What amount of TDS shall be deducted on Income of E-commerce participants?

by Estartup India Grow Business With Us

The Union Budget 2020 was presented on the February 1, 2020, in the parliament by the esteemed Finance Minister of India Smt. Nirmala Sitharaman.


The current year's budget can be termed as a tax-friendly budget since it has given respite to a great many taxpayers with a massive reduction in the income tax slabs.


The government has brought great tax reliefs and brought a new Income tax slab, as per which income up to INR 5 lakhs will be tax-free.


In an offer to broaden the tax base, the government has likewise announced that E-commerce operators, for example, Amazon and Flipkart that facilitate the sale of products and services are currently required to deduct TDS @ 1% on the gross measure of sales exceeding INR 5 lakhs.


Right now, new section 194-O will be inserted in the Income Tax Act 1961.


Let's understand the key features of this update.


1.      1   Why is section 194-O introduced in the Income Tax Act?

The new section 194-O of Income Tax Act has been introduced to levy income tax the sale of merchandise or services or both through the e-commerce gateway.


With its effect, the E-commerce operator (e.g. Amazon or Flipkart) is supposed to deduct tax @ 1% at the time of payment or credit to the record of an E-commerce seller.


In the event that the E-commerce seller has provided his PAN or Aadhar to the E-commerce operator, then TDS will be deducted just if his gross sales or services or both during the budgetary year exceed INR 5 Lacs.


2. Imagine a scenario in which PAN or Aadhar not provided to the E-commerce operator

Right now, Section 206AA of the Income Tax The act has also been revised. After this amendment, if the E-commerce seller has not furnished his PAN or Aadhar UIN  number to the E-commerce operator, then his TDS will be taken away flat @ 5%, not considering how much his gross sales or services or both during the money related year has been.


3. What does an E-commerce participant mean here?

E-commerce member or seller means a body or a unit, being resident of India selling its merchandise or offering types of assistance or both, including advanced items, through the computerized stage, i.e. the E-commerce entrance or E-commerce operator e.g. Amazon or Flipkart.

Here, services are defined to include the fees for technical services and for the professional services, as defined in section 194J of the Income Tax Act 1961.


4. What does the word Gross sale signify here?

It is very essential to note here the term "Net measure of Sales" or simply gross sales signify that e-commerce the operator needs to deduct TDS on:

  •   GST part of sales by traders having GST registration 
  • ·  On the Commission and the association charged by the e-commerce operator, which he keeps down.
  • ·     Along these lines, the e-commerce Seller himself isn't holding any sum by virtue of GST, Commission or advertising fees.
  • ·    TDS @ 1% will be deducted on every one of these sums in view of the Gross Sales. 

5. What is the date for the new section 194-O to be made effectual

The new section 194-O of the Income-tax Act 1961 shall be made effective from 1st April 2020. This will be  relevant while the ITR filing for the FY 2020-21.


6. What are the other relaxations in income tax?

The Government has further looked to improve the income tax system from multiple points of view. It has proposed the accompanying relaxing norms for recuperating the taxation arrangement


  • ·         70 Tax exemptions and deductions reduced. 
  • ·         Dividend circulation tax abolished. Dividends will currently be taxable in the hands of the taxpayer.
  • ·         Least Alternative Tax (MAT) has been removed.
  • ·         The income tax review limit is raised to INR 5 Crores for those businesses that sudden spike in demand for 95% cashless mode.
  • ·         The corporate tax rate of 15% that was introduced in September 2019 to assembling companies, presently likewise extended to power companies.
  • ·         Faceless appeals to be introduced for greater transparency and responsibility.

So these are a few of the newly introduced relaxed norms as regards the Income-tax Structure for the FY 2020-21.

These will surely reduce the tax burden on the taxpayers and will boost Indian start-ups.

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Created on Feb 19th 2020 00:07. Viewed 204 times.


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