Every payout you've received from Amazon, Flipkart, or Meesho since October 1, 2024 has had 0.1% income tax deducted before it hit your bank account. If you've been ignoring the TDS line in your settlement reports, you're leaving a refundable tax credit unclaimed — and potentially filing an incomplete ITR.
Most sellers know TDS exists. Very few understand how to claim it, what happens if they don't, and why the rate changed from 1% to 0.1%. Here's the complete picture.
What Section 194O Actually Says
Section 194O was introduced in October 2020 to bring e-commerce sellers into the tax net. Before it existed, millions of marketplace sellers collected income through platforms and simply didn't file returns — there was no mechanism to track them.
The law mandates that every e-commerce operator — Amazon, Flipkart, Meesho, Nykaa, Myntra, Swiggy for restaurant partners, Uber for drivers, any digital marketplace — must deduct income tax at source before paying sellers and service providers on their platform.
The key legal text: the operator deducts TDS at the time of credit to the seller's account OR at the time of actual payment, whichever comes first. In practice, this means TDS is deducted on every settlement cycle — weekly, biweekly, or monthly depending on the platform.
The Rate Change: 1% to 0.1% From October 1, 2024
Until September 30, 2024, the Section 194O TDS rate was 1% of gross sales. From October 1, 2024, it dropped to 0.1%.
| Period | TDS Rate Under 194O |
|---|---|
| October 2020 – September 2024 | 1% of gross sales |
| October 2024 onwards | 0.1% of gross sales |
Why the cut? The 1% rate created an imbalance — offline businesses selling B2B faced 0.1% TDS under Section 194Q, and offline sellers receiving payment from buyers faced 0.1% TCS under Section 206C(1H). Online marketplace sellers were paying 10× more in source deduction for no structural reason. Finance Bill 2024 corrected this parity.
The practical impact: a seller doing ₹5 lakh/month in GMV was having ₹5,000/month deducted. From October 2024 onwards, it's ₹500/month. Over a year, that's ₹54,000 more cash that flows to your bank account instead of sitting as advance tax credit.
Exactly How It Appears in Your Settlements
Every marketplace settlement report has a TDS line. Here's where to find it:
Amazon Seller Central: Payments → Transaction View → filter by "Service Fee" type → look for "TDS deducted u/s 194O". Also available as a consolidated TDS Certificate downloadable from Reports → Tax Reports → TCS/TDS Certificates.
Flipkart Seller Hub: Payments → Settlement Reports → each settlement shows "TDS deducted" as a line item. Monthly TDS certificates available under Tax Documents.
Meesho Supplier Panel: Payments → Payment History → each cycle shows TDS deduction. Annual TDS certificate downloadable from Tax section.
The figure in each settlement is the TDS deducted for that payment cycle. Your annual total across all platforms is what goes in your ITR.
Who Is Exempt From 194O
Not every seller has TDS deducted. Two exemptions apply:
1. Very small sellers — If your total gross sales through an operator in a financial year are below ₹5 lakh AND you furnish a PAN or Aadhaar declaration to the operator, TDS is not deducted.
2. Resident sellers with valid PAN — The 0.1% rate applies only when you have a valid PAN on record with the marketplace. If your PAN is not registered with the platform, the TDS rate jumps to 5% — ten times higher. This is the fastest and most avoidable tax problem for new sellers.
Check your PAN status in your seller account settings today if you're not sure. One missing PAN on one platform can cost thousands in excess TDS deductions over a year.
The Cash Flow Impact — Playing It Forward
Priyanka runs a home décor brand selling ₹8L/month across Amazon and Flipkart — ₹5L on Amazon, ₹3L on Flipkart. Under the old 1% rate, her monthly TDS deduction was ₹8,000. From October 2024, it's ₹800/month.
That ₹7,200/month difference is ₹86,400/year in working capital that stays with her instead of going to the government as advance tax.
The TDS that does get deducted — ₹800/month, ₹9,600/year — isn't lost. It's advance income tax paid on her behalf and fully credited when she files her ITR. If her total tax liability for the year is ₹6,000, she gets ₹3,600 back as a refund. If her liability is ₹15,000, she pays only ₹5,400 more.
The mistake sellers make: treating TDS as a cost rather than as a prepayment. It's always recoverable through your ITR.
How to Claim 194O TDS Credit in Your ITR
This is where most sellers leave money unclaimed. The process is straightforward but requires one specific step:
Step 1 — Collect TDS certificates from all platforms. Download Form 26AS from the income tax portal (incometaxindia.gov.in → e-File → View Form 26AS) — this shows all TDS deducted against your PAN from all sources, including all marketplaces. Verify it matches the TDS certificates from your seller accounts.
Step 2 — Reconcile with your sales income. Your total marketplace sales (net of returns) must be declared as business income under your appropriate ITR form. The TDS shown in 26AS must correspond to this income — mismatches trigger scrutiny.
Step 3 — Claim the credit in your ITR. In ITR-3 or ITR-4 (the forms most sellers use), TDS credit is claimed in Schedule TDS. Enter the TAN of each marketplace operator, the amount deducted, and the gross sales amount.
Step 4 — Verify Form 26AS before filing. TDS deducted by platforms appears in 26AS typically within 30–45 days of each quarter end. File your ITR after the AIS (Annual Information Statement) is updated — don't rely on seller portal figures alone.
| Marketplace | TAN (for Schedule TDS) |
|---|---|
| Amazon Seller Services Pvt Ltd | BLRA08899F |
| Flipkart Internet Pvt Ltd | BNAF00598F |
| Fashnear Technologies (Meesho) | BLRF04579F |
TANs can change. Always cross-verify against your actual TDS certificate or Form 26AS before filing.
The 194O vs GST TCS Confusion — Cleared Once and For All
This is the single most common confusion among e-commerce sellers, so let's kill it clearly.
Section 194O TDS — Income Tax Act. Deducted by the marketplace. It's income tax paid in advance on your earnings. Goes into your 26AS. Claimed as credit in your ITR.
GST TCS (Section 52, CGST Act) — GST law. Also deducted by the marketplace, at 1% of net taxable value. It's a GST advance. Appears in your GSTR-2B as TCS credit. Claimed in Table 8 of your GSTR-3B to offset your GST liability.
They are separate deductions under separate laws. You will see both in your settlement report. Both are recoverable — one through your ITR, one through your GST return. Many sellers claim the GST TCS correctly but miss the income tax TDS (194O), or vice versa.
Check both every month. At ₹10L/month GMV, you're accumulating ₹1,000 in 194O TDS credit and ₹10,000 in GST TCS credit monthly — ₹1.32 lakh/year in combined credit that should offset your tax bills, not sit as unclaimed advance.
How to reconcile your GST TCS in GSTR-3B → Calculate your annual income tax liability as a seller → New vs Old tax regime — which is better for your business income? →
The rate cut from 1% to 0.1% freed up meaningful working capital for every serious marketplace seller. What you do with the saved cash — reinvest in inventory, pay down a loan, or let it compound in a liquid fund — is a more interesting question than worrying about the TDS itself.