I sell through a marketplace and the operator is deducting under section 194-O. What is the rate now, when does the five lakh exemption apply, and can the operator also deduct under section 194H or 194J on the same transaction?
The rate is 0.1 per cent of the gross amount of the sales or services, substituted for one per cent with effect from 1 October 2024. No deduction is made where the e-commerce participant is an individual or Hindu undivided family whose gross amount of such sale or services during the previous year does not exceed five lakh rupees and who has furnished PAN or Aadhaar to the operator. And sub-section (3) provides that a transaction on which the operator has deducted under sub-section (1), or which is not liable to deduction because of sub-section (2), shall not be liable to tax deduction at source under any other provision of Chapter XVII-B — subject to a proviso that takes advertising and other services unconnected with the sale out of that shelter.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Income-tax Act, 1961, s.194-O, as it stands after the rate was reduced to 0.1 per cent with effect from 1 October 2024. It bears on section 194-O, section 194-O(1), section 194-O(2), section 194-O(3), section 194-O(4), section 194-O(6), section 194J, section 199 of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Three things about this section catch people. First, the base is the GROSS amount, and the Explanation to sub-section (1) deems a payment made directly by the buyer to the participant to be an amount credited or paid by the operator and to be included in that gross amount — so the deduction is on a figure larger than what the participant actually receives after platform fees, and larger than the turnover he reports after sales returns. That mismatch is what generates the proportionate-TDS-credit disputes; see the entry on Gopikishan Pallod v. ITO. Second, sub-section (3) is a genuine shelter and is worth invoking: once section 194-O applies, or once the five lakh exemption applies, no other section in Chapter XVII-B can be applied to the same transaction, which stops an operator being asked to deduct twice on the same amount. But the proviso is narrow and important — amounts received or receivable by the operator for hosting advertisements, or for other services not in connection with the sale or services under sub-section (1), fall outside the shelter and remain exposed to the ordinary sections. Third, sub-section (6) deems the operator to be the person responsible for paying, which is what makes sections 200, 201 and 203 bite on him; and sub-sections (4) and (5) give the Board a difficulty-removing guideline power whose output is expressly binding both on the income-tax authorities and on the operator.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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As printed on the Year 2026 and Year 2025 departmental pages, section 194-O provides: (1) notwithstanding anything to the contrary in Part B of Chapter XVII, where sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform, the operator shall, at the time of credit of the amount of sale or services or both to the account of the participant or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax at the rate of 0.1 per cent of the gross amount of such sales or services or both; and by the Explanation to that sub-section, any payment made by a purchaser of goods or recipient of services directly to the participant for a facilitated sale or service is deemed to be the amount credited or paid by the operator and is included in the gross amount. (2) No deduction is made from any sum credited or paid or likely to be credited or paid during the previous year to an e-commerce participant being an individual or Hindu undivided family where the gross amount of such sale or services or both during the previous year does not exceed five lakh rupees and the participant has furnished his Permanent Account Number or Aadhaar number to the operator. (3) Notwithstanding anything in Part B of the Chapter, a transaction in respect of which tax has been deducted by the operator under sub-section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of the Chapter, with a proviso that this does not apply to any amount or aggregate of amounts received or receivable by an operator for hosting advertisements or providing any other services which are not in connection with the sale or services referred to in sub-section (1). (4) The Board may, with the approval of the Central Government, issue guidelines to remove any difficulty. (5) Every such guideline shall be laid before each House of Parliament and shall be binding on the income-tax authorities and on the e-commerce operator. (6) The operator is deemed to be the person responsible for paying to the participant. The Explanation to the section defines 'electronic commerce', 'e-commerce operator', 'e-commerce participant' (a person resident in India selling goods or providing services or both, including digital products, through such a platform) and 'services' as including fees for technical services and fees for professional services as defined in the Explanation to section 194J.
As the section stands from 1 October 2024: the rate is 0.1 per cent of the gross amount; the individual/HUF exemption applies where the gross amount for the previous year does not exceed five lakh rupees and PAN or Aadhaar has been furnished; a transaction covered by sub-section (1) or exempt under sub-section (2) is not liable to deduction under any other provision of Chapter XVII-B, except in respect of amounts received by the operator for hosting advertisements or for services not connected with the facilitated sale; the operator is deemed to be the person responsible for paying; and guidelines issued by the Board under sub-section (4) bind both the income-tax authorities and the operator.
Not applicable — this is a statement of statutory text with the amendment footnotes printed on the same departmental pages. No judicial reasoning is involved.
Notwithstanding anything contained in Part B of this Chapter, a transaction in respect of which tax has been deducted by the e-commerce operator under sub-section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of this Chapter:
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Handle my notice → Ask a CA on WhatsAppThe rate is 0.1 per cent of the gross amount of the sales or services, substituted for one per cent with effect from 1 October 2024. No deduction is made where the e-commerce participant is an individual or Hindu undivided family whose gross amount of such sale or services during the previous year does not exceed five lakh rupees and who has furnished PAN or Aadhaar to the operator. And sub-section (3) provides that a transaction on which the operator has deducted under sub-section (1), or which is not liable to deduction because of sub-section (2), shall not be liable to tax deduction at source under any other provision of Chapter XVII-B — subject to a proviso that takes advertising and other services unconnected with the sale out of that shelter. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194-O, section 194-O(1), section 194-O(2), section 194-O(3), section 194-O(4), section 194-O(6), section 194J, section 199 of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.194-O, as it stands after the rate was reduced to 0.1 per cent with effect from 1 October 2024. Three things about this section catch people. First, the base is the GROSS amount, and the Explanation to sub-section (1) deems a payment made directly by the buyer to the participant to be an amount credited or paid by the operator and to be included in that gross amount — so the deduction is on a figure larger than what the participant actually receives after platform fees, and larger than the turnover he reports after sales returns. That mismatch is what generates the proportionate-TDS-credit disputes; see the entry on Gopikishan Pallod v. ITO. Second, sub-section (3) is a genuine shelter and is worth invoking: once section 194-O applies, or once the five lakh exemption applies, no other section in Chapter XVII-B can be applied to the same transaction, which stops an operator being asked to deduct twice on the same amount. But the proviso is narrow and important — amounts received or receivable by the operator for hosting advertisements, or for other services not in connection with the sale or services under sub-section (1), fall outside the shelter and remain exposed to the ordinary sections. Third, sub-section (6) deems the operator to be the person responsible for paying, which is what makes sections 200, 201 and 203 bite on him; and sub-sections (4) and (5) give the Board a difficulty-removing guideline power whose output is expressly binding both on the income-tax authorities and on the operator. If it applies to you, the first step is this: Fix the date of credit or payment: 0.1 per cent from 1 October 2024, one per cent before it. A single financial year straddling that date has two rates in it.
As printed on the Year 2026 and Year 2025 departmental pages, section 194-O provides: (1) notwithstanding anything to the contrary in Part B of Chapter XVII, where sale of goods or provision of services of an e-commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform, the operator shall, at the time of credit of the amount of sale or services or both to the account of the participant or at the time of payment thereof by any mode, whichever is earlier, deduct income-tax at the rate of 0.1 per cent of the gross amount of such sales or services or both; and by the Explanation to that sub-section, any payment made by a purchaser of goods or recipient of services directly to the participant for a facilitated sale or service is deemed to be the amount credited or paid by the operator and is included in the gross amount. (2) No deduction is made from any sum credited or paid or likely to be credited or paid during the previous year to an e-commerce participant being an individual or Hindu undivided family where the gross amount of such sale or services or both during the previous year does not exceed five lakh rupees and the participant has furnished his Permanent Account Number or Aadhaar number to the operator. (3) Notwithstanding anything in Part B of the Chapter, a transaction in respect of which tax has been deducted by the operator under sub-section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of the Chapter, with a proviso that this does not apply to any amount or aggregate of amounts received or receivable by an operator for hosting advertisements or providing any other services which are not in connection with the sale or services referred to in sub-section (1). (4) The Board may, with the approval of the Central Government, issue guidelines to remove any difficulty. (5) Every such guideline shall be laid before each House of Parliament and shall be binding on the income-tax authorities and on the e-commerce operator. (6) The operator is deemed to be the person responsible for paying to the participant. The Explanation to the section defines 'electronic commerce', 'e-commerce operator', 'e-commerce participant' (a person resident in India selling goods or providing services or both, including digital products, through such a platform) and 'services' as including fees for technical services and fees for professional services as defined in the Explanation to section 194J. The matter was decided on 2024-10-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. As the section stands from 1 October 2024: the rate is 0.1 per cent of the gross amount; the individual/HUF exemption applies where the gross amount for the previous year does not exceed five lakh rupees and PAN or Aadhaar has been furnished; a transaction covered by sub-section (1) or exempt under sub-section (2) is not liable to deduction under any other provision of Chapter XVII-B, except in respect of amounts received by the operator for hosting advertisements or for services not connected with the facilitated sale; the operator is deemed to be the person responsible for paying; and guidelines issued by the Board under sub-section (4) bind both the income-tax authorities and the operator.
Not applicable — this is a statement of statutory text with the amendment footnotes printed on the same departmental pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "Notwithstanding anything contained in Part B of this Chapter, a transaction in respect of which tax has been deducted by the e-commerce operator under sub-section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of this Chapter:"
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Income-tax Act, 1961, s.194-O, as it stands after the rate was reduced to 0.1 per cent with effect from 1 October 2024. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194-O, section 194-O(1), section 194-O(2), section 194-O(3), section 194-O(4), section 194-O(6), section 194J, section 199, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. As the section stands from 1 October 2024: the rate is 0.1 per cent of the gross amount; the individual/HUF exemption applies where the gross amount for the previous year does not exceed five lakh rupees and PAN or Aadhaar has been furnished; a transaction covered by sub-section (1) or exempt under sub-section (2) is not liable to deduction under any other provision of Chapter XVII-B, except in respect of amounts received by the operator for hosting advertisements or for services not connected with the facilitated sale; the operator is deemed to be the person responsible for paying; and guidelines issued by the Board under sub-section (4) bind both the income-tax authorities and the operator. It arises in TDS Defaults and How Tax Law Is Read matters, on section 194-O, section 194-O(1), section 194-O(2), section 194-O(3), section 194-O(4), section 194-O(6), section 194J, section 199 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For an individual or HUF participant, check both conditions of sub-section (2) — gross amount for the previous year not exceeding five lakh rupees AND PAN or Aadhaar furnished to the operator. Furnishing the number is not optional; without it the exemption is not available. Include in the gross amount every payment the buyer made directly to the participant for a sale or service facilitated by the operator; the Explanation to sub-section (1) deems it to have passed through the operator. Where another deductor asserts a parallel obligation on the same transaction, invoke sub-section (3) in terms and identify the Chapter XVII-B section being displaced. Separate out advertising revenue and any service not connected with the facilitated sale — the proviso to sub-section (3) leaves those exposed to the ordinary sections, so the shelter must not be claimed across the board. As a participant, reconcile Form 26AS against gross sales rather than net turnover before filing, and keep the sales return workings, because the gross-versus-net gap is what the Central Processing Centre uses to restrict credit.
Still good law. The Year 2025 and Year 2026 departmental pages print identical text, which is the best evidence available on this pass that nothing has displaced the 1 October 2024 position; no Finance Act text was retrieved and no citator check was run, so a later amendment cannot be excluded. Anything applying a one per cent rate to a credit or payment on or after 1 October 2024 is superseded by amendment. The library's older entries citing section 194-O at one per cent — including judicial statements of the rate in orders relating to assessment years up to 2024-25, such as Gopikishan Pallod v. ITO (ITAT Hyderabad, 25 June 2025) — remain correct for their own periods and should be read with that limit. No CBDT guideline issued under sub-section (4) was retrieved this pass and none is relied on here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The text and the rate change were transcribed this pass from two departmental pages that print them identically — https://incometaxindia.gov.in/w/section-194-o-7 (Year: 2026) and https://incometaxindia.gov.in/w/section-194-o-6 (Year: 2025) — both headed 'Income-tax Act, 1961' and 'Payment of certain sums by e-commerce operator to e-commerce participant'. Both carry a footnote against the rate: footnote 48 on the 2026 page, 'Sub. for "one" by Act No. 15 of 2024, w.e.f. 1-10-2024', and footnote 1 on the 2025 page in the same terms. That the rate was previously one per cent is confirmed independently on https://incometaxindia.gov.in/w/section-194-o-3 (Year: 2023) and /w/section-194-o-2 (Year: 2022), both of which print 'one per cent' in an otherwise identical section; the 2022 page carries footnote 22, 'Ins. by the Act No. 12 of 2020, w.e.f. 1-10-2020', for the insertion of the section. I did NOT verify from any source read this pass that Act No. 15 of 2024 is the Finance (No. 2) Act, 2024, and the Act number is given as the department prints it — this is exactly the point on which build 127 erred, and 1 October 2024 and 1 April 2025 are both live commencement dates in this area. The five lakh rupee figure in sub-section (2) is unchanged across all four pages read; no amendment footnote attaches to it on any of them. What I could NOT do: the brief that commissioned this entry asks for Circular 17/2020 on who deducts in a multiple-operator chain, and NO CBDT circular could be retrieved this pass. Every URL tried on incometaxindia.gov.in returned HTTP 404 — /communications/circular/circular_17_2020.pdf, /communications/circular/circular_no_17_2020.pdf, /communications/circular/circular-no-17-2020.pdf, /communications/circular/circular_17_2020_1.pdf, /communications/circular/circular_no_17_2020_dated_29092020.pdf, /Lists/Latest%20News/Attachments/415/Circular_17_2020.pdf and /communications/circular/circular_no_20_2023.pdf — the circulars listing pages at /Pages/communications/circulars.aspx and /circulars render no rows, an indiankanoon phrase search for a judgment reproducing the circular returned nil, and the session's WebSearch budget was exhausted before the working URL could be found. Nothing whatever is therefore stated here about Circular 17/2020 or Circular 20/2023, and a later pass must retrieve them before anything is written about the multiple-operator chain. The Board's power under sub-sections (4) and (5) is stated only as the statute states it. No rule was read; the Form references on the departmental page's own note are 'See rules 28, 28AA, 28AB, 30, 31, 31A, 37BA and Form Nos. 13, 16A, 24G, 26B, 26Q and 27A'. 'decided_on', 1 October 2024, is the COMMENCEMENT DATE of the rate substitution recorded in footnote 48 / footnote 1, not a decision date; this is a statutory entry and there is no decision behind it. 'bench' is 'Not applicable — statutory text' and 'favours' is null for the same reason. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
As the section stands from 1 October 2024: the rate is 0.1 per cent of the gross amount; the individual/HUF exemption applies where the gross amount for the previous year does not exceed five lakh rupees and PAN or Aadhaar has been furnished; a transaction covered by sub-section (1) or exempt under sub-section (2) is not liable to deduction under any other provision of Chapter XVII-B, except in respect of amounts received by the operator for hosting advertisements or for services not connected with the facilitated sale; the operator is deemed to be the person responsible for paying; and guidelines issued by the Board under sub-section (4) bind both the income-tax authorities and the operator.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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