Section 194O Of Income Tax Act 1961 – Payment made to a Resident for the sale of goods or provision of services by an e-commerce operator through its digital or electronic facility or platform.
| Section | 194O |
| Particulars | Payment of certain sums by e-commerce operators to e-commerce participant |
| Type of business | E-commerce operator and associated person |
Introduction to Section 194O
Section 194O of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) specifies that every e-commerce operator paying an e-commerce participant must deduct tax where such payment exceeds the threshold limit.
Who is liable to deduct TDS under Section 194O?
As per section 194O, ane-commerce operator who is responsible for paying a resident e-commerce participant is liable to deduct TDS under Section 194O.
Rate Of TDS under section 194O of Income Tax Act
TDS is required to be deducted at the rate of 1%. Surcharge or Health and Education Cess will not be added to these rates. If the deductee doesn’t provide his PAN to the deductor, the tax will be deducted under Section 206AA at 20%. If the deductee has not filed their applicable tax return for a specified period, the tax will be deducted at the rate prescribed by Section 206AB.
If both Section 206AA and Section 206AB apply, the tax will be withheld at the higher of the two rates prescribed under section 206AA and Section 206AB.
Threshold Limit under 194O
Section 194O does not provide a threshold limit.
Timing for deduction under section 194O
As per section 194O, the tax must be deducted at the time of payment or credit of consideration to the account of the deductee, whichever is earlier.
Exemption on TDS under section 194O of Income Tax Act
In the following cases, no income tax shall be required to be deducted under the section:
1. Individual or HUF
If the e-commerce participant is an individual or a Hindu Undivided Family (HUF).
2. Gross amount
The gross goods or services sold do not exceed Rs. 5 lakhs in a financial year.
3. Given PAN or Aadhar
The e-commerce participant has given the e-commerce operator his PAN or Aadhaar.
