194O TDS in 2026: How E-commerce Operators Deduct 0.1% and How It Sits with GST TCS

Anyone who sells on an online marketplace in India sees two small deductions on every settlement report: an income-tax TDS and a GST TCS. The first is what most people still call 194O TDS, after the section of the 1961 Act that introduced it in October 2020. This guide is for online sellers, D2C brands using marketplaces, food and service providers on aggregator apps, and the finance teams of e-commerce operators. It explains who deducts, the 0.1% rate and the 5% no-PAN rate, the ₹5 lakh exemption for small individual sellers, how the gross amount is worked out, how the rule overrides other TDS sections, and how it sits alongside GST TCS — with rupee examples and the section numbers under the Income-tax Act, 2025.

Quick answer

194O TDS is income-tax deducted by an e-commerce operator at 0.1% of the gross amount of goods sold or services provided by a resident seller through its platform — 5% if the seller has no PAN. Individual and HUF sellers who give a PAN or Aadhaar and sell no more than ₹5 lakh a year through that operator are exempt. Since 1 April 2026 the rule is section 393(1) Table Sl. No. 8(v) of the Income-tax Act, 2025. It is separate from the 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) GST TCS under section 52 of the CGST Act.

• Rate: 0.1% of gross sales or services (cut from 1% on 1 October 2024)

• No PAN: 5%, not 20%

• Small individual/HUF sellers with PAN or Aadhaar: exempt up to ₹5 lakh a year

• Takes precedence: no other TDS (such as 194Q) on the same transaction

• GST TCS of 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) is collected as well, under a different law

Who deducts, and on whose sales

The rule turns on three definitions in section 402 of the Income-tax Act, 2025. Electronic commerce is the supply of goods or services or both, including digital products, over a digital or electronic network. An e-commerce operator is a person who owns, operates or manages a digital or electronic facility or platform for electronic commerce. An e-commerce participant is a person resident in India selling goods or providing services, including digital products, through such a platform.

When a sale or service by a participant is facilitated by an operator through its platform, the operator must deduct tax on the gross amount. That covers marketplace sellers of goods, restaurants on food-delivery apps, hotels and homestays on travel platforms, drivers and fleet owners on ride-hailing apps, service professionals on home-services apps, sellers on the government-backed open network through participating apps, and creators selling digital products through a platform. Non-resident sellers are outside this row because the definition of participant requires residence.

Note 3 to the row adds two deeming rules that close obvious gaps. First, the operator is treated as the person responsible for paying the participant, even where it is not the one who actually remits the money. Second, a payment that the buyer makes directly to the seller — cash on delivery collected by the seller's own staff, for example, or a direct bank transfer — is treated as paid by the operator and included in the gross amount. So a sale facilitated by the platform is inside the rule however the money moves.

Does e-commerce TDS apply to this sale?

Step 1

Sale or service facilitated through a platform?

Step 2

Seller resident in India?

Step 3

Individual/HUF with PAN or Aadhaar and sales within the yearly limit? → exempt

Step 4

Otherwise operator deducts

0.1% of gross amount

Step 5

No other TDS on the same transaction

Rate, no-PAN rate and the small-seller exemption

The rate in Table Sl. No. 8(v) is 0.1% of the gross amount of the sale or services or both. When section 194-O was introduced from 1 October 2020 the rate was 1%; the Finance (No. 2) Act 2024 cut it to 0.1% from 1 October 2024, and the Income-tax Act, 2025 kept that rate. The Income Tax Department's TDS compliance help confirms that rates and thresholds were retained when the 1961 Act's TDS sections moved into section 393.

If the seller does not give a valid PAN, section 397(2) sets a special higher rate for this row: the higher of the normal rate or 5% — not the 20% that applies to most other payments. Section 397(2) names the e-commerce row and the purchase-of-goods row specifically for the 5% rate.

The threshold in the table itself is nil, so for companies, LLPs, partnership firms and other non-individual sellers, TDS applies from the first rupee. The exemption for small sellers sits in section 393(4) Table Sl. No. 11. No tax is deducted where all three conditions hold: the seller is an individual or HUF; the gross amount of sales or services through that operator in the tax year does not exceed ₹5 lakh; and the seller has furnished a PAN or an Aadhaar number to the operator. The test is per operator — a home baker selling ₹3 lakh through one app and ₹3 lakh through another stays exempt on both.

Because the condition refers to amounts credited, paid or likely to be credited or paid in the tax year, operators judge the exemption on expected sales. If a seller is likely to cross the limit, or actually crosses it during the year, expect the operator to start deducting; practice on whether earlier sales are also caught varies, so check your operator's seller policy and your settlement reports.

E-commerce TDS at a glance (2026-27)

0.1%

TDS rate

on gross sales or services

5%

Without PAN

s.397(2)

₹5 lakh

Small-seller exemption

individual/HUF with PAN or Aadhaar

0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST)

GST TCS (separate)

CGST Act s.52

What goes into the gross amount

The tax is on the "gross amount" of the sale or services, not on the operator's payout after its fees. If a seller sells goods worth ₹1,000 and the marketplace keeps ₹150 as commission and fees and pays out ₹850, the TDS is on ₹1,000.

CBDT Circular 20/2023, issued on 28 December 2023 under the old section 194-O, answered the questions that came up after the open-network model grew. Its main clarifications are these:

• GST: where tax is deducted when the amount is credited and GST is shown separately on the invoice, TDS is on the amount excluding GST. Where tax is deducted at the time of payment because payment comes first and the GST component cannot be identified, it applies to the whole amount.
• Delivery and packaging: logistics, delivery, shipping and packaging charges that the seller charges the buyer are part of the gross amount. So are convenience fees or commission charged by an operator to the seller where the seller passes them on to the buyer.
• Network fees: payments to a network provider that form part of the transaction payment are included; lump-sum payments not linked to a transaction are not.
• Discounts: a discount given by the seller reduces the price, so TDS is on the discounted amount. A discount funded by an operator, where the seller still receives the full price, does not reduce the gross amount.
• Returns: if goods are returned and the money refunded after TDS was deducted, the TDS can be adjusted against the next sale by the same seller in the same tax year. If the goods are replaced instead, no adjustment is needed.
• Several operators: where a buyer-side app and a seller-side app are both involved, the seller-side operator that makes the final payment to the seller deducts. If the seller-side operator is itself the seller, the operator that pays it deducts.

The circular has not been reissued under the Income-tax Act, 2025, but the provision it explains was carried across with the same wording, and operators continue to follow it.

How it overrides other TDS sections

The e-commerce row is designed to be the only TDS on a platform transaction. Note 3(a) says it takes precedence over any other provision of the TDS chapter. Note 3(d) says that if tax has been deducted under this row, or the transaction is exempt under the small-seller rule in section 393(4) Table Sl. No. 11, no tax is deducted on that transaction under any other provision.

This matters most for business buyers. A company buying ₹80 lakh of office supplies a year from one seller through a B2B marketplace would normally have to consider the purchase-of-goods row in section 393(1) Table Sl. No. 8(ii) (old section 194Q). But Note 1(a) to that row says it does not apply to a transaction on which tax is deductible or collectible under another provision — and the e-commerce TDS covers it. Similarly, a business booking services through a platform does not deduct contractor or professional-fee TDS on that booking; see our TDS on purchase of goods guide for the buyer-side rule.

There are two limits to this override. Note 3(e) says the protection does not extend to amounts the operator itself receives for hosting advertisements or for other services not connected with the sale — so a seller paying a marketplace for sponsored listings deals with that payment on its own terms. And Note 4 says that where a platform sale is also a transfer of a virtual digital asset, only the virtual-asset row (1%) applies.

The old TCS on sale of goods above ₹50 lakh under section 206C(1H) was omitted from 1 April 2025 and has no equivalent in the TCS table of the new Act, so there is no longer a question of sellers collecting TCS on top of platform TDS.

Income-tax TDS vs GST TCS on a marketplace payout

Point	E-commerce TDS (Income-tax Act, 2025)	GST TCS (CGST Act s.52)
Old name	Section 194-O	Section 52 TCS
Rate	0.1% (5% without PAN)	0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST)
Base	Gross amount of sales or services (GST excluded if shown separately)	Net value of taxable supplies (after returns), excluding s.9(5) services
Small-seller relief	Individual/HUF with PAN or Aadhaar up to ₹5 lakh a year	None for registered sellers
Operator deposits	By the 7th of the next month; Form 140 quarterly	By the 10th of the next month; GSTR-8 monthly
Seller gets credit	In AIS; claimed in the income-tax return	In the electronic cash ledger after accepting it on the GST portal

Old name

E-commerce TDS (Income-tax Act, 2025)

Section 194-O

GST TCS (CGST Act s.52)

Section 52 TCS

Rate

E-commerce TDS (Income-tax Act, 2025)

0.1% (5% without PAN)

GST TCS (CGST Act s.52)

0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST)

Base

E-commerce TDS (Income-tax Act, 2025)

Gross amount of sales or services (GST excluded if shown separately)

GST TCS (CGST Act s.52)

Net value of taxable supplies (after returns), excluding s.9(5) services

Small-seller relief

E-commerce TDS (Income-tax Act, 2025)

Individual/HUF with PAN or Aadhaar up to ₹5 lakh a year

GST TCS (CGST Act s.52)

None for registered sellers

Operator deposits

E-commerce TDS (Income-tax Act, 2025)

By the 7th of the next month; Form 140 quarterly

GST TCS (CGST Act s.52)

By the 10th of the next month; GSTR-8 monthly

Seller gets credit

E-commerce TDS (Income-tax Act, 2025)

In AIS; claimed in the income-tax return

GST TCS (CGST Act s.52)

In the electronic cash ledger after accepting it on the GST portal

How it sits alongside GST TCS

Section 52 of the CGST Act requires every e-commerce operator (other than one acting as an agent) to collect tax at a notified rate on the net value of taxable supplies made through it by other suppliers, where the operator collects the consideration. The rate has been 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) since 10 July 2024. Net value means the month's taxable supplies by registered sellers minus supplies returned in that month, and it excludes services on which the operator itself pays GST under section 9(5) — restaurant services through food-delivery apps, for example. The operator pays the TCS and files GSTR-8 within ten days after the month ends.

The two systems run in parallel and do not reduce each other. A restaurant on a delivery app will usually see income-tax TDS deducted (food delivery is a service facilitated by the operator) but no GST TCS (because the app pays the GST under section 9(5)). A goods seller on a marketplace sees both. The GST TCS credit lands in the seller's electronic cash ledger once accepted on the GST portal and can be used to pay GST; the income-tax TDS is claimed in the income-tax return. Our TCS under GST guide covers GSTR-8 and how sellers accept the credit.

Worked examples in ₹

1. A private limited company selling on a marketplace. In October 2026 the company's sales through the platform total ₹11,80,000, invoiced as ₹10,00,000 plus GST of ₹1,80,000 shown separately. The operator deducts TDS at the time of credit, so the base excludes GST: 0.1% × ₹10,00,000 = ₹1,000. It also collects GST TCS of 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) on the net taxable value of ₹10,00,000 = ₹5,000. If ₹50,000 of goods were returned during the month, the GST TCS base falls to ₹9,50,000 (₹4,750), and the TDS on returned goods can be adjusted against later sales.

2. A home baker on a food app. An individual with a PAN expects ₹4,20,000 of orders through one app in 2026-27. She is an individual, her gross amount through that operator is within ₹5 lakh and she has given her PAN, so no income-tax TDS is deducted. Because she supplies restaurant-type services, the app pays the GST under section 9(5) and no GST TCS applies either.

3. A seller without PAN. A partnership firm that has not updated its PAN with the operator sells ₹2,00,000 in a month. TDS is 5% × ₹2,00,000 = ₹10,000 instead of ₹200. Fixing the PAN on the seller portal is the quickest way to bring the rate back to 0.1%.

4. A discount funded by the platform. A product listed at ₹1,000 is sold for ₹900 because the operator runs a ₹100 coupon at its own cost; the seller still receives ₹1,000. Under Circular 20/2023 TDS is on ₹1,000 = ₹1. If the seller had funded the discount, TDS would be on ₹900.

5. A B2B buyer. A company buys ₹70 lakh of packaging material through a B2B marketplace from one seller. The operator deducts e-commerce TDS on the seller's sales, so the buying company does not apply the purchase-of-goods TDS on these purchases.

Check other TDS on your business paymentsFree calculator for commission, rent, contractor, professional-fee and interest TDS — with the no-PAN rate built in.

Deposit, reporting and claiming the credit

The operator deposits the tax by the 7th of the next month under its TAN using the code for the e-commerce row (1035, according to a practitioner rate chart), reports it in its quarterly statement Form 140 — due 31 July, 31 October, 31 January and 31 May for tax year 2026-27 — and issues sellers Form 131 certificates from TRACES. Most marketplaces also show TDS line by line in seller settlement reports, which is the easiest place to reconcile.

Sellers should match their settlement reports with the TDS shown in their Annual Information Statement each quarter, not just at return time. Missing credits usually come from a mismatch between the PAN on the seller account and the PAN on the bank account or GST registration. Because 0.1% is small, most active sellers' TDS is well below their actual tax and is simply adjusted in the return; sellers with losses or very thin margins can claim the excess as a refund, or apply for a lower or nil deduction certificate in Form 128 under section 395(1) — see our lower TDS certificate guide.

Common mistakes and how to fix them

Booking the payout as sales. Record the gross sale, the operator's fees, the TDS and the GST TCS separately. If you book only the net payout as revenue, your books will not match the gross amounts the operator reports against your PAN, and your TDS credit will look out of proportion to your sales.

Using the old 1% rate in reconciliations. Payouts after 30 September 2024 should show 0.1%. A deduction at 5% almost always means a PAN problem.

Assuming the ₹5 lakh exemption covers firms. It applies only to individual and HUF sellers who have given a PAN or Aadhaar. Partnership firms, LLPs and companies suffer TDS from the first rupee.

Treating GST TCS as income-tax credit, or the reverse. GST TCS is used in the GST cash ledger; income-tax TDS is claimed in the income-tax return. They cannot be swapped.

Double deduction by business buyers. A company buying through a platform should not also apply purchase-of-goods or contractor TDS to the same transaction. Flag platform purchases in the vendor master.

What changed under the Income-tax Act, 2025

Section 194-O of the 1961 Act became Table Sl. No. 8(v) of section 393(1), with its precedence and deeming rules in Notes 3 and 4 and the small-seller exemption in section 393(4) Table Sl. No. 11. The new Act came into force on 1 April 2026. Where the earlier of credit or payment fell on or before 31 March 2026, the old section applies; after that, the new one. Forms changed too — Form 140 replaced Form 26Q for the operator's statement and Form 131 replaced Form 16A for sellers' certificates.

Official links

• Income-tax Act, 2025 — Gazette textSection 393(1) Table Sl. 8(v), Notes 3–4; s.393(4) Sl. 11; s.397(2)
• CGST Act section 52GST TCS by e-commerce operators
• TDS compliance helpTransition rule, retained rates
• e-Filing portalAIS and returns for sellers
• TRACESForm 131 certificates, Form 128 applications

What to do next

If you sell online, check that the PAN on every marketplace account is correct, export last quarter's settlement reports and match the TDS and GST TCS lines against your AIS and GST cash ledger. If you are an individual seller near ₹5 lakh with one operator, keep track of the running total. Starting out? Read our guide to starting an e-commerce business, and use what TDS is for the wider picture.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the TDS rate under section 194O?

E-commerce operators deduct 0.1% of the gross amount of sales or services made by sellers through their platform. The rate was cut from 1% to 0.1% from 1 October 2024. From 1 April 2026 the rule is section 393(1) Table Sl. No. 8(v) of the Income-tax Act, 2025. If the seller has not given a PAN, the rate is 5%.

Is there a threshold for 194O TDS?

Only for individual and HUF sellers. No TDS is deducted if the seller is an individual or HUF, has given the operator a PAN or Aadhaar number, and the gross amount of sales or services through that operator in the tax year does not exceed ₹5 lakh. For companies, firms and LLPs selling online there is no threshold — TDS applies from the first rupee.

Is 194O TDS the same as GST TCS?

No. They are separate taxes under separate laws. The operator deducts 0.1% income-tax TDS under the Income-tax Act, 2025, which the seller claims against income tax in the return. It also collects 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) GST TCS under section 52 of the CGST Act on the net value of taxable supplies, which reaches the seller's electronic cash ledger. Both are usually deducted from the same payout.

Does the buyer deduct TDS under 194Q on purchases made through a marketplace?

No. Where tax has been deducted under the e-commerce row — or the sale is exempt under the ₹5 lakh rule for small individual sellers — no tax is deducted on that transaction under any other TDS provision. The purchase-of-goods row (old section 194Q) also does not apply to a transaction on which tax is deductible under another provision.

Is GST included in the gross amount for 194O?

CBDT Circular 20/2023 says that where tax is deducted at the time of credit and GST is shown separately in the invoice, the deduction is on the amount excluding GST. Where the operator deducts at the time of payment and the GST component cannot be identified, tax is deducted on the whole amount.

How do online sellers claim the 194O TDS?

The operator deposits the tax, reports it in its quarterly TDS statement (Form 140) and issues a Form 131 certificate. The credit then appears against the seller's PAN in the Annual Information Statement. The seller claims it in the income-tax return for the tax year in which the sales are taxed; any excess over the actual tax is refunded.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.The Income-tax Act, 2025 (Act No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025 — Ministry of Law and Justice (Legislative Department) · accessed 12 October 2026
2. 2.Memorandum explaining the provisions in the Finance (No. 2) Bill, 2024 — Ministry of Finance (Union Budget 2024-25) · accessed 12 October 2026
3. 3.CGST Act, 2017 — section 52 (collection of tax at source) — CBIC · accessed 12 October 2026
4. 4.TDS Compliance — e-Filing help — Income Tax Department (e-Filing portal) · accessed 12 October 2026
5. 5.CBDT Releases Guidelines for Deduction of Tax Under Section 194-O (Circular No. 20/2023, 28 December 2023) — Taxmann · accessed 12 October 2026
6. 6.TDS / TCS Rate Chart Tax Year (FY 2026-27) — TDSMAN · accessed 12 October 2026