{"id":4275,"date":"2021-07-10T13:46:12","date_gmt":"2021-07-10T08:16:12","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=4275"},"modified":"2022-09-30T18:04:13","modified_gmt":"2022-09-30T12:34:13","slug":"section-194o-tds-for-e-commerce-businesses","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/","title":{"rendered":"Section 194O: The Ultimate Guide on TDS Payments for E-commerce Businesses"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Section 194O announced in the Union Budget 2020 brings all e-commerce businesses within the TDS ambit. If you\u2019re struggling to figure out TDS payments for your e-commerce business, you\u2019re not alone. On the bright side, you\u2019ve landed at the right place.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As more and more businesses are setting up online shops, it is essential for the IT Department to ensure that these businesses pay taxes on their income. Earlier, many small e-commerce businesses wouldn\u2019t file their income tax returns. With the introduction of Section 194O, it is mandatory for all e-commerce businesses to pay TDS.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We\u2019ve broken down everything you need to know about Section 194O, applicable from 1st October 2020, and how it can impact your e-commerce sales.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d3b46aa1df0\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d3b46aa1df0\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Section-194O-TDS-on-e-commerce-payments\" >Section 194O: TDS on e-commerce payments<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Law\" >Law<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Time-of-TDS-deduction\" >Time of TDS deduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#TDS-rate\" >TDS rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#TDS-Certificate\" >TDS Certificate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#TDS-Return\" >TDS Return<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Example-of-TDS-deduction-for-an-E-commerce-Business\" >Example of TDS deduction for an E-commerce Business<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Penalties-Under-Section-194O\" >Penalties Under Section 194O<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Frequently-Asked-Questions-FAQs\" >Frequently Asked Questions (FAQs)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#What-does-TDS-on-e-commerce-transactions-mean\" >What does TDS on e-commerce transactions mean<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#What-is-an-e-commerce-service\" >What is an e-commerce service\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Who-is-an-e-commerce-operator\" >Who is an e-commerce operator\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/razorpay.com\/learn\/business-banking\/section-194o-tds-for-e-commerce-businesses\/#Who-is-an-e-commerce-participantseller\" >Who is an e-commerce participant\/seller<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Section-194O-TDS-on-e-commerce-payments\"><\/span>Section 194O: TDS on e-commerce payments<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Law\"><\/span><strong>Law<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Finance Act 2020 dictates every e-commerce operator to deduct 1 % TDS (0.75% for FY 2020-21 applicable till March 31, 2021) of the gross amount of sales of the e-commerce participant.\u00a0<\/span><\/p>\n<p><b><i>Note: TDS will not be applied to the GST component.<\/i><\/b><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Time-of-TDS-deduction\"><\/span><b>Time of TDS deduction<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The e-commerce operator is required to deduct the TDS at the time of payment to the e-commerce participant.\u00a0\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"TDS-rate\"><\/span><b>TDS rate<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">If the e-commerce participant is a resident Individual or HUF and the gross sales exceed Rs. 5,00,000 in the financial year, <a href=\"https:\/\/razorpay.com\/blog\/tds-rate-chart\/\">TDS rate<\/a> that will be deducted is\u00a0 1% on Gross Sales.\u00a0<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\">If the deductee does not provide the PAN or Aadhaar, then TDS shall be deducted at the rate of 5% irrespective of the gross sales amount.<\/span><\/p>\n<p style=\"text-align: left;\"><span style=\"font-weight: 400;\"><strong>Pro Tip:<\/strong> <strong>Make your monthly TDS payments in 30 seconds and in under 3 steps, completely FREE on our new <a href=\"https:\/\/razorpay.com\/x\/tds-online-payment\/\">TDS Payment tool.<\/a><\/strong><br \/>\n<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"TDS-Certificate\"><\/span><b>TDS Certificate<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The e-commerce operator is required to issue Form 16A to the e-commerce seller. This form can be used by the seller to claim credit of the tax deducted while filing the Income Tax Return.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"TDS-Return\"><\/span><b>TDS Return<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">After depositing TDS with the income tax department, the deductor should file Form 26Q on TRACES (<\/span><span style=\"font-weight: 400;\">TDS Reconciliation Analysis and Correction Enabling System)<\/span><span style=\"font-weight: 400;\"> to report the details of the dividend payment.\u00a0<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/tax-payments\/\">Automate Tax Payments for Your Business<\/a><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Example-of-TDS-deduction-for-an-E-commerce-Business\"><\/span><b>Example of TDS deduction for an E-commerce Business<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Let\u2019s say Sapna is a registered e-commerce seller on Shopify (e-commerce operator). Here are the details of her sales.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gross sales = Rs. 5,20,000<\/span><\/p>\n<p><span style=\"font-weight: 400;\">GST @ 18% included in the above sales = Rs. 93,600<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Shopify\u2019s commission @ 2.9% = Rs. 15,080<\/span><\/p>\n<p><b>TDS Calculation according to Section 194O<\/b><\/p>\n<p><span style=\"font-weight: 400;\">E-Commerce Operator \u2013 Shopify<\/span><\/p>\n<p><span style=\"font-weight: 400;\">E-Commerce Seller \u2013 Sapna<\/span><\/p>\n<p><span style=\"font-weight: 400;\">TDS = 1% of 5,20,000 = Rs. 5,200<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Shopify is required to,\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">deduct TDS of Rs. 5,200 at the time of credit fulfillment or making payment, whichever is earlier.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">file TDS return via Form 26Q &amp; issue form 16A to Sapna.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">If Sapna fails to furnish the PAN or Aadhar, then TDS should be deducted @ 5% irrespective of gross sales amount.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Penalties-Under-Section-194O\"><\/span><b>Penalties<\/b> <b>Under Section 194O<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">If the deductor (E-commerce operator) fails to file and pay the TDS, they will bear the following penalties.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest at the rate of 1% per month or part thereof for non-deduction of TDS<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest at the rate of1.5% per month or part thereof for non-payment of TDS by 7th of every month<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Rs 200\/per day for non-filing of TDS return on a quarterly basis<\/span><\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Frequently-Asked-Questions-FAQs\"><\/span><span style=\"font-weight: 400;\"><strong>Frequently Asked Questions (FAQs)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"What-does-TDS-on-e-commerce-transactions-mean\"><\/span><b>What does TDS on e-commerce transactions mean<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">According to section 194O, TDS (Tax deducted at source) on e-commerce transactions is defined as a percentage of the gross sales that the e-commerce operator is required to withhold and deposit to the Government.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"What-is-an-e-commerce-service\"><\/span><b>What is an e-commerce service\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Electronic commerce (e-commerce), or internet commerce, means buying and selling goods or services using the internet. Often, e-commerce is associated with the sale of physical goods online, but it describes any commercial transaction that is facilitated via digital or electronic networks.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Who-is-an-e-commerce-operator\"><\/span><b>Who is an e-commerce operator\u00a0<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">An e-commerce operator manages, owns, or operates a digital or electronic platform like Shopify or Amazon for electronic commerce.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Who-is-an-e-commerce-participantseller\"><\/span><b>Who is an e-commerce participant\/seller<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">An e-commerce participant sells goods or services on an electronic platform via an e-commerce operator.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We hope this helped you understand how the TDS Section 194O will impact your e-commerce businesses. Subscribe to our weekly newsletter to stay updated about all the recent tax changes &amp; their effect on your business.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>TDS Section 194O announced in Union Budget 2020 brings all e-commerce businesses within the TDS ambit.\u00a0Find out how does it impact your e-commerce sales.<\/p>\n","protected":false},"author":151156479,"featured_media":4277,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3437],"tags":[],"class_list":{"0":"post-4275","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banking"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/4275","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156479"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=4275"}],"version-history":[{"count":13,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/4275\/revisions"}],"predecessor-version":[{"id":6814,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/4275\/revisions\/6814"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/4277"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=4275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=4275"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=4275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}