You can apply to your Assessing Officer for a lower or nil TDS certificate under Section 197 if your estimated tax liability for the year is significantly lower than the total TDS that would be deducted. This is useful for sellers whose income after expenses falls below the taxable threshold but whose gross sales exceed Rs 5 lakh.
Does TDS under 194O apply to international sales through Indian platforms?
Section 194O applies to resident e-commerce participants. If you are a resident Indian seller selling internationally through an Indian platform (for example, Amazon India's global selling program), TDS at 0.1% applies on the gross amount. If you are a non-resident selling through an Indian platform, Section 195 (now Section 393(2)) applies instead.
What if the e-commerce platform has not deducted TDS on my sales?
If the operator fails to deduct TDS, the compliance burden is on the operator, not the seller. The operator faces interest, penalty, and potential prosecution. However, as a seller, you must still report the full gross income in your ITR. If no TDS appears in Form 26AS, you cannot claim a credit for it. Report the income and pay tax on the full amount.
Is TDS under 194O applicable on return of goods or cancelled orders?
TDS should be computed on the net amount after accounting for returns, cancellations, and refunds. Most e-commerce platforms adjust TDS in the settlement report for the period in which the return or cancellation is processed. The platform's quarterly return (Form 140) reflects the net figure. If TDS was already deposited on a sale that was later returned, the credit gets adjusted in subsequent settlements.
Sources
This guide is verified against Section 194O of the Income Tax Act, 1961 (TDS on payments by e-commerce operators to participants, effective October 1, 2020), Section 393(1) of the Income Tax Act, 2025 (consolidated non-salary TDS table, effective April 1, 2026), Finance Act 2020 (introduction of Section 194O), Finance (No. 2) Act, 2024 (rate reduction from 1% to 0.1% effective October 1, 2024), Section 206AA (higher TDS at 5% for non-PAN cases), CBDT Circular No. 17/2020 (clarifications on gross amount and GST treatment), Section 201(1A) (interest on late deduction/deposit), Section 234E (late filing fee), and Section 271C (penalty for failure to deduct). Definitions of e-commerce operator, e-commerce participant, and electronic commerce are from Section 194O(1), Explanation (a), (b), and (c). Rates, thresholds, and definitions confirmed from ClearTax, TaxBuddy, BajajFinserv, DisyTax, TDSman, TaxGuru, Quicko, and RazorpayX reference materials as of May 2026. All rates and thresholds should be verified against incometax.gov.in before applying to specific deductions.
