Section 194O TDS on E-Commerce (2026): 0.1% Rate, Rs 5 Lakh Threshold & Section 393 Explained

If you sell on Amazon, Flipkart, Meesho, Swiggy or Zomato, you may have seen a small deduction in your payout. That deduction is TDS under Section 194O. It is not a new fee from the platform. It is income tax, deducted in advance, and you get full credit for it when you file your return.

Section 194O makes every e-commerce platform deduct tax at source on the gross value of the sales it facilitates, before paying the seller. The current rate is 0.1% of the gross sale amount. Individual and HUF sellers pay nothing until their sales cross Rs 5 lakh in a year on that platform — but if they have not given PAN or Aadhaar, the rate jumps to 5%.

Section 194O in numbers

• 0.1% — the TDS rate today, cut from 1% on 1 October 2024 (Finance Act 2024).
• Rs 5,00,000 — the yearly sales limit per platform for individual and HUF sellers who have given PAN or Aadhaar (Section 194O).
• 5% — the TDS rate when the seller has not furnished PAN or Aadhaar (Section 206AA).
• 1 October 2020 — the date Section 194O came into force (Finance Act 2020).
• Section 393(1), Table Sl. No. 8(v) — the new home of this rule under the Income-tax Act 2025, from 1 April 2026.

What Is Section 194O?

Section 194O was added by the Finance Act 2020 and applies from 1 October 2020. Its job is simple: bring marketplace sales into the tax net at the point of payment.

Two parties matter here.

An e-commerce operator is the company that owns, runs and manages the digital platform — Amazon, Flipkart, Meesho, Swiggy, Zomato, and similar marketplaces.

An e-commerce participant is anyone who sells goods or services through that platform. The participant can be an individual, a Hindu Undivided Family (HUF), a partnership firm, a limited liability partnership (LLP) or a company.

The operator must deduct TDS before it releases the money to the participant. TDS stands for Tax Deducted at Source. The tax is collected at the time the money is paid or credited, whichever comes first, and it is deposited with the government against the seller’s PAN.

What Is the TDS Rate Under Section 194O?

The rate has changed once since the rule began.

Period	Rate on gross sales
1 October 2020 to 30 September 2024	1%
From 1 October 2024 onward	0.1%
No PAN or Aadhaar given (any period)	5% under Section 206AA

The 0.1% rate is the one that applies today. On a sale of Rs 10,000, the TDS is just Rs 10. The cut from 1% to 0.1% was a ten-fold reduction, made by the Finance Act 2024 to ease the cash-flow burden on small sellers. Many older articles on the internet still show 1% — they are out of date. Check the date on any page you read.

What Is the Rs 5 Lakh Threshold?

The threshold is a relief for small sellers, but it has strict conditions.

• It applies only to individual and HUF sellers who have furnished their PAN or Aadhaar to the platform.
• If such a seller’s total gross sales on one operator are Rs 5,00,000 or less in the financial year, the operator does not deduct any TDS.
• The limit is counted per operator. If you sell on Amazon and on Flipkart, each platform checks its own Rs 5 lakh limit. Sales of Rs 4 lakh on Amazon and Rs 4 lakh on Flipkart mean no TDS on either platform, even though your total is Rs 8 lakh.
• For companies, firms and LLPs there is no threshold. TDS is deducted from the first rupee of sales.

The threshold is a trigger, not a deduction. Once your sales on a platform cross Rs 5 lakh, the operator deducts TDS on the whole amount, not only on the part above Rs 5 lakh. This surprises many sellers. The first Rs 5 lakh is not tax-free forever — it only escapes TDS while you stay under the limit.

If you do not give PAN or Aadhaar, there is no threshold at all. The operator deducts 5% from the first rupee, whatever your sales are.

How Is 194O TDS Calculated? Worked Examples

Example 1 — Individual seller crosses the threshold

You are an individual seller on Amazon. You have given your PAN. Your gross sales for the year are Rs 8,00,000.

Your sales are above Rs 5,00,000, so TDS applies on the full Rs 8,00,000.

TDS = 0.1% × Rs 8,00,000 = Rs 800

Amazon deducts Rs 800 across your payouts and deposits it against your PAN.

Example 2 — Restaurant on Swiggy or Zomato

You run a restaurant listed on Swiggy. Your yearly sales on Swiggy have already crossed Rs 5 lakh. A customer orders food worth Rs 550.

TDS = 0.1% × Rs 550 = Rs 0.55

The amount is tiny — 55 paise — but it appears on every payout statement. Over hundreds of orders it adds up, and it all counts as your tax credit.

Example 3 — Company seller, no threshold

You sell through a private limited company on Meesho. Your monthly gross sales are Rs 3,00,000.

TDS = 0.1% × Rs 3,00,000 = Rs 300

As a company you get no Rs 5 lakh threshold. The platform deducts 0.1% on every sale, from the first rupee.

Example 4 — No PAN or Aadhaar given

You are an individual seller on Flipkart. You never submitted your PAN or Aadhaar. Your yearly sales are Rs 2,00,000 — well below the threshold.

TDS = 5% × Rs 2,00,000 = Rs 10,000

Without PAN or Aadhaar the 5% rate applies no matter how small your sales are. Giving your PAN to the platform is the single easiest way to cut this deduction.

What Is the TDS Calculated On?

TDS is calculated on the gross amount of the sale — the price the customer pays — before the platform deducts its commission, delivery fee or any other charge. If a customer pays Rs 1,000 for your product, the TDS is 0.1% of Rs 1,000, even if the platform keeps Rs 150 as commission and pays you only Rs 850.

CBDT Circular 20 of 2023 gives the detailed rules for working out this gross amount, including how discounts borne by the platform itself are treated. The practical point for sellers is simple: do not expect the TDS to be calculated on the money that reaches your bank. It is calculated on the full sale value.

What Is NOT Covered by Section 194O?

• Sales through your own website. If customers buy from your own site and pay you directly, there is no e-commerce operator in the middle, so 194O does not apply.
• Direct payments. If the buyer pays you directly without the operator handling the payment, the operator has nothing to deduct from.
• Payments to non-resident sellers. Section 194O covers resident participants only. A non-resident seller is outside this rule.

In these cases the platform does not deduct TDS under 194O. That does not mean the income is tax-free — it only means no TDS is deducted at source. You still report the income in your return.

Section 194O TDS vs GST TCS

Both deductions show up in a seller’s statement, and sellers often mix them up. They belong to two different laws.

Feature	Section 194O (Income Tax)	GST TCS
Law	Income-tax Act	GST Act (Section 52, CGST Act)
Rate	0.1% (current)	1% (0.5% CGST + 0.5% SGST)
Basis	Gross sale amount	Same gross amount
Who deducts	E-commerce operator	Same operator, as a GST collector
Where it shows	Form 26AS (Form 168 from tax year 2026-27)	GSTR-8 filed by the operator; appears in the seller’s GSTR-2B
What it is	Advance income tax	GST collected at source

The two are independent. You claim credit for both, but in different places — the TDS in your income-tax return, the TCS in your GST returns. One is not a substitute for the other.

Section 194O vs Section 194Q

Section 194Q is a different TDS rule for buyers. It makes a buyer whose turnover exceeds Rs 10 crore deduct 0.1% TDS on purchases of goods above Rs 50 lakh in a year from a resident seller. Our guide to TDS on contractor and professional payments under Sections 194C and 194J explains how buyer-side TDS works in other cases.

When the same purchase goes through an e-commerce operator, only 194O applies. The law says the buyer does not also deduct under 194Q on a transaction where the operator has already deducted under 194O. There is no double deduction — the operator’s deduction is the only one.

How Do Sellers Claim the 194O TDS Credit?

The TDS deducted from your payouts is your money, paid in advance as tax. Here is how you get credit for it.

1. Log in to the income-tax portal at incometax.gov.in.
2. Open Form 26AS — from tax year 2026-27 it is called Form 168. Find the entry for TDS under Section 194O and note the amount.
3. While filing your Income Tax Return (ITR), enter the amount in the TDS credit section. The portal usually pre-fills it from Form 26AS.
4. The credit reduces your total tax liability for the year.
5. If the TDS is more than the tax you owe — common for small sellers below the taxable limit — the excess is refunded to your bank account after processing.

Keep the monthly payout statement from each platform. It shows the gross sale, the TDS deducted and the net amount paid to you. If the TDS in Form 26AS does not match your statements, ask the platform for the corrected TDS certificate. The certificate is Form 16A, which becomes Form 131 from 1 April 2026.

If you are a freelancer selling services online, our GST guide for freelancers covers the GST side of the same income, and our Section 194H guide covers the 2% TDS that applies to commission and brokerage — a different rule that agents and brokers often meet alongside 194O.

Section 194O Under the Income-tax Act 2025

From 1 April 2026 the Income-tax Act 2025 replaced the 1961 Act. TDS rules were consolidated, and Section 194O moved to a new number.

Item	Old (1961 Act, up to 31 March 2026)	New (2025 Act, from 1 April 2026)
Provision	Section 194O	Section 393(1), Table Sl. No. 8(v)
Rate	0.1%	0.1% (unchanged)
Threshold	Rs 5 lakh, individuals/HUFs with PAN/Aadhaar	Same
TDS certificate	Form 16A	Form 131
Quarterly TDS return	Form 26Q	Form 140

The TDS payment (challan) code for this provision under the new Act is 1035.

Rates, thresholds and conditions are unchanged. Only the section numbers, form numbers and payment codes changed. If you sell crypto or other virtual digital assets, the parallel rule is Section 194S — covered in our crypto tax guide — which moved to Section 393(1) Sl. No. 8(vi) with a 1% rate.

What Changed in 2024 and 2026?

Two changes matter for sellers, and neither changed the threshold.

1 October 2024 — the rate fell from 1% to 0.1%. The Finance Act 2024 cut the rate to one-tenth. A seller with Rs 20 lakh of annual sales now loses Rs 2,000 to TDS instead of Rs 20,000. Cash flow improved overnight, but the TDS still has to be tracked and claimed.

1 April 2026 — the rule got a new number. The Income-tax Act 2025 renumbered 194O as Section 393(1) Sl. No. 8(v). Sellers searching old guides will still find “194O” everywhere, and that is fine — the old number remains the search term most people use. Use the new number on challans and in your own records for tax year 2026-27 onward.

Nothing changed about who deducts, who is exempt, or the Rs 5 lakh threshold in either change.

Common Mistakes Sellers Make

• Thinking TDS is an extra tax. It is a pre-payment of your own income tax. You get the full amount back as credit, or as a refund if you owe less.
• Ignoring the Rs 5 lakh trigger. Once you cross the limit on a platform, TDS applies on the whole sales figure, not just the part above Rs 5 lakh.
• Not giving PAN or Aadhaar. This raises the rate from 0.1% to 5% — fifty times higher — from the first rupee.
• Confusing TDS with GST TCS. They are separate deductions under separate laws. The 0.1% is income tax; the 1% is GST. Both appear in your statements.
• Not checking Form 26AS. If the platform deducted TDS but did not deposit it against your PAN, you lose the credit. Check every quarter.
• Reading old articles that still say 1%. The rate has been 0.1% since 1 October 2024. Anything that quotes 1% without a date is out of date.

Frequently Asked Questions

What is Section 194O of the Income Tax Act?

Section 194O makes e-commerce platforms deduct tax at source on the gross sales they facilitate, before paying the seller. It applies to operators such as Amazon, Flipkart, Meesho, Swiggy and Zomato, and to resident sellers of goods or services on those platforms.

What is the TDS rate under Section 194O?

The current rate is 0.1% of the gross sale amount. It was 1% before 1 October 2024, when the Finance Act 2024 cut it to 0.1%. If the seller has not given PAN or Aadhaar, the rate is 5% under Section 206AA.

What is the threshold limit for 194O TDS?

For individual and HUF sellers who have furnished PAN or Aadhaar, no TDS is deducted if total sales on that platform are Rs 5,00,000 or less in the financial year. Companies, firms and LLPs have no threshold — TDS applies from the first rupee.

Who deducts TDS under Section 194O?

The e-commerce operator deducts it — the platform that facilitates the sale, such as Amazon, Flipkart, Meesho, Swiggy or Zomato. The seller does not deduct anything; the deduction happens automatically in the payout.

What happens if I do not give my PAN to the platform?

The operator must deduct TDS at 5% of the gross sale amount, whatever your sales are. The Rs 5 lakh threshold does not apply without PAN or Aadhaar. Giving your PAN is the fastest way to bring the rate down to 0.1%.

Does 194O apply if I sell on my own website?

No. Sales on your own website, or where the buyer pays you directly, are outside Section 194O because no e-commerce operator is involved. You still pay tax on that income in your return — only the TDS step is missing.

What is the difference between TDS under 194O and TCS under GST?

TDS under 194O is 0.1% income tax deducted by the platform, credited in your Form 26AS (now Form 168). TCS under GST is 1% (0.5% CGST + 0.5% SGST) collected by the same platform under the GST law and shown in GSTR-8. They are different taxes under different laws.

What is the new section number for 194O under the Income Tax Act 2025?

From 1 April 2026 it is Section 393(1), Table Serial No. 8(v) of the Income-tax Act 2025. The rate stays 0.1%, the threshold stays Rs 5 lakh, and the TDS payment code is 1035.

Official Sources

• Income Tax e-Filing Portal: https://www.incometax.gov.in/
• Income Tax Department: https://incometaxindia.gov.in/
• Central Board of Indirect Taxes and Customs (GST TCS): https://www.cbic.gov.in/

Reviewed by Asuthod Rathod, CA. Last updated: 8 November 2026.

Disclaimer: This article explains Section 194O in simple words for general information. Tax rules change often. Check the official portals linked above or speak to a qualified tax professional before acting on your own case.