What is Section 194O TDS?
When you sell on Amazon, Flipkart, Meesho, or any registered e-commerce operator, the platform is required to deduct 1% TDS on the net amount credited to your account before releasing payment. This is mandated by Section 194O of the Income Tax Act, introduced in the Union Budget 2020.
Net amount = Gross sales credited − Returns and cancellations
So if your monthly sales were ₹1,50,000 and returns were ₹10,000, the platform deducts 1% TDS on ₹1,40,000 = ₹1,400.
When does 194O TDS apply?
| Seller type | Threshold | TDS rate |
|---|---|---|
| Individual / HUF | Only if annual sales exceed ₹5 lakh | 1% |
| Company / Firm / LLP | No threshold — from first rupee | 1% |
| Any seller without PAN | No threshold | 5% |
Once the threshold is crossed in a financial year, TDS applies on all subsequent credits — not just the amount above ₹5 lakh.
How is TDS different from GST TCS?
E-commerce platforms collect two separate deductions that are often confused:
| Section 194O TDS | GST TCS | |
|---|---|---|
| Law | Income Tax Act | GST Act |
| Rate | 1% of net sales | 1% of net taxable value |
| Purpose | Advance income tax | GST compliance |
| Claim in | ITR Schedule TDS2 | GST return (GSTR-3B) |
| Appears in | Form 26AS / AIS | GSTR-2A / GSTR-2B |
Both appear as line items in your marketplace seller account.
How to claim 194O TDS credit in your ITR
- Download Form 26AS from the Income Tax portal and verify the TDS entries
- Cross-check with your AIS (Annual Information Statement)
- In your ITR, go to Schedule TDS2 (TDS on other income)
- Enter the TAN of the e-commerce operator and the TDS amount
- The credit reduces your final tax payable — any excess is refunded