What rate does an e-commerce operator deduct now, when is a small seller outside the section, and does the Board's guidance bind me?
0.1 per cent of the gross amount of the sale or services, for anything on or after 1 October 2024; one per cent before that. No deduction is required where the e-commerce participant is an individual or HUF whose gross sales or services through the platform in the previous year do not exceed five lakh rupees and who has furnished PAN or Aadhaar to the operator. Guidelines issued by the Board under s.194-O(4) bind the income-tax authorities and the e-commerce operator alike.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-10-01, reported as Income-tax Act 1961, s.194-O; rate in sub-section (1) substituted for 'one' by Act No. 15 of 2024 w.e.f. 1 October 2024. It bears on section 194-O, section 194Q, section 206C(1H), section 194J of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
Section 194-O is drafted to override the rest of Part B of Chapter XVII: a transaction on which the operator has deducted, or which is exempt under sub-section (2), is not liable to tax deduction at source under any other provision of Chapter XVII. That override is about deduction only; the order of priority as between s.194-O, s.194Q and s.206C(1H) is worked out by s.194Q(5), by the provisos to s.206C(1H) and by CBDT Circular 13/2021, which this library already holds — not by s.194-O(3) standing alone. Two features matter in practice. Direct payment by the buyer to the seller is deemed by the Explanation to sub-section (1) to be an amount credited or paid by the operator, so a platform that never touches the money is still the deductor. And the carve-out in the proviso to sub-section (3) means that amounts the operator receives for hosting advertisements or for services unconnected with the sale keep their own character and stay outside the override.
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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Section 194-O(1) provides that notwithstanding anything to the contrary in any provision of Part B of Chapter XVII, where the 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 participant's account or at the time of payment to the participant 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. The Explanation to sub-section (1) deems any payment made by a purchaser of goods or recipient of services directly to the participant, for a sale or service facilitated by the operator, to be an amount credited or paid by the operator, and includes it in the gross amount. Sub-section (2) exempts sums credited or paid to a participant who is an individual or Hindu undivided family where the gross amount of sale or services through the platform in the previous year does not exceed five lakh rupees and the participant has furnished his Permanent Account Number or Aadhaar number to the operator. Sub-section (3) provides that, notwithstanding anything contained in Part B of this Chapter, a transaction on which the operator has deducted 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, with a proviso excepting amounts received or receivable by the operator for hosting advertisements or providing any other services not in connection with the sale or services referred to in sub-section (1). Sub-section (4) empowers the Board, with the approval of the Central Government, to issue guidelines to remove difficulty; sub-section (5) requires every such guideline to be laid before each House of Parliament and makes it binding on the income-tax authorities and on the e-commerce operator. Sub-section (6) deems the operator to be the person responsible for paying to the participant. The Explanation defines electronic commerce, e-commerce operator, e-commerce participant — a person resident in India selling goods or providing services, including digital products, through the platform — and provides that 'services' includes fees for technical services and fees for professional services as defined in the Explanation to s.194J. The rate was one per cent as enacted and was substituted by 0.1 per cent by Act No. 15 of 2024 with effect from 1 October 2024.
Not applicable — statutory provisions. The operative position is that from 1 October 2024 an e-commerce operator deducts at 0.1 per cent of the gross amount of the sale or services facilitated through its platform, and for any earlier period at one per cent; that an individual or HUF participant with gross sales or services of not more than five lakh rupees in the previous year who has furnished PAN or Aadhaar is outside the section; and that guidelines issued by the Board under sub-section (4) bind the income-tax authorities and the e-commerce operator.
Not applicable — statutory provisions, and no decision construing the section was retrieved beyond the interim order in Mjunction Services Ltd v Union of India, which is entered separately and decides nothing on construction. What follows is this library's reading of the statutory words as published by the department. The rate change is established by the footnote substituting 0.1 per cent for 'one' by Act No. 15 of 2024 with effect from 1 October 2024, printed on all three current pages, and by their agreement on the figure.
Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the e-commerce operator.
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Handle my notice → Ask a CA on WhatsApp0.1 per cent of the gross amount of the sale or services, for anything on or after 1 October 2024; one per cent before that. No deduction is required where the e-commerce participant is an individual or HUF whose gross sales or services through the platform in the previous year do not exceed five lakh rupees and who has furnished PAN or Aadhaar to the operator. Guidelines issued by the Board under s.194-O(4) bind the income-tax authorities and the e-commerce operator alike. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194-O, section 194Q, section 206C(1H), section 194J of the Income Tax Act 1961. It is reported as Income-tax Act 1961, s.194-O; rate in sub-section (1) substituted for 'one' by Act No. 15 of 2024 w.e.f. 1 October 2024. Section 194-O is drafted to override the rest of Part B of Chapter XVII: a transaction on which the operator has deducted, or which is exempt under sub-section (2), is not liable to tax deduction at source under any other provision of Chapter XVII. That override is about deduction only; the order of priority as between s.194-O, s.194Q and s.206C(1H) is worked out by s.194Q(5), by the provisos to s.206C(1H) and by CBDT Circular 13/2021, which this library already holds — not by s.194-O(3) standing alone. Two features matter in practice. Direct payment by the buyer to the seller is deemed by the Explanation to sub-section (1) to be an amount credited or paid by the operator, so a platform that never touches the money is still the deductor. And the carve-out in the proviso to sub-section (3) means that amounts the operator receives for hosting advertisements or for services unconnected with the sale keep their own character and stay outside the override. If it applies to you, the first step is this: Date the transaction. 0.1 per cent from 1 October 2024; one per cent for anything earlier. Advice written before that date is wrong for a current transaction.
Section 194-O(1) provides that notwithstanding anything to the contrary in any provision of Part B of Chapter XVII, where the 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 participant's account or at the time of payment to the participant 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. The Explanation to sub-section (1) deems any payment made by a purchaser of goods or recipient of services directly to the participant, for a sale or service facilitated by the operator, to be an amount credited or paid by the operator, and includes it in the gross amount. Sub-section (2) exempts sums credited or paid to a participant who is an individual or Hindu undivided family where the gross amount of sale or services through the platform in the previous year does not exceed five lakh rupees and the participant has furnished his Permanent Account Number or Aadhaar number to the operator. Sub-section (3) provides that, notwithstanding anything contained in Part B of this Chapter, a transaction on which the operator has deducted 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, with a proviso excepting amounts received or receivable by the operator for hosting advertisements or providing any other services not in connection with the sale or services referred to in sub-section (1). Sub-section (4) empowers the Board, with the approval of the Central Government, to issue guidelines to remove difficulty; sub-section (5) requires every such guideline to be laid before each House of Parliament and makes it binding on the income-tax authorities and on the e-commerce operator. Sub-section (6) deems the operator to be the person responsible for paying to the participant. The Explanation defines electronic commerce, e-commerce operator, e-commerce participant — a person resident in India selling goods or providing services, including digital products, through the platform — and provides that 'services' includes fees for technical services and fees for professional services as defined in the Explanation to s.194J. The rate was one per cent as enacted and was substituted by 0.1 per cent by Act No. 15 of 2024 with effect from 1 October 2024. 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. Not applicable — statutory provisions. The operative position is that from 1 October 2024 an e-commerce operator deducts at 0.1 per cent of the gross amount of the sale or services facilitated through its platform, and for any earlier period at one per cent; that an individual or HUF participant with gross sales or services of not more than five lakh rupees in the previous year who has furnished PAN or Aadhaar is outside the section; and that guidelines issued by the Board under sub-section (4) bind the income-tax authorities and the e-commerce operator.
Not applicable — statutory provisions, and no decision construing the section was retrieved beyond the interim order in Mjunction Services Ltd v Union of India, which is entered separately and decides nothing on construction. What follows is this library's reading of the statutory words as published by the department. The rate change is established by the footnote substituting 0.1 per cent for 'one' by Act No. 15 of 2024 with effect from 1 October 2024, printed on all three current pages, and by their agreement on the figure. In the words reproduced by the source cited on this page: "Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the e-commerce operator."
It was decided by the CBDT Circulars & Instructions on 2024-10-01 and is reported as Income-tax Act 1961, s.194-O; rate in sub-section (1) substituted for 'one' by Act No. 15 of 2024 w.e.f. 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 194Q, section 206C(1H), section 194J, 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. Not applicable — statutory provisions. The operative position is that from 1 October 2024 an e-commerce operator deducts at 0.1 per cent of the gross amount of the sale or services facilitated through its platform, and for any earlier period at one per cent; that an individual or HUF participant with gross sales or services of not more than five lakh rupees in the previous year who has furnished PAN or Aadhaar is outside the section; and that guidelines issued by the Board under sub-section (4) bind the income-tax authorities and the e-commerce operator. It arises in TDS Defaults and How Tax Law Is Read matters, on section 194-O, section 194Q, section 206C(1H), section 194J 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. Collect PAN or Aadhaar from every individual and HUF participant — without it the five lakh rupee exemption in sub-section (2) is unavailable however small the sales. Do not assume that money passing directly from buyer to seller escapes deduction; the Explanation to sub-section (1) deems it to be credited or paid by the operator and includes it in the gross amount. Separate advertising and other unconnected service fees in the contract and the invoice; the proviso to sub-section (3) takes them out of the override, so they must be tested under their own section. If the section produces an impossibility on your facts, make a representation for guidelines under sub-section (4); by sub-section (5) any guideline issued is binding on the income-tax authorities and on the operator, and a writ court has directed the Board to dispose of such a representation by a speaking order — see the entry on Mjunction Services Ltd v Union of India. Read the section with CBDT Circular 13/2021, already in this library, on the order of priority between s.194-O, s.194Q and s.206C(1H).
Validity check could not be completed. Validity check could not be completed in the sense that no decision construing the section was located and none could therefore be checked. The statutory text was read on three current departmental pages with Year stamps of 2024 (No. 2), 2025 and 2026, and all three agree on the rate, the thresholds and the wording of every sub-section. The attribution of the rate change to Act No. 15 of 2024 with effect from 1 October 2024 comes from the department's own footnote and was not verified against the e-Gazette. 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.
This entry is statutory text, not a decision. It asserts no holding, no bench and no judge's words; the quoted string is statutory text. The date in the decided_on field, 1 October 2024, is the date from which the rate change operates and is NOT a decision date. The text was read on 8 September 2026 on the Income Tax Department's own section pages with the 'Year:' stamp checked on each: /w/section-194-o-5 (Year 2024 (No. 2)), /w/section-194-o-6 (Year 2025) and /w/section-194-o-7 (Year 2026). All three print the rate as 0.1 per cent and all three carry the departmental footnote substituting it for 'one' by Act No. 15 of 2024 with effect from 1 October 2024 — numbered 5 on the Year 2024 (No. 2) page, 1 on the Year 2025 page and 48 on the Year 2026 page. A warning for a later editor: the brief for this build already records /w/section-194-o as a stale snapshot, and it should not be used to state the current rate. Act No. 15 of 2024 is the Finance (No. 2) Act 2024. I did not read the Finance (No. 2) Act 2024 in the e-Gazette. The library holds CBDT Circular 13/2021, which deals with the priority between this section, s.194Q and s.206C(1H), and this entry does not restate it. 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.
Not applicable — statutory provisions. The operative position is that from 1 October 2024 an e-commerce operator deducts at 0.1 per cent of the gross amount of the sale or services facilitated through its platform, and for any earlier period at one per cent; that an individual or HUF participant with gross sales or services of not more than five lakh rupees in the previous year who has furnished PAN or Aadhaar is outside the section; and that guidelines issued by the Board under sub-section (4) bind the income-tax authorities and the e-commerce 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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