Introduction to Section 194O:
Budget 2020 introduced a new section 194O to deduct TDS on e-commerce sales. As per section 194O of income tax Act the e-Commerce operator is required to deduct TDS for facilitating any sale of goods or providing services through an e-Commerce participant.
Who is required to Deduct TDS u/s 194O?
E-commerce operator facilitating sale of goods or provision of services of an E-commerce Participant through its digital or electronic Facility or platform (by whatever name called).
Rate of TDS
- TDS is to be deducted at 1% on the gross amount of sales or services or both.
- If the Pan/Aadhaar is not submitted by the E- commerce participant then TDS will deduct @5% as per section 206AA of income Tax.
Special provision for Resident E-commerce participant being a resident individual or HUF:
E-commerce operator is not required to deduct TDS if the following conditions are satisfied
- Resident E-commerce participant being a resident individual or HUF.
- The gross amount of sale of goods, services, or both during the previous year does not exceed Rs 5 lakh.
- The e-Commerce participant has furnished his PAN or Aadhaar.
Note- 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.
Point of time for deduction of TDS:
As per section 194O, TDS is required to earlier of the followings
- At the time of credit of amount of sale or services or both to the account of an e-commerce participant (Or)
- At the time of payment thereof to such e-commerce participant by any mode
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.
Due date of TDS deposit and Filing of TDS returns:
The Deductor is liable to deposit TDS with the Government with following dates:
| Particulars | Due date of Deposite |
|---|---|
| April-February | 7th of Next following next Month |
| March month | 30th April |
The Deductor is liable to File TDS Returns in the Form 26Q with the Government with following due dates:
| Quarter | Due Date for Return |
|---|---|
| April to June | 31st of July |
| July to September | 31st of October |
| October to December | 31st of October |
| January to March | 31st of May |
Due dates for Issue of TDS Statement:
Here the TDS statement means Form 16A which is issued by specified persons who is required to deduct the TDS.
Form 16A is issued to the deductee with the following due dates
| Particulars | Due Date |
|---|---|
| April-June | 15th August |
| July-September | 15th November |
| October-December | 15th February |
| January-March | 15th June |
Consequences Non compliance of TDS deposit and TDS Return within Due Date:
| Particulars | Rate of Interest/Penalty |
|---|---|
| When TDS not deducted | 1% per month or part of the month |
| TDS deducted but not Deposited to the Government | 1.5% per month or part of the month |
| Late filing of TDS Return | As per Section 234E, Late fee is 200 per day but not exceeds TDS amount |
Illustration for more understanding
Santosh is a registered e-commerce seller on Flipkart India. For May 2022, here are the details of his sales on Flipkart:
- Total Sales = Rs. 5,90,000
- GST @ 18% included in the above sales = Rs. 90,000
- Commission @ 6% charged by Flipkart included in above sales = Rs. 35,400
- Sales from Santosh to Rohan through Flipkart. However, Rohan directly made a payment to Santosh of Rs. 20,000 (including GST)
Solution:
- E-Commerce Operator – Flipkart India
- E-Commerce Seller – Santosh
- Gross Sales = Rs. 5,90,000 + Rs. 20,000 = Rs. 6,10,000
- Since Gross Sales exceed Rs. 5,00,000 and Santosh is a resident Individual, Flipkart India should deduct TDS @ 1% on Gross Sales before making payment to Santosh
- TDS = 1% of 6,10,000 = Rs. 6,100
- Payment to Rahul = 6,10,000 – 35,400 – 6,100 = Rs. 5,68,500
- Flipkart would deposit a TDS of Rs. 6,100 with the Income Tax Department and will also file a TDS Return in Form 26Q
- If Santosh has not provided PAN or Aadhar, then TDS should be deducted @ 5% irrespective of the gross sales amount
Important Defination u/s 194O:
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.
