Seller receiving e-mail from amazon and Flipkart for TDS deduction from 01.10.2020: Section 194O

written by Income tax Expert | September 12, 2020

Most of the sellers selling on e-commerce operator might be receiving e-mail from such operator like Flipkart, Amazon, Snapdeal etc that new TDS deduction would be done from 01.10.2020 on the payments being made to them and hence the total amount of cash that they would receive would be less.

Section 194-O was inserted by Finance Act, 2020, according to which:

TDS under this section shall be deducted at 1% (0.75% till 31.03.2021) of the gross amount of sale value of goods or services or both.

TDS shall be deducted at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier.

In case the E-commerce participant (i.e. person selling on E-commerce platform) is an individual/ HUF, TDS shall be deducted only if gross amount of such sale or services or both during the previous year exceed five lakh rupees and such e-commerce participant has furnished his Permanent Account Number or Aadhaar number to the e-commerce operator.

Also no TDS shall be deducted if the E-commerce participant is a non-resident.

The above provision was added in the Income tax act with the following motive as mentioned in memorandum: “In order to widen and deepen the tax net by bringing participants of e-commerce within tax net, it is proposed to insert a new section 194-O in the Act.”

However, it is important to mention here that E-commerce participant were already covered in the tax net under GST where TCS at 1% is required to be collected and now again this 1% would be deducted under Income tax and hence 2% amount would be withheld with government.

Further with regard to transaction between 14.05.2020 to 31.03.2021 the TDS rate would be reduced to 0.75% by virtue of the notification issued by CBDT.

Thus, this new provision will surely affect the working capital of the e-commerce seller during this tuff times as 1% would be withheld under TCS (GST), 0.75% under TDS (Income tax) and also in some e-commerce operator the seller needs to pay TDS on payment made to e-commerce operator for commission etc which is later reimbursed by E-commerce operator.

This article is just for information purpose and are personal views of the author. It is always advisable to hire a professional for practical execution. If you need assistance you can ask a question to our expert and get the answer within an hour or post a comment about your views on the post and also subscribe to our newsletter for latest weekly updates.