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The 2-Minute Summary
Any platform that facilitates sale of goods or provision of services online is an e-commerce operator. Under Section 393(1) Sl. No. 8(v), such operators must deduct TDS at 0.1% on the gross amount of every sale or service by every seller (called an e-commerce participant) on their platform.
The threshold is nil for most sellers. However, individual and HUF participants who have furnished their PAN or Aadhaar and whose gross sales on the platform do not exceed Rs. 5 lakh in the Tax Year are exempt from TDS under Section 393(4) Table Sl. No. 11.
Example: Meera sells Rs. 8 lakh of products through an online marketplace. TDS = 0.1% = Rs. 800. The marketplace deducts this before crediting her earnings.
Example: Rajan is an individual seller with PAN registered on the platform. His sales total Rs. 3.5 lakh. Since he is below Rs. 5 lakh and has furnished PAN, no TDS is deducted.
Under Income Tax Act 1961: Section 194O of the Income Tax Act 1961. Now Section 393(1) Sl. No. 8(v) of the Income Tax Act 2025.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 8(v) of Income Tax Act 2025 |
| Old Act Reference | Section 194O of Income Tax Act 1961 |
| Who Deducts | The e-commerce operator |
| Rate | 0.1% of gross amount of sales or services |
| General Threshold | Nil |
| Small seller exemption | Individual or HUF with PAN/Aadhaar, gross sales not exceeding Rs. 5 lakh (Section 393(4) Sl. No. 11) |
| Override rule | Note 3(a): Sl. 8(v) takes precedence over all other TDS provisions for the same transaction |
| Exception to override | Note 4: where Sl. 8(v) and Sl. 8(vi) (VDA) both apply, only Sl. 8(vi) applies |
| Direct payment rule | Note 3(b): buyer paying seller directly is deemed paid by the e-commerce operator |
| Advertising revenue | Note 3(e): provision does not apply to amounts received for hosting advertisements or other services not connected with the sale |
| Form for TDS Certificate | Form 16A |
The following notes are from Section 393(1) Table Sl. No. 8 Notes 3, 4, and 5 of the Act:
Note 3(a) states: for deduction of tax, the provisions of Sl. 8(v) shall take precedence over any other provisions of this Chapter.
Note 3(b) states: any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant, facilitated by an e-commerce operator, shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce participant and shall be included in the gross amount.
Note 3(c) states: the e-commerce operator shall be deemed to be the person responsible for paying to the e-commerce participant.
Note 3(d) states: if tax has been deducted on a transaction under Sl. 8(v), or the transaction is exempt under Section 393(4) Sl. No. 11, tax shall not be deducted on such transaction under any other provision of this Chapter.
Note 3(e) states: Note 3(d) does not apply to amounts received by an e-commerce operator for hosting advertisements or providing other services not connected with the sale covered by Sl. 8(v).
Note 4 states: where both Sl. 8(v) and Sl. 8(vi) apply to the same transaction, TDS shall only be deducted under Sl. 8(vi).
Small Seller Exemption: Exact Conditions
Section 393(4) Table Sl. No. 11 states no TDS is required where the amount credited or paid to an e-commerce participant is (a) an individual or HUF, and (b) the gross amount of sales or services does not exceed Rs. 5,00,000, and (c) the e-commerce participant has furnished their PAN or Aadhaar number to the operator.
All three conditions must be satisfied simultaneously. If any one is absent, TDS applies at 0.1%.
Practical Compliance Checklist
- If you are an e-commerce seller: ensure your PAN or Aadhaar is registered with every platform you use. Without it, TDS applies even if your sales are below Rs. 5 lakh.
- If you sell on multiple platforms: each platform deducts TDS independently. All TDS appears in your Form 26AS. Consolidate and claim all credits in your ITR.
- If you are an e-commerce operator: your TDS engine must cover both platform credits and deemed payments where buyers pay sellers directly off the platform.
- If a VDA is transferred through your platform: do not apply Sl. 8(v) at 0.1%. Apply Sl. 8(vi) at 1% per Note 4.
At 0.1%, the TDS amount is small. On Rs. 10 lakh of annual sales, it is just Rs. 1,000. The provision’s real purpose is to create a comprehensive trail of e-commerce income for cross-verification with ITR filings.
