A new section 194-O was introduced in Income Tax act by Budget 2020.
We have discussed the section in detail in one of our article. To read the same CLICK HERE.
In a brief this section was introduced so that e-commerce operator can deduct TDS of e-commerce participant i.e. people who are selling goods or service on their e-commerce platforms.
Rate of TDS was kept at 1% but due to general relief in TDS rate same was reduced to 0.75% for period upto 31.03.2021.
In case of e-commerce seller who are individual or HUF, the gross sale limit was kept at Rs. 5 lakh above which TDS would be deducted.
Later a clarification was also issued in respect of this section which can be read HERE.
The platforms are sending below mentioned e-mails to the participants:
“Tax Deducted at Source (TDS)
New Indian government regulations introduced in Section 194-0 of the Income Tax Act, 1961 has mandated that tax at source would be deducted from the payment made to freelancers who are registered and do business through e-commerce operators.
How does this affect you?
If you are an Indian Individual or HUF (Hindu Undivided Family) intending to earn over INR 500,000 during the financial year then TDS is required to be deducted from your payments on the platform for the year. Your earnings threshold will be calculated from April 1st, 2020.
How is Freelancer.com supporting you through this process?
From December 1st, 2020, Freelancer.com will start collecting Tax Deducted at Source.
You can opt into the program and configure your Permanent Account Number (PAN) through the Payments & financial section in your User Settings. You can configure these details in your account now in preparation for this functionality to be activated.”
Thus, you must have received such e-mail from different e-commerce operators.
Although one cannot sell goods or provide service on such e-commerce operator without registering under GST and providing their PAN, however if you have still not provided your PAN then you must provide it at earliest or else TDS will be deducted @20% plus you won’t get credit of such TDS deducted.