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.
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 / situation | TDS Rate | Threshold (FY) | TDS due? |
|---|---|---|---|
| Resident seller with PAN | 0.1% | — | Yes |
| Individual / HUF · sales ≤ ₹5L · PAN furnished | Nil | ₹5,00,000 | No |
| Individual / HUF · sales > ₹5L · PAN furnished | 0.1% | ₹5,00,000 | Yes |
| Seller without PAN / Aadhaar (s.206AA) | 5% | — | Yes |
| Non-resident e-commerce participant | N/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.
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.
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
5% Seller without PAN — ₹10,00,000 annual sales
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.
Talk to a TDS Expert →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.
- 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
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 →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 platform | Section | Typical rate |
|---|---|---|
| Seller's gross sales of goods / services | 194-O | 0.1% |
| Commission / brokerage retained by operator | 194-H | 2% |
| Purchase of goods > ₹50L (buyer side) | 194-Q | 0.1% |
| Payment to a non-resident seller | 195 | Per 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.
Under the Income-tax Act, 2025 (applicable from AY 2026-27), the e-commerce TDS provision is renumbered (Section 402). The substance — the 0.1% rate, the ₹5 lakh individual/HUF threshold and the 5% no-PAN rate — is unchanged. The familiar "194-O" reference remains valid for FY 2025-26 and is what operators and sellers still use.
TDS on E-Commerce (194-O) — Frequently Asked Questions
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