TDS on E-commerce Transactions – Section 393(1) (194O)

The provisions relating to TDS on e-commerce transactions have been restructured under the Income-tax Act, 2025. The earlier Section 194O of the Income-tax Act, 1961 is now covered under Section 393(1) [Table: Sl. No. 8(v)], effective from 1st April, 2026.

This restructuring retains the provisions relating to deduction of tax at source on transactions facilitated through digital platforms, while incorporating updated TDS rates as per recent amendments.

Quick Reference – Section Mapping & Reporting

• New Section (IT Act 2025): Section 393(1)
• Table Reference: Table: Sl. No. 8(v)
• Nature of Payment: Sale of goods or provision of services through e-commerce platform
• Earlier Section (IT Act 1961): Section 194O
• Return Form: 26Q
• Code (for return filing): 1035

Applicability of TDS

TDS is required to be deducted on the gross amount of sales or services facilitated by an e-commerce operator through its digital or electronic platform. The provision applies to transactions involving goods as well as services, including professional and technical services.

Who are E-commerce Operators and Participants

E-commerce Operators

E-commerce operators are entities that own, manage or maintain digital platforms for sale of goods or services. They are responsible for deducting TDS before making payments to participants.

• Examples: Amazon, Flipkart, Zomato, Uber

E-commerce Participants

E-commerce participants are persons or businesses who sell goods or provide services through such platforms.

• Examples:

1. A restaurant listed on Zomato
2. A seller on Flipkart
3. A driver providing services through Ola

Who is Required to Deduct TDS?

• The e-commerce operator is responsible for deduction of TDS
• Deduction is required at the time of:

1. Credit to the account of the participant, or
2. Payment to the participant
3. Whichever is earlier

Rate of TDS

• 0.1% on the gross amount of sales or services

Threshold Limit

TDS applicability depends on the category of the participant:

• Resident Individual / HUF:

1. No TDS if total sales/services do not exceed ₹5 lakh in a financial year
2. PAN/Aadhaar must be furnished

• Other persons:

1. No threshold limit
2. TDS applicable from first transaction

Applicability Conditions

• Applies only to resident e-commerce participants
• Non-resident participants are not covered under other provisions of the Act

Exceptions

TDS shall not be deducted in the following cases:

• Where a declaration under Section 395(1) (Form 121) is furnished
• Where:

1. Participant is an Individual/HUF
2. Sales/services do not exceed ₹5 lakh
3. PAN/Aadhaar is provided

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