194O TDS is a 0.1% deduction that an online marketplace keeps from the gross value of goods or services a seller sells through it. The rate was 1% for sales before 1 October 2024 and has been 0.1% since then, so FY 2025-26 sales carry 0.1%.
The person deducting is the e-commerce operator, meaning the business that owns or runs the digital platform. The person losing the 0.1% is the e-commerce participant: a resident who sells on that platform. Sellers get the money back as credit in their own return. The TDS rate chart lists this beside the other sections.
Quick facts
Rate
0.1% of gross amount of sales or services (from 1 October 2024)Earlier rate
1% before 1 October 2024Exempt seller
Resident individual or HUF with gross sales up to ₹5 lakh in the year who gives PAN or AadhaarNo PAN or Aadhaar
5%Who deducts
The e-commerce operatorReturn
Form 26Q every quarterUnder the 2025 Act
Now covered in the TDS table under section 393
194o tds rate and who is covered
| Situation | Rate |
|---|---|
| Sales credited or paid before 1 October 2024 | 1% |
| Sales credited or paid from 1 October 2024 (all of FY 2025-26) | 0.1% |
| Seller has not given PAN or Aadhaar | 5% |
| Resident individual or HUF, gross sales in the year up to ₹5 lakh, PAN or Aadhaar given | Nil |
The 5% figure comes from section 206AA, which sets a lower penalty rate for this section than the usual 20%. Firms, LLPs and companies selling online have no small-seller exemption; they lose 0.1% from the first rupee.
What section 194o of income tax act charges
The base is the gross amount of sales or services, not the payout the seller finally receives. Platform commission, shipping fees and advertising charges are deducted from the seller's payout, but the TDS is still worked out on the full sale value. Returns and discounts that cut the sale value reduce the base.
Timing follows the earlier of credit or payment. If a customer pays the seller directly, outside the platform, the law treats that amount as credited by the operator, so the operator still deducts on it. This keeps cash-on-delivery and direct-pay orders inside the net.
Worked example of 194O on a marketplace seller
A handloom seller on a marketplace. A proprietor sells sarees online. In one month of FY 2025-26 her gross sales are ₹3,60,000. The platform charges ₹43,200 as commission and fees.
Step 1: TDS base is the gross sale, ₹3,60,000. Step 2: TDS at 0.1% is ₹360. Step 3: her payout is ₹3,60,000 minus ₹43,200 minus ₹360, which is ₹3,16,440. Step 4: the ₹360 appears in her Form 26AS and she claims it in her ITR.
A hobby seller below the limit. A retired teacher, an individual, sells homemade pickles worth ₹2,10,000 in the year and has given his PAN to the platform. His sales stay under ₹5 lakh, so nothing is deducted.
How tds 194o sits with other sections
- No double deduction: once the operator deducts under this section on a transaction, no other TDS section applies to that same payment to the seller.
- Purchase of goods: a buyer who would otherwise deduct under 194Q does not deduct where the operator has already deducted on that sale.
- GST is separate: the platform may also collect tax at source under GST. That is a GST credit, explained on our GST TDS page, and is not claimed in the income tax return.
- Operator's own fees: the commission the operator charges the seller is a separate matter and does not change the 194O base.
Deposit, return and the seller's credit
The operator pays the tax by the 7th day of the month after (30 April for March deductions), files Form 26Q each quarter by 31 July, 31 October, 31 January and 31 May, and issues Form 16A to the seller. Late payment costs 1.5% interest a month.
As a seller, sign in at the department's filing website, download your AIS and Form 26AS, and match the credits against the platform's settlement reports before you file.
194O under the Income-tax Act, 2025
| Sale date | Law and reference |
|---|---|
| Up to the end of FY 2025-26 | Income-tax Act, 1961, section 194O |
| From 1 April 2026, tax year 2026-27 | Income-tax Act, 2025, TDS table in section 393 |
The 0.1% rate and the ₹5 lakh exemption for small individual sellers have carried into the new table. Operators should use the new statement codes for tax year 2026-27 shown on the portal.
Seller mistakes and fixes
| Slip | Fix |
|---|---|
| Not giving PAN or Aadhaar to the platform | Update it in the seller account to avoid 5% |
| Reading the settlement figure as total sales | Report gross sales as turnover; the fees are expenses |
| Missing the credit in the ITR | Match each quarter's 26AS entries with the operator's statement |
| Confusing GST TCS with income tax TDS | Claim GST TCS in the GST return, 194O credit in the ITR |
General reading on how the rule works, not a ruling on your shop. Before filing, check the latest position through the e-filing portal or your chartered accountant.
Sources we checked
- Income-tax Act, 1961, section 194O
- Income-tax Act, 1961, section 206AA
- Finance (No. 2) Act, 2024
- Income-tax Act, 2025, section 393
Frequently asked questions
What is the 194o tds rate for FY 2025-26?
The rate is 0.1% of the gross amount of sales or services. It fell from 1% on 1 October 2024. A seller without PAN or Aadhaar suffers 5%.
Who deducts under the 194o tds section?
The e-commerce operator that owns or runs the digital platform deducts it from payments to sellers. Sellers do not deduct anything themselves.
Is there a threshold under section 194o of income tax act?
Only for resident individuals and HUFs. If their gross sales through the platform stay within ₹5 lakh in the year and they have given PAN or Aadhaar, no TDS is deducted. Firms and companies have no threshold.
Is 194 o tds deducted on the payout or on the sale value?
On the gross sale value. Fees and commission the platform keeps do not lower the TDS base.
How do I claim back 194O TDS?
It appears in your Form 26AS and AIS against your PAN. Claim it in your income tax return as tax already deducted; it reduces your tax or adds to your refund.