[Section 194-O]: TDS on Payments by E-Commerce Operators to Participants

Section 194-O of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on payments made by e-commerce operators to resident e-commerce participants for sales of goods/services facilitated through digital platforms. Introduced in 2020, this provision ensures tax compliance in the growing digital economy.

1. Applicability of Section 194-O

✅ Covered Transactions:

• Payments by e-commerce operators(e.g., Amazon, Flipkart) to resident participants (sellers/service providers) for:
  • Sale of goods.
  • Provision of services (including professional/technical services).
  • Digital products.
• Applies even if the buyer pays the participant directly (deemed payment by the operator).

❌ Exemptions:

• Non-resident participants(no TDS under this section).
• Individual/HUF participantswith annual gross sales ≤ ₹5 lakh (if PAN/Aadhaar provided).

2. TDS Rates & Thresholds

Example:

• Gross Sales: ₹6 lakh (PAN provided).
• TDS (0.1%): ₹600 → Net Payment: ₹5,99,400.

3. Key Compliance Requirements

For E-Commerce Operators:

1. Deduct TDSat the earlier of:
   • Credit to participant’s account.
   • Actual payment (cash/cheque/digital).
2. Deposit TDS: By the 7th of the next month(March: April 30) via Challan 281.
3. File Returns: Quarterly Form 26Q.
4. Issue Certificate: Form 16Ato participants within 15 days of filing.

For Participants:

• Submit PAN/Aadhaarto avoid higher TDS (5%).
• Claim TDS Creditvia ITR using Form 26AS.

4. Special Cases

• GST Component: TDS applies to the gross amount(including GST) unless separately stated.
• Direct Payments: TDS applies even if the buyer pays the participant directly (if facilitated by the operator).
• No Double TDS: If TDS is deducted under Section 194-O, no other TDS (e.g., Section 194J) applies.

5. Penalties for Non-Compliance

• Late Deduction/Payment: Interest @ 1%–1.5% per month.
• Non-Filing: Penalty up to ₹1 lakh.

Key Takeaways

🔹 0.1% TDS on e-commerce payments > ₹5 lakh/year (for individuals/HUFs).

🔹 PAN Mandatory to avoid 5% deduction.

🔹 No TDS for non-residents or small sellers (≤₹5 lakh).

🔹 Quarterly Filing: Use Form 26Q for returns.