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Section 194O – TDS on Payments Made to E-commerce Participants

Section 194-O is applicable for E-commerce operator for sale of goods or provision of service facilitated by it through its digital or electronic facility or platform.

Section 194-O has been inserted with effect from October 1, 2020.

Who are E-commerce Operator:

E-Commerce operators are the person who owns, operates, or manages a digital/electronic facility for the sale of goods and services. He is responsible for making payments to the e-Commerce participant on such sales.

Who are E-Commerce Participant:

E-Commerce participants are the person who sells goods, services, or both through an electronic facility provided by an e-Commerce operator. He must be a resident of India.

Who is responsible for tax deduction at source:

E-commerce operator is required to deduct tax at source under section 194-O.

Time of tax deduction at source:

Tax is deductible by e-commerce operator at the time of credit of the amount of sale of goods/services to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier.

Rate of TDS:

Tax is deductible at the rate of 1 percent (0.75 per cent up to March 31, 2021) of the gross amount of such sale of goods/services.

If the recipient does not have PAN, tax is deductible (by virtue of section 206AA) at the rate of 5 percent.

Taxable Amount:

Any payment made by a purchaser of goods/services directly to an e-commerce participant for the sale of goods/services, facilitated by an e-commerce operator, shall be deemed to be the amount credited/paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sale or services for the purpose of tax deduction.

Limits for the purpose of this section:

Tax is not deductible under section 194-O if the following conditions are satisfied –

  • E-commerce participant is an individual or HUF;
  • Gross amount of such sale of goods/services through e-commerce operator during the previous year does not exceed Rs. 5 lakh, and
  • Such e-commerce participant has furnished his PAN or Aadhar number to the e-commerce operator.

Lower TDS certificate:

Lower / nil TDS certificate can be obtained by e-commerce participants by submitting Form No. 13 within the parameters of section 197.

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