TDS under Section 194-O
An Indian income-tax provision requiring e-commerce operators to deduct tax at source on the gross amount of sales of goods or services facilitated through their platform on behalf of the seller.
Section 194-O of the Indian Income Tax Act, effective from 1 October 2020, requires every e-commerce operator (Amazon, Flipkart, Meesho, etc.) to deduct income tax at source at 1 percent (0.1 percent for specified low-margin categories with effect from later amendments) on the gross sale value credited to a seller's account.
The deduction reduces the amount remitted to the seller, who must then claim the TDS as a credit when filing income tax. The marketplace issues a TDS certificate (Form 16A) and the deduction appears in the seller's Form 26AS — making 26AS-vs-MTR reconciliation a recurring tax-season exercise.
Common reconciliation issues: TDS deducted on returned/cancelled orders that should have been reversed, deductions at the wrong rate (1 percent vs 0.1 percent for eligible categories), and timing differences between when the marketplace deducts and when the deduction reflects in 26AS. Each of these is a recoverable amount the seller is otherwise leaving on the table.