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Guide · TDS

TDS on E-Commerce — Section 194-O

The current 0.1% TDS rate (cut from 1% in October 2024), the ₹5 lakh seller threshold, who deducts, the 5% no-PAN rate and how sellers on Amazon, Flipkart, Meesho, Swiggy and Zomato claim TDS credit for FY 2025-26.

Written by
TaxClue Editorial Desk
Updated
18 August 2026
Reading time
6 min
Questions
15 answered
  • Updated August 2026
  • Income-tax Act · s.194-O
  • CA-reviewed
Quick Answer

Under Section 194-O, an e-commerce operator (Amazon, Flipkart, Meesho, Swiggy, Zomato, etc.) must deduct TDS at 0.1% on the gross sales of goods or services routed through its platform to a resident seller. The rate was reduced from 1% to 0.1% with effect from 1 October 2024. No TDS applies to a resident individual or HUF seller whose gross sales are ₹5,00,000 or less in the year and who has furnished PAN. If PAN is not furnished, TDS is deducted at 5% under Section 206AA. Non-resident sellers are outside 194-O.

At a glance

Section 194-O — TDS Rate & Threshold

The TDS rate and threshold under Section 194-O for FY 2025-26. TDS is deducted by the operator on the gross amount of sales credited to or paid to the seller. See the full TDS rate chart 2025-26.

Seller / situationTDS RateThreshold (FY)TDS due?
Resident seller with PAN0.1%—Yes
Individual / HUF · sales ≤ ₹5L · PAN furnishedNil₹5,00,000No
Individual / HUF · sales > ₹5L · PAN furnished0.1%₹5,00,000Yes
Seller without PAN / Aadhaar (s.206AA)5%—Yes
Non-resident e-commerce participantN/A—Out of 194-O

The 0.1% rate is effective from 1 October 2024 (earlier 1%). The ₹5 lakh threshold applies only to resident individuals and HUFs, not to companies, firms or LLPs. Non-resident sellers fall under Section 195.

The rate is 0.1%, not 1% — a common error

Many old guides and even some accounting setups still show 194-O TDS at 1%. The correct rate for FY 2025-26 is 0.1%, reduced by the Finance (No. 2) Act, 2024 with effect from 1 October 2024. Deducting 1% now over-withholds ten times the tax and blocks a seller's working capital until they claim the refund in their ITR.

When it applies

Threshold & the ₹5 Lakh Exemption

The only exemption under Section 194-O is for small resident sellers. No TDS is deducted where both conditions hold — the seller is a resident individual or HUF and gross sales through the platform do not exceed ₹5,00,000 in the financial year, and the seller has furnished a valid PAN or Aadhaar. Companies, firms and LLPs get no threshold — 0.1% applies from the first rupee.

  • ₹5,00,000 — annual gross-sales threshold, resident individual / HUF only
  • PAN / Aadhaar must be furnished to use the threshold — otherwise 5% applies
  • TDS is deducted at the time of credit to the seller's account or payment, whichever is earlier
  • Covers goods and services routed through the platform, including barter / non-cash consideration

0.1% Seller with PAN — ₹10,00,000 annual sales

Gross sales via platform₹10,00,000
TDS @ 0.1%₹1,000
Withheld by operator₹1,000

5% Seller without PAN — ₹10,00,000 annual sales

Gross sales via platform₹10,00,000
TDS @ 5% (s.206AA)₹50,000
Withheld by operator₹50,000
No PAN = 5%, a 50x jump

A seller who does not link a valid PAN/Aadhaar to the marketplace account loses both the ₹5 lakh threshold and the 0.1% rate — the operator must deduct 5% under Section 206AA on every rupee of sales. Always verify your PAN is correctly registered on Amazon, Flipkart or Meesho before the season peaks.

Selling online and unsure how 194-O affects your cash flow? Get your TDS position reviewed.

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Deductor side

Who Is an E-Commerce Operator & What They Must Do

The e-commerce operator — the person who owns, operates or manages the digital platform and is responsible for paying the seller — deducts and deposits the TDS. Individual sellers never deduct 194-O TDS themselves. Where a payment is already covered by another TDS section (for example a professional fee under 194-H commission or 194-J), 194-O does not apply again to the same amount.

  1. 1Operator deducts0.1% at credit/payment, whichever is earlier
  2. 2Deposit challanBy the 7th of the next month via TAN
  3. 3File 26QQuarterly TDS return + Form 16A to seller
  4. 4SellerViews credit in 26AS / AIS, claims in ITR
  • Operator obtains TAN
  • Deduct 0.1% at credit or payment, whichever is earlier
  • Deduct 5% where seller PAN is missing
  • Deposit challan by the 7th of the next month
  • File quarterly Form 26Q
  • Issue Form 16A to each seller
  • Reconcile gross sales excluding GST where shown separately
TaxClue Insight — 206AB is gone

Section 206AB — the higher-rate deduction for sellers who had not filed their income-tax returns — was omitted with effect from 1 April 2025 by Budget 2025. Operators no longer run a return-filing compliance check on each seller; only the Section 206AA higher rate (5% for a missing PAN) survives under 194-O.

Running a marketplace or aggregator? File your Form 26Q and issue Form 16A on time.

Get TDS Return Filing →
Seller side

How Sellers Claim 194-O TDS Credit

TDS deducted by the operator is deposited against the seller's PAN and appears in Form 26AS and the Annual Information Statement (AIS). The seller claims it as a tax credit while filing the income tax return, reducing the final tax payable or generating a refund. The operator issues Form 16A as the TDS certificate.

  • Check 194-O TDS credit in Form 26AS / AIS before filing your ITR
  • The certificate for 194-O deductions is Form 16A (not Form 16D)
  • The 0.1% withheld is only a prepayment — reconcile it against your actual tax on business income
  • GST charged and collected separately is not part of the sale value for 194-O where shown distinctly
Payment through platformSectionTypical rate
Seller's gross sales of goods / services194-O0.1%
Commission / brokerage retained by operator194-H2%
Purchase of goods > ₹50L (buyer side)194-Q0.1%
Payment to a non-resident seller195Per DTAA

A single transaction attracts only one TDS section; 194-O overrides other TDS on the same sale amount but the operator's own commission can still fall under 194-H.

New law: 194-O is renumbered under the 2025 Act

Under the Income-tax Act, 2025, which applies from 1 April 2026 (tax year 2026-27), e-commerce TDS moves into the consolidated TDS table in section 393. The substance — the 0.1% rate, the ₹5 lakh individual/HUF threshold and the 5% no-PAN rate — carries over. The familiar "194-O" reference remains correct for FY 2025-26, including that year's returns filed in 2026.

Sources
  1. Bare provision: incometax.gov.in — Section 194-O, Income-tax Act 1961
  2. Rate cut 1% → 0.1%: Finance (No. 2) Act, 2024 (eff. 1 Oct 2024)
  3. No-PAN 5% rate: Section 206AA / 194-O(4)
  4. Section 206AB omitted — Finance Act 2025 (eff. 1 Apr 2025)

Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.

People also ask

TDS on E-Commerce (194-O) — Frequently Asked Questions

Short, direct answers to the 15 questions readers ask most on this topic.

The TDS rate under Section 194-O is 0.1% of the gross sales of goods or services routed through the e-commerce platform to a resident seller. The rate was reduced from 1% to 0.1% with effect from 1 October 2024 by the Finance (No. 2) Act, 2024. If the seller does not furnish a valid PAN or Aadhaar, TDS is deducted at 5% under Section 206AA instead.

It has changed. The 194-O rate was cut from 1% to 0.1% with effect from 1 October 2024 and remains 0.1% for FY 2025-26. Any tool, guide or accounting setup still deducting 1% is outdated and over-withholds ten times the correct tax, blocking the seller's working capital until they claim the refund in their ITR.

TDS is not deducted where the seller is a resident individual or HUF, gross sales through the platform do not exceed ₹5,00,000 in the financial year, and the seller has furnished PAN or Aadhaar. This ₹5 lakh threshold applies only to resident individuals and HUFs. Companies, firms and LLPs get no threshold — 0.1% applies from the first rupee.

If a resident seller does not furnish a valid PAN or Aadhaar to the operator, TDS is deducted at 5% under Section 206AA — higher than the normal 0.1% — and the ₹5 lakh threshold is also lost. Ensure your PAN is correctly registered on Amazon, Flipkart or Meesho to keep the lower rate.

The e-commerce operator — the person who owns, operates or manages the digital platform and pays the seller, such as Amazon, Flipkart, Meesho, Swiggy or Zomato — deducts and deposits the TDS. The deduction is made at the time of credit of the sale amount to the seller's account or at the time of payment, whichever is earlier. Individual sellers never deduct 194-O TDS themselves.

Any person owning or managing a digital or electronic platform for e-commerce of goods or services is an operator — marketplaces (Amazon, Flipkart, Meesho, Snapdeal, Myntra), food-delivery apps (Swiggy, Zomato), travel aggregators (MakeMyTrip, Goibibo), ride-hailing (Ola, Uber) and India-based freelance platforms. All must deduct 0.1% on payments to their resident sellers or service providers.

No. Section 206AB, which required checking whether a seller had filed income-tax returns and deducting at a higher rate for non-filers, was omitted with effect from 1 April 2025 by Budget 2025. For FY 2025-26 the operator only needs a valid PAN; a missing PAN triggers the 5% rate under Section 206AA.

TDS deducted by the operator is deposited against the seller's PAN and appears in Form 26AS and the Annual Information Statement (AIS). The seller claims it as a tax credit while filing their income tax return, which reduces the final tax payable or generates a refund. The 0.1% withheld is only a prepayment, not a final tax.

For Section 194-O, the operator issues Form 16A — the standard TDS certificate for non-salary deductions filed through Form 26Q. Form 16D is the certificate for 194-M (payments by individuals/HUF to contractors or professionals) and does not apply to 194-O e-commerce TDS. Sellers use Form 16A to reconcile their credit against Form 26AS.

TDS under Section 194-O is deducted at the time of credit of the sale amount to the seller's account or at the time of actual payment to the seller, whichever is earlier. It is not tied to when the customer places the order. It applies to both cash and non-cash consideration, including gift vouchers and barter arrangements.

Where GST is shown separately, TDS under Section 194-O is deducted on the gross sale value of the goods or services and not on the GST component that is separately identified. Operators should compute 0.1% on the taxable sale value, mirroring the treatment used for other TDS sections where GST is shown distinctly.

No. Section 194-O covers the TDS the operator deducts on the seller's sales. The commission or brokerage the operator retains for facilitating the sale is a separate flow that can attract TDS under Section 194-H (2% commission/brokerage). The two must not be confused — 194-O is on the seller's gross sales, 194-H can apply to the operator's commission.

No. Section 194-O covers only resident e-commerce participants. Payments to a non-resident seller are governed by Section 195, which applies rates by the nature of income and the relevant Double Taxation Avoidance Agreement (DTAA), often with surcharge and cess.

Section 194-O overrides other TDS provisions on the same transaction amount — once the operator deducts 0.1% on the seller's gross sales, the same sale amount is not taxed again under another TDS section. However, the operator's own commission can still fall under 194-H, as it is a different payment stream.

The e-commerce TDS provision is renumbered under the Income-tax Act, 2025, which applies from AY 2026-27. The substance — the 0.1% rate, the ₹5 lakh individual/HUF threshold and the 5% no-PAN rate — is unchanged. For FY 2025-26 filings the familiar "194-O" reference remains valid and is what operators and sellers continue to use.