SECTION 194O - TDS ON PAYMENT TO E-COMMERCE PARTICIPANT

TDS U/S 194O: TDS ON PAYMENT MADE TO E-COMMERCE PARTICIPANTS

1. What do you mean by TDS?

TDS stands for Tax Deducted at Source. TDS is a kind of tax that is deducted by the payer before making certain payments like Salary, Rent, Commission, Interest, Royalty, Professional Fees etc. to the payee.

TDS is required to be deducted at the source if the money to be paid and the money already paid exceeds a specified amount.

The Payee can claim this tax deducted by the payer while paying his income tax liability for the year, and if the TDS deducted is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TDS was to reduce the Tax evasion by the person receiving the income.

Note: -

Payer- A payer is a person or organization who is responsible for deducting TDS before paying the amount to Payee.

Payee- A Payee is a person or organization who receives the payment from the payee after the TDS deduction.

2.  What is TDS under Section 194O of Income Tax Act?

Section 194O of Income Tax Act, 1961 mandates that TDS to be deducted by e-commerce operators of the gross sales amount made by e-commerce participant on the platform facilitated by the e-commerce operators.

3. Who are e-commerce operators and e-commerce participants?

E-commerce operator

An E-commerce operator is a person who owns, operates, or manages a digital/ electronic facility for 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 in India.

4. When is TDS to be deducted under Section 194O?

TDS is required to be deducted: -

• At the time of payment.

            Or

• At the time of crediting the account of payee, whichever is earlier.

Few examples of date of deduction are: -

5. Who is required to deducts TDS under Section 194O?

The E-commerce operator shall deduct TDS on the gross sales amount made by resident e-commerce participant on the platform facilitated by the e-commerce operators.

NOTE: -

This section i.e. TDS u/s 194O is not applicable when the e-commerce participant is non- residents.

Example: -

Mrs. Harsha sales kesar through flipkat.com an E-commerce operator. Flipkart is using payment gateway of CC- Avenue? What are the TDS implications?

In this case Flipkart is required to deduct TDS u/s 194O of Mrs. Harsha and CC-Avenue is not required to deduct TDS of Flipkart as Payment gateway will not be required to be deduct TDS u/s 194O, if the tax has been deducted by the e-commerce operator u/s 194O provided CC-avenue takes undertaking from Flipkart regarding deduction of Tax by Flipkart.

6. Rate of TDS under Section 194O?

The TDS rate under this Section is: -

NOTE: -

From 1^st October 2024 TDS rate will be reduced from 1% to 0.1%.

7. Exemption under Section 194O?

No TDS if all the following conditions are satisfied: -

• The e-commerce participant is an Individual or HUF.
• The gross amount of such sale or service or both during the previous year upto Rs. 5 lakhs.
• The e-commerce participant has furnished his PAN or AADHAR to the e-commerce operator.

8. Time limit for deposit of TDS under Section 194O?

The due date for deposit of TDS is as below: -

9. What is the due date for filing of TDS return under Section 194O?

TDS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

10. Type of TDS return & form to be issued?

TDS under this section has to filed quarterly through FORM 26Q and the deductor has to issue FORM 16A to the employee after filing of return.

11. Fees/ Penalties for Late/ Non- Filing of TDS u/s 194O?

Following penalties/fees will be levied if there is delay in TDS deduction or delay in deposit of TDS or non-filing of quarterly return.

FREQUENTLY ASKED QUESTIONS?

Q. Is there any threshold under Section 194O?

A. No, there is no threshold for TDS u/s 194O, but in case of Individuals or HUF and the amount of sales or services is upto 5 lakhs during the financial year then no TDS will be required to be deducted.

Q. Is 194O applies to non-residents?

A. NO, Section 194O does not apply if the e-commerce applicant is non-resident.

Q. From when TDS under Section 194O is reduced to 0.1%?

A. TDS on e-commerce transaction u/s 194O is reduced to 0.1% from 1^st October 2024.

Q. Does this section 194O includes on TDS on sale of goods through e-commerce?

A. NO, TDS under 194O also includes sale of services and services includes fees for professional and technical services also.

FEW IMPORTANT POINTS

1. Any payment made by a purchaser of goods or services directly to an e-commerce participant, but sale facilitated by e-commerce operator, shall deemed to be amount paid/ credited by e-commerce operator to e-commerce participants and shall be included in the gross amount for the purpose of TDS.
2. If TDS deducted u/s 194O (or not deductible due to Rs. 5 lakhs limit), TDS is not deductible under any other section.
3. Payment gateway will not be required to be deduct TDS u/s 194O, if the tax has been deducted by the e-commerce operator u/s 194O.