TDS Under Section 194-O for Marketplace Sellers: the 0.1% Rate, the ₹5 Lakh Limit and How to Claim It

TDS under section 194-O is an income tax deduction that a marketplace such as Amazon or Flipkart makes from your sales payout. As of November 2026 the rate is 0.1% of the gross amount of sales, applied from 1 October 2024; it was 1% before that. A resident individual or HUF with gross sales of up to ₹5 lakh in the previous year, who has given PAN or Aadhaar, is outside the deduction. The TDS is your advance income tax, and you claim it as credit when you file your return.

What is section 194-O?

Under 194-O, an e-commerce operator that facilitates the sale of goods or services by a seller (the "e-commerce participant") through its digital platform deducts tax at the time of crediting the seller's account or making payment, whichever is earlier. The section has applied since 1 October 2020.

It is income tax, collected by the Income Tax Department. It is not GST. GST TCS under section 52 is a different collection with a separate return and a different credit route: see 194-O TDS vs GST TCS.

What is the 194-O TDS rate in 2026?

The rate is 0.1%, down from 1%, with effect from 1 October 2024. The reduction was made to align 194-O with the 0.1% rate under section 194Q and the 0.1% TCS under section 206C(1H).

The rows come from ClearTax's explainer on section 194-O. That page notes that the FAQ wording on the ₹5 lakh limit differs from its body text, and takes the body text as the clearer statement. The point where the limit bites is worth checking with your accountant. The page also says non-residents are excluded.

On what amount is TDS deducted?

On the gross amount of sales or services facilitated through the platform. ClearTax's example: Flipkart credits a seller on 1 April 2024 for a ₹50,000 sale; 0.1% is ₹50, deducted on 1 April even though the customer paid on 15 April.

Whether GST is part of the gross amount is not stated on either page we opened, so we are not confirming it. The CBDT may have issued instructions on this; ask your chartered accountant, and read the TDS lines on your own settlement report to see which base your marketplace has used.

For example, if a marketplace's base for a month's sales is ₹2,00,000, TDS at 0.1% is ₹200. If you had not given PAN or Aadhaar, it would be 5%, which is ₹10,000. That gap alone is a reason to keep your PAN updated in the seller portal.

Who is covered and who is not?

• Resident sellers on an e-commerce platform: covered, subject to the ₹5 lakh limit for individuals and HUFs.
• Non-residents: excluded.
• Company, firm or LLP sellers: the ₹5 lakh exemption is described for individuals and HUFs only, so the 0.1% applies to them from the first rupee on the page we read.

If you sell through several marketplaces, the limit is described by reference to gross sales in the previous year. How each marketplace tracks that figure, and whether they count your sales across other platforms, is not covered in the sources we read. Check the declaration form your marketplace asks you to fill in.

What happens when a customer returns the product?

ClearTax says that if a purchase is returned and the money is refunded, the tax already deducted may be adjusted against the next transaction with the same seller in the same financial year. If the item is replaced, no adjustment is needed. In practice you will see this as a lower deduction on a later payout, not a cash refund of TDS.

How do I claim 194-O TDS?

1. The operator deposits the tax and files Form 26Q, then issues Form 16A to you.
2. Check that the TDS shows against your PAN in your tax credit statement on the Income Tax portal. The names and layout of statements can change; we did not test the current screens.
3. Match the amount with Form 16A and the marketplace's tax report.
4. Claim the credit as TDS in your income tax return, against your tax liability for the year.
5. If the TDS is missing or wrong, ask the marketplace to correct its statement; the operator has to fix its own filing.

A fall in cash flow is the real cost: the TDS is held back for months until you file. The deduction itself is not a final tax.

Worked example: a month of sales

Say a seller who is above the threshold has gross marketplace sales of ₹6,00,000 in a month. TDS at 0.1% is ₹600. Over a year with similar sales (₹72,00,000), the TDS held back is ₹7,200. If the seller's total income tax for the year works out lower than that, the excess TDS is refunded after the return is processed. If the tax is higher, the TDS is set against it and the balance paid.

Compare the old 1% rate: the same ₹6,00,000 would have had ₹6,000 held back each month, which is why the cut to 0.1% eased working capital for sellers (the rate change is in source: https://taxguru.in/income-tax/section-194-o-amendment-lower-tds-rate-e-commerce-payments.html). The example uses a round figure of our own and is not a statement about any marketplace's practice.

What should I check in my seller account?

• PAN and Aadhaar. Make sure your tax details in the seller portal match your PAN, because a missing PAN leads to the 5% rate.
• Declarations. If you are an individual or HUF under the ₹5 lakh limit, check whether the marketplace has asked for a declaration; the process differs by platform and is described inside the seller portal.
• Monthly tax report. Note the TDS line for each month and keep it for the return.
• Name mismatches. TDS credit follows the PAN reported by the operator, so a typo in the PAN means the credit may not reach your statement.

Is TDS the only thing deducted?

No. Your payout also carries referral and closing fees, shipping fees, GST on those fees and GST TCS at 0.5%. CBIC's own explainer on TCS describes it as having similarities with TDS but being a different mechanism, collected by the operator on supplies made through its portal. Read GST TCS on marketplace sales, how to claim TCS credit and the fee guides for Amazon and Flipkart.

This page is general information, not tax advice. Confirm your position with a chartered accountant.

FAQ

What is the TDS rate under 194-O in 2026? The rate is 0.1% of the gross amount of sales, applied from 1 October 2024 under the Finance Bill 2024 change. Before that it was 1%.

Do small sellers have to bear 194-O TDS? Not if you are a resident individual or HUF whose previous-year gross sales were up to ₹5 lakh and you have given PAN or Aadhaar. Other sellers are charged from the first order.

What if I have no PAN or Aadhaar on file? TDS is deducted at 5% under section 206AA instead of 0.1%. That is fifty times higher, so update your tax details in the seller portal quickly.

Who deducts the TDS, Amazon or me? The e-commerce operator deducts it from your payout and deposits it. You do not file the deduction yourself, but you claim the credit in your return.

Where do I get the TDS certificate? The operator issues Form 16A after filing Form 26Q. Many sellers also check the credit in their tax credit statement on the Income Tax portal.

Is 194-O the same as GST TCS? No. 194-O is income tax TDS at 0.1%. GST TCS is 0.5% under section 52 of the CGST Act, collected by the operator and credited to your GST cash ledger.

Does the Income-tax Act 2025 change 194-O? The Income Tax Department's portal says the Income-tax Act, 2025 applies from tax year 2026-27. We have not confirmed whether the 0.1% rate and the ₹5 lakh limit continue unchanged; check with your accountant.

Next step

Reading TDS, TCS and fee lines on a marketplace payout is slow work. Blooprint's Amazon account management team helps sellers reconcile payouts and tax reports across Amazon and Flipkart.