TDS
TDS on E-Commerce Operator Payments — Section 194O
Section 194O requires an e-commerce operator (marketplace) to deduct 0.1% TDS on payments to sellers on its platform — with a ₹5 lakh threshold that applies only to individual/HUF sellers who've furnished PAN or Aadhaar.
This section makes e-commerce operators (marketplaces) responsible for deducting TDS on the gross amount a seller earns through the platform for goods or services sold, before paying the seller out — not something the seller or buyer handles directly.
The threshold only benefits individual or HUF sellers who've furnished PAN or Aadhaar: they get a ₹5 lakh exemption, with 0.1% TDS applying only above it. Every other seller type — companies, firms, LLPs — has TDS deducted from the first rupee of every payout, with no exemption.
If a seller hasn't furnished PAN or Aadhaar, the rate rises to 5% — again not the standard 20% under Section 206AA that applies to most other sections.
From FY 2026-27, this is Section 393(1), Table 1, Sl. 8(v) under the Income-tax Act, 2025, filed against payment code 1035.
Worked example
On a ₹3,00,000.00 payment at 0.1%, TDS is ₹300.00 and the net payment is ₹2,99,700.00. That's the figure for a seller registered as a company, LLP, or other non-individual entity — TDS applies from the first rupee, with no ₹5 lakh exemption. An individual/HUF seller who's furnished PAN or Aadhaar would owe nothing at all on the same ₹3 lakh, since it stays under their ₹5 lakh threshold.
Frequently asked questions
Does the ₹5 lakh threshold apply to every seller?
No — only to individual or HUF sellers who've furnished PAN or Aadhaar. Companies, firms, LLPs, and other non-individual sellers have TDS deducted from the first rupee, with no threshold.
Who's responsible for deducting this — the buyer, the seller, or the platform?
The e-commerce operator (the marketplace platform) — it deducts TDS from the gross amount before paying the seller, rather than the buyer or seller handling it directly.
What if the individual seller hasn't furnished PAN or Aadhaar?
Two things change: they lose the ₹5 lakh threshold (TDS applies from the first rupee), and the rate rises to 5% instead of 0.1% — still not the standard 20% under Section 206AA.