Section 194O of the Income-tax Act, 1961 deals with Tax Deducted at Source (TDS) on payments made to e-commerce participants. It was introduced in the Union Budget 2020 and came into effect on 1st October 2020.
Here’s a summary of the key points of Section 194O:
Who is responsible for deducting TDS?
E-commerce operators like Amazon, Flipkart, Meesho, etc., are responsible for deducting TDS at the rate of 1% on the gross amount of sales made through their platform by sellers (e-commerce participants).
What transactions are covered?
The TDS applies to sales of goods, provision of services, or both facilitated through the e-commerce platform. This includes professional and technical services as well.
When is the TDS deducted?
The TDS is deducted at the time of crediting the seller’s account, irrespective of the mode of payment, or at the time of making payment to the seller, whichever is earlier.
Threshold limit:
There is no threshold limit for e-commerce companies. They are required to deduct TDS on all transactions facilitated through their platform. However, for individual/HUF e-commerce participants, no TDS is deducted if the gross amount of sales during the previous year does not exceed Rs 5 lakh and they have furnished their PAN or Aadhaar.
Purpose of Section 194O:
This section aims to improve tax compliance by bringing e-commerce participants under the TDS net. Many small sellers operating on e-commerce platforms often miss filing their income tax returns. By collecting TDS at the source, the government ensures that some tax is collected upfront even if the seller doesn’t file their returns.
I hope this summary is helpful. If you have any further questions about Section 194O or its implications, feel free to ask!
Gaurav Sharma
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Infinityservices2018@gmail.com
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