Income Tax

TDS on E-commerce Sellers: Section 194-O Explained

CA Nikhil Gupta·June 2026·7 min readTDS

Reviewed by CA Nikhil Gupta · Last reviewed 17 June 2026

If you sell products or services through an e-commerce platform - Amazon, Flipkart, Meesho, Myntra, or similar - Section 194-O requires the platform itself to deduct TDS on the gross amount of your sales, before you even receive the payment. This applies regardless of whether you made a profit on those sales, and understanding how it works is essential for managing your cash flow and filing an accurate return.

What Is Section 194-O?

Section 194-O requires an "e-commerce operator" (a platform that owns, operates, or manages a digital or electronic facility for the sale of goods or provision of services) to deduct TDS on the gross amount of sales of goods or services facilitated through its platform for an "e-commerce participant" (the seller).

Particulars	Detail
TDS rate	0.1% of the gross amount of sales/services (for sellers with PAN/Aadhaar)
Rate without PAN/Aadhaar	5% (higher rate under Section 206AA)
Threshold for individual/HUF sellers	No TDS if gross sales during the year do not exceed ₹5,00,000 AND the seller has furnished PAN/Aadhaar to the e-commerce operator
Threshold for other sellers (companies, firms, etc.)	TDS applies from the first rupee - no threshold exemption
Who deducts	The e-commerce operator (platform), not the buyer or the seller

TDS is on the gross sale value, not your profit or margin. Section 194-O TDS is deducted on the full transaction value of goods/services sold through the platform - regardless of your cost of goods, platform commission, shipping charges, or whether you actually made a profit on that sale. This is fundamentally a cash-flow and reconciliation issue, not a tax on profit - the actual tax liability is determined separately when you compute your business income and file your ITR.

Worked Example

Particulars	Amount
Gross sale value of a product sold via e-commerce platform	₹10,000
TDS deducted by platform under Section 194-O (0.1%)	₹10
Platform commission, shipping, and other deductions (separate from TDS)	₹2,500 (example)
Net amount credited to seller's account	₹7,490 (₹10,000 - ₹10 TDS - ₹2,500 platform deductions)

Even though the seller's actual margin on this sale might be small or even negative after accounting for cost of goods and platform fees, the TDS of ₹10 (0.1% of ₹10,000) is still deducted on the gross ₹10,000 - the platform doesn't know or consider the seller's cost structure.

The ₹5 Lakh Threshold for Individuals/HUFs

How Sellers Should Reconcile and Claim TDS Credit

Step	Action
1	Track gross sales reported by each e-commerce platform - this should match (or be reconcilable with) the figures in Form 26AS/AIS for TDS deducted under Section 194-O
2	Compute actual business income (gross sales less cost of goods sold, platform fees, shipping, packaging, and other business expenses) for the ITR
3	Report the gross sales as turnover/gross receipts in the business income computation (under presumptive taxation Section 44AD, if eligible, or actual income computation)
4	Claim the TDS deducted under Section 194-O (reflected in Form 26AS) as a credit against the total tax liability computed on the net business income

Interaction With Presumptive Taxation (Section 44AD)

Many small e-commerce sellers opt for presumptive taxation under Section 44AD, where income is deemed to be a specified percentage (commonly 6% for digital/banking transactions, 8% for cash) of turnover, without needing to maintain detailed books of accounts. Section 194-O TDS is still deducted on gross sales regardless of whether the seller opts for presumptive taxation - the TDS credit is then claimed against the tax computed on the presumptive income, which is typically much lower than the gross turnover, often resulting in a refund of a portion of the TDS deducted.

Because TDS under 194-O is calculated on gross turnover while tax liability (especially under presumptive taxation) is based on a much smaller deemed income figure, many e-commerce sellers end up with excess TDS credit that results in an income tax refund - but only if they file their ITR. Sellers who don't file because their net income is below the taxable threshold are effectively leaving this refund unclaimed.

📦

Selling online and wondering about presumptive taxation?See how Section 44AD can simplify your tax computation as an e-commerce seller.

Presumptive Taxation Guide

Frequently Asked Questions

I'm an individual selling handmade products on an e-commerce platform, and my total sales this year were ₹4.2 lakh. Will TDS be deducted under Section 194-O? ▼

If your gross sales through the platform during the financial year are ₹5,00,000 or less, and you have furnished your PAN or Aadhaar to the e-commerce operator, no TDS should be deducted under Section 194-O - your sales of ₹4.2 lakh fall within this exemption. However, this exemption applies only to individuals and HUFs; if you operate as a partnership firm, LLP, or company, TDS would apply from the first transaction regardless of the total amount. Also note that even without TDS, you are still required to report this income in your ITR if it's taxable.

The TDS deducted by the e-commerce platform seems much higher than my actual tax liability for the year (which is based on presumptive income under Section 44AD). Can I get this excess back? ▼

Yes. Since Section 194-O TDS is deducted on your gross sales (turnover), while your actual tax liability under presumptive taxation (Section 44AD) is computed on a much smaller deemed income (typically 6% or 8% of turnover), the TDS deducted often exceeds your actual tax liability for the year. By filing your ITR and reporting your turnover, presumptive income, and the TDS credit reflected in Form 26AS, any excess TDS over your computed tax liability would be processed as a refund. You must file an ITR to claim this refund - it is not automatic.

I sell through multiple e-commerce platforms (e.g., both Amazon and Flipkart). How is the ₹5 lakh threshold for individuals/HUFs applied - separately for each platform, or combined? ▼

The ₹5 lakh threshold exemption for individual/HUF sellers under Section 194-O is based on the gross amount of sales of goods or services facilitated by 'an e-commerce operator' through 'one or more e-commerce operators' during the financial year - which is generally understood to mean the seller's cumulative sales across all platforms count toward this limit collectively, not separately per platform. However, in practice, each e-commerce operator may assess the threshold based on the sales it facilitates and the seller's declarations to it, since operators don't automatically have visibility into a seller's transactions on other platforms. Sellers operating on multiple platforms should track their cumulative sales and may need to proactively manage their PAN/Aadhaar declarations and expectations regarding TDS across platforms.

Source and review trail

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Primary category: Income Tax
Official starting point: www.incometax.gov.in

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