Section 194-O TDS is the 0.1% income tax that Amazon, Flipkart, Meesho and every other e-commerce operator deducts from the gross sales it facilitates for you. From 1 April 2026, the same rule sits in Section 393(1), Table Sl. No. 8(v) of the Income-tax Act, 2025. The deduction is not a marketplace fee. It is your tax credit, and you claim it in your income-tax return.
Sellers usually lose this credit to a PAN mismatch, a quarter nobody checked, or a ledger that books the deduction as a platform charge. Below: the rate, the ₹5 lakh exemption, what "gross amount" includes, the 1 April 2026 switch and a quarterly check.
Item | Position for tax year 2026-27 |
|---|---|
Provision | Section 393(1), Table Sl. No. 8(v), Income-tax Act, 2025 (earlier Section 194-O, Income-tax Act, 1961) |
Rate | 0.1% of the gross amount of sales or services |
Threshold | Nil, except the individual and HUF exemption below |
Exemption | Individual or HUF with gross sales up to ₹5,00,000 in the tax year who has given PAN or Aadhaar: no TDS (Section 393(4), Table Sl. No. 11) |
PAN not furnished | TDS at 5% (Section 397(2)) |
Your TDS certificate | Form 131 (earlier Form 16A) |
Where your credit shows | Form 168 from tax year 2026-27; Form 26AS up to 2025-26 |
What Section 194-O TDS covers and why the section number changed
Section 194-O made an e-commerce operator deduct tax when it facilitates a sale of goods or services through its digital platform. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and moved this obligation into Section 393(1), Table Sl. No. 8(v). The rate, the payer and the exemption carried over unchanged.
The deduction started on 1 October 2020 at 1%. The Finance (No. 2) Act, 2024 cut it to 0.1% from 1 October 2024.
Marketplace help pages still say "194-O", and both names point to the same deduction. For any credit or payment on or after 1 April 2026, quote Section 393 in your working papers.
Who deducts TDS on e-commerce sales and on which payments
The e-commerce operator deducts the TDS from resident sellers, whom the Act calls e-commerce participants. Non-resident sellers fall outside this item. Note 3 to the Section 393 Table adds three rules:
A buyer's direct payment to you for a sale the platform facilitated counts as paid by the operator, so cash-on-delivery orders attract the same 0.1%.
Once tax is deducted under this item, no other TDS provision applies to that transaction, so a B2B buyer does not deduct a second 0.1% under the old Section 194Q item.
The exclusion does not cover what the operator earns from you for advertising or unconnected services; TDS on those follows the normal provisions.
When the ₹5 lakh exemption applies
The exemption applies only when all three conditions hold together: you are an individual or a Hindu undivided family (HUF), your gross sales through the operator do not exceed ₹5,00,000 in the tax year, and you have given the operator your PAN or Aadhaar. A company, LLP or partnership firm suffers TDS from the first rupee of sales.
The test uses amounts credited or likely to be credited in the year, so an operator starts deducting once it expects your sales on its platform to cross ₹5 lakh. Near the limit the tax at stake is at most ₹500 a year. The real risk is a proprietor who assumed the exemption and never claims the TDS deducted after the operator starts.
What "gross amount" includes in e-commerce TDS
The TDS base is your gross sale value, not your net settlement. CBDT Circular No. 20 of 2023, dated 28-12-2023, sets out the treatment:
Item on the order | Treatment in the TDS base |
|---|---|
Commission, convenience fee, logistics or delivery fee charged in relation to the sale | Included in the gross amount |
GST and state levies shown separately on the invoice | Excluded when TDS is deducted at the time of credit; included when payment comes before the credit |
Discount funded by you, the seller | Reduces the gross amount |
Discount funded by the operator | Does not reduce the gross amount |
Return after TDS was deducted | Adjusted against the operator's next transaction with you; no adjustment when the item is replaced |
The circular was issued under the 1961 Act; because Note 3 of the new Table repeats the same scheme, we treat it as the working position until CBDT issues guidance under the 2025 Act.
On a ₹1,000 taxable order where the platform keeps ₹280 in fees, TDS is ₹1.00 on the ₹1,000, not ₹0.72 on the ₹720 payout. Match against gross sales, never payouts.
Which Act applies to orders around 1 April 2026
The operator's credit or payment date decides the Act, not your order date. According to the CBDT's FAQs on interplay and transition, if the earlier of credit or payment falls on or before 31 March 2026 the 1961 Act applies; on or after 1 April 2026, Section 393 applies.
Order date | Operator's credit or payment (earlier of the two) | Provision | Statement to check |
|---|---|---|---|
24 March 2026 | 27 March 2026 | Section 194-O, 1961 Act | Form 26AS, 2025-26 |
30 March 2026 | 2 April 2026 | Section 393, 2025 Act | Form 168, tax year 2026-27 |
The second row is where credits go missing: the sale belongs to 2025-26, but its TDS appears in the 2026-27 statement. Under the 1961 rules (Rule 37BA), credit follows the year in which the income is offered to tax, so keep a list of late-March orders for whoever files your return.
How 0.1% income-tax TDS differs from 0.5% GST TCS
Marketplaces deduct two separate amounts under two laws, and each is claimed in a different place:
Point | Income-tax TDS | GST TCS |
|---|---|---|
Law | Section 393(1), Table Sl. No. 8(v), Income-tax Act, 2025 | Section 52, CGST Act, 2017 |
Rate | 0.1% of gross sales | 0.5% of net taxable supplies (0.25% CGST + 0.25% SGST, or 0.5% IGST), per Notification No. 15/2024-Central Tax, dated 10-07-2024 |
Operator reports it in | Form 140, quarterly | GSTR-8, monthly |
You see it in | Form 168 and Form 131 | "TDS and TCS credit received" on the GST portal, then the electronic cash ledger |
You use it against | Income tax in your return, with any excess refunded | GST payable, or a refund of the cash ledger balance |
Never cross-claim the two. Our guide to the e-commerce operator under GST covers the GST side.
How to check your e-commerce TDS credit every quarter
Run this check in the second month after each quarter closes, once the operator's quarterly statement (Form 140) has processed:
Download each platform's tax or sales report for the quarter, with gross sales, seller-funded discounts and returns by order.
Compute the expected TDS: (gross sales − seller discounts − returns − separately shown GST) × 0.1%.
On the income-tax e-Filing portal, open View Form 168 (Form 26AS for periods up to 2025-26) and note the TDS against each operator's TAN.
Download Form 131 from the seller panel, or ask the operator's seller support for it.
Compare the three figures per operator: your expected TDS, Form 168 and Form 131.
If Form 131 shows TDS that Form 168 does not, the operator's statement carries a PAN or amount error. Raise a ticket quoting the TAN, quarter and certificate number.
Book the confirmed amount as "TDS receivable" against that operator's account in your books.
This check is the core of TDS reconciliation and sits naturally beside monthly marketplace payment reconciliation.
At Complylocal, the first figure we compare for a new seller is the Form 168 TDS against 0.1% of the platform's gross sales for the same quarter. When the gap is more than a few hundred rupees, it usually traces to a PAN difference between the seller panel and the return, not to the operator's arithmetic.
Want this checked for you every quarter? Talk to Ankush's team about e-commerce tax and compliance support.
A worked quarter on two marketplaces
Illustrative figures: a proprietor with PAN on file sells on two platforms in April to June 2026. Values exclude separately shown GST.
Line | Marketplace A | Marketplace B |
|---|---|---|
Gross sales | ₹18,40,000 | ₹6,20,000 |
Less seller-funded discounts | ₹40,000 | ₹0 |
Less returns adjusted | ₹1,20,000 | ₹20,000 |
TDS base | ₹16,80,000 | ₹6,00,000 |
Expected TDS at 0.1% | ₹1,680 | ₹600 |
Form 168 shows | ₹1,680 | ₹0 |
Form 131 shows | ₹1,680 | ₹600 |
Marketplace B crossed ₹5 lakh within the quarter and its certificate confirms ₹600, so the missing Form 168 entry points to a PAN error in the operator's Form 140. The fix is a support ticket, not a write-off.
Mistakes that cost sellers their TDS credit
The PAN on the seller account decides whose credit it is. A proprietor who incorporates but keeps the old seller account sees TDS land on the personal PAN while the company reports the sales, so update the account PAN the day the business changes hands.
Book the deduction as "TDS receivable", an asset set off against tax in the return. A seller who books it as a marketplace fee understates profit and usually forgets the claim as well; our guide on accounting for an e-commerce business shows the monthly entry.
Two more errors recur:
Claiming the 0.5% GST TCS in the income-tax return, or the 0.1% TDS against GST.
Leaving PAN or Aadhaar off the seller profile, which raises the rate to 5% and removes the ₹5 lakh exemption.