Section 194-O: TDS on Payment by e-commerce operator to e-commerce participant

Section 194-O: TDS on Payment of certain sums by e-commerce operator to e-commerce participant

A New section 194-O introduced through Union budget 2020 to levy TDS on Payment of certain sums by e-commerce operator to e-commerce participant.

TDS Under Section 194-O

Provisions of Section 194-O of the Income Tax Act:

  1. As per the provision of Section 194-O, an e-commerce operator is required to deduct TDS for sale of goods or provision of services of e-commerce participant is facilitated by it through its digital or electronic facility or platform;
  2. TDS at the rate of one percent (1%) is to be deducted at the time of credit of amount of sale or service* or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier.

* [email protected]% is required to be deducted on the gross amount of such sales or service or both.

Key Explanation:

For the purpose of Section 194-O, any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant shall be deemed to be amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount of such sales or services for the purpose of deduction of TDS.

When TDS not to be deducted under Section 194-O?

No deduction under section 194-O shall be made from any sum credited or paid to an e-commerce participant (being an individual or HUF) by the e-commerce operator, if the gross amount of sales or services or both during the previous year does not exceed five lakh rupees and such e-commerce participant has furnished his PAN or Aadhaar number to the
e-commerce operator.

Thus, Rs. 5, 00,000 shall be annual threshold limit for applicability of Section 194O in case of Individual or HUF subject to availability of PAN or Aadhaar.

[email protected]% will be deducted U/s 206AA, in case of non-furnishing of PAN or Aadhaar by e-commerce participant.

Meaning of Key Terms – For the purposes of section 194-O

(a) “electronic commerce” means the supply of goods or services or both, including digital products, over digital or electronic network;

(b) “e-commerce operator” means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce and is responsible for paying to e-commerce participant;

(c) “e-commerce participant” means a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce;

(d) “services” includes ‘fees for technical services’ and fees for ‘professional services’, as defined in the Explanation to section 194J.’

Key Points of the Section 194-O

  • E-Commerce operator (e.g. Flipkart, Amazon, Myntra, Swiggy, Zomato) is required to deduct TDS from the remittance to e-commerce participant listed on their platform, portal, or app.
  • Rate of TDS shall be 1% (one percent)
  • TDS to be deducted at the time of credit or payment of amount of sale or service* or both to the account of e-commerce participant by any mode, whichever is earlier.
  • No TDS deduction in case of Individual or HUF e-commerce participant, if the gross amount of sales or services or both during the previous year does not exceed five lakh rupees
  • [email protected]% is subject of PAN or Aadhaar submission by e-commerce participant.
  • [email protected]% if PAN or Aadhaar not furnished
  • Section 194-O will come into effect from 1st April, 2020.

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