Section 194O- TDS on Payments Made to e-commerce Participants
- Section 194O has been introduced in the Union Budget 2020. According to Section 194O, an e-Commerce operator is required to deduct TDS for facilitating any sale of goods or providing services through an e-Commerce participant. TDS on e-commerce operators under section 194-O is applicable from 1 October 2020.
- E-Commerce operators should deduct TDS @1% at the time of credit of the amount of sale of goods, services, or both to the account of an e-commerce participant or at the time of making payment to an e-Commerce participant by any other mode, whichever is earlier.
E-Commerce Operator
An e-Commerce operator is a person who owns, operates, or manages a digital/electronic facility for the sale of goods and services. He is responsible for making payments to the e-Commerce participant on such sales.
E-Commerce Participant
An e-Commerce participant is a person who sells goods, services, or both through an electronic facility provided by an e-Commerce operator. He must be a resident of India.
E-commerce participant being a resident individual or HUF
- E-commerce operator is not required to deduct TDS if the gross amount of sale of goods, services, or both during the previous year does not exceed Rs 5 lakh and if the e-Commerce participant has furnished his PAN or Aadhaar.
- If the e-Commerce participant does not furnish his PAN or Aadhaar, TDS must be deducted at the rate of 5%, as per provisions of Section 206AA.
E-Commerce participant being a non-resident
As stated earlier, an e-Commerce participant must be a resident of India. Thus, no TDS will be deducted if the participant is a non-resident.
For example, a proprietary firm XYZ (e-commerce participant) is selling its products through Flipkart (e-commerce operator). Mr A buys this product online from XYZ for Rs 50,000 on 1 October 2020.
Flipkart credits the account of XYZ on 1 October 2020, but the customer makes the payment directly to XYZ on 15 October 2020.
Here, Flipkart is required to deduct TDS @1% on Rs 50,000 at the time of credit to the party or making payment, whichever is earlier. In this case, TDS should be deducted on 1 October 2020.
Exceptions to Section 194O
- Non-resident e-Commerce participants are exempted from the scope of this section.
- A ceiling limit of Rs 5 lakh is set only for resident individuals and HUF. Thus, an e-Commerce operator is not required to deduct TDS if the amount, paid or credited to individuals/HUF during a financial year, does not exceed Rs 5 lakh.
