{"id":21266,"date":"2020-12-08T12:26:00","date_gmt":"2020-12-08T06:56:00","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=21266"},"modified":"2024-07-02T14:30:55","modified_gmt":"2024-07-02T09:00:55","slug":"applicability-of-section-194o-under-tax-deducted-at-source","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/applicability-of-section-194o-under-tax-deducted-at-source\/","title":{"rendered":"Explanation on the Applicability of Section 194O under Tax Deducted at Source"},"content":{"rendered":"\n<p class=\"has-drop-cap\">A new TDS section 194O was unveiled in the Union Budget\n2020. E-commerce has become the primary choice for traders and buyers in the\nrecent past. With the increase in online sales, there has been a significant\nincrease in the number of buyers and sellers who trade via online platforms (e-Commerce\nwebsite). The seller must address their tax liabilities on such income.<\/p>\n\n\n\n<p>Therefore, the Budget 2020 brought new section 194O for the\ndeduction of TDS on e-commerce sales. In the view of the said section, the\ne-commerce operator must deduct TDS on the payment made to the seller @ 1% on\nthe aggregated amount of sales if it surpasses INR 5, 00,000 in the financial\nyear. Section 194O has become effective from 1st October 2020.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-section-194o-under-tax-deducted-at-source\/#What_the_Concept_behind_the_Introduction_of_Section_194O\" >What the Concept behind the Introduction of\nSection 194O?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-section-194o-under-tax-deducted-at-source\/#Understanding_the_Concept_of_Section_194O_through_Examples\" >Understanding the Concept of Section 194O through\nExamples<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-section-194o-under-tax-deducted-at-source\/#TDS_process_Chart\" >TDS process Chart<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/applicability-of-section-194o-under-tax-deducted-at-source\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_the_Concept_behind_the_Introduction_of_Section_194O\"><\/span>What the Concept behind the Introduction of\nSection 194O?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The concept behind the Introduction of Section 194O\nprimarily revolves around the concept of Deductor, Deductee, nature of Payment\n&amp; time, applicable rates and TDS Returns &amp; certificates. The\nillustrations for each criterion are given below:-<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Who is the Deductor u\/s 194O?<\/h3>\n\n\n\n<p>An E-Commerce operator is an individual who controls and\noperates the online platform for the trading of goods and services. Thus,\ne-Commerce Operators are under the legal obligations to deduct TDS (Tax\ndeduction at source) on making payments to the sellers of the e-commerce\nplatform. Henceforth, the TDS ought to be deposited with the IT department and\na TDS return must be filed. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Who is the Deductee u\/s 194O?<\/h3>\n\n\n\n<p>E-Commerce Seller or E-Commerce participant is an individual\nfrom the Indian Territory who engaged in the selling of goods and services on\nan online platform. Income generated by the seller on the e-Commerce platform\nshall be deducted u\/s 194O. E-commerce sellers who are not from the Indian\nprovince would also have to comply with the same provision. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Nature of Payment<\/h3>\n\n\n\n<p>E-commerce operators must have to deduct TDS on the\naggregate sales of goods and services. This includes GST (Goods and services\ntax) and commission imposed by the e-commerce operator. <\/p>\n\n\n\n<p>Moreover, if the buyer who made a payment to the e-commerce\nsellers would be deemed as the payment made by the e-commerce operator and the\namount will consolidate in aggregate sales on which the deduction regarding the\nTDS has to be done.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Time of Payment<\/h3>\n\n\n\n<p>The deduction regarding the TDS must be done at the time of\ncredit of the amount to the seller&#8217;s account or at the time of payment,\nwhichever is applicable.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Rate<\/h3>\n\n\n\n<p>If the Deductee is from the Indian Territory or HUF having\naggregate sales in the excess of five lakh rupees in a financial year, deduct\nTDS under section 194O @ 1% on aggregate sales. For any other category of\ndeductee, deduct TDS (tax deduction at source) @ 1% on aggregate sales\nregardless of the number of gross sales. In the absence of Aadhaar or PAN, the\nTDS will be deducted by @ 5% regardless of the gross sale amount. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">TDS Certificate<\/h3>\n\n\n\n<p>Deductor must provide Form 16A to the seller as the tax credit certificate for the deduction of TDS. With the help of such a form, the seller can claim credit for the tax deducted while <a href=\"https:\/\/corpbiz.io\/income-tax-return-filing\"><strong>filing Income tax return<\/strong><\/a>. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">TDS Return<\/h3>\n\n\n\n<p>Once the e-Commerce operator deposits the TDS with the <strong>IT department<\/strong>, the next step is to file Form 26Q on TRACES to provide info regarding dividend payment. After <a href=\"https:\/\/corpbiz.io\/tds-return-filing\"><strong>filing TDS return<\/strong><\/a>, the deductor i.e. Ecommerce operator must forward Form 16A to the deductee.\u00a0 <\/p>\n\n\n\n<p>After depositing TDS with the IT department, the deductor\nshould file Form 26Q on TRACES to submit details of dividend payment.<\/p>\n\n\n\n<p>As soon as the&nbsp; return\nis filed, the deductor should provide Form 16A to the deductee<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Understanding_the_Concept_of_Section_194O_through_Examples\"><\/span>Understanding the Concept of Section 194O through\nExamples <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following examples will let you understand the notion of\nSection 194O. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Example 1<\/h3>\n\n\n\n<p>Arun is a legitimate e-Commerce-seller on Flipkart, a\nleading eCommerce store. The following are the particulars of sales that he\nmade on this very platform. <\/p>\n\n\n\n<ul>\n<li>Aggregate Sales : Rs 7,08,000 (Sales from Arun\nto Champak through Amazon)<\/li>\n\n\n\n<li>GST @ 18% included in the above sales = Rs.\n108,000<\/li>\n\n\n\n<li>Commission @ 6% charged by Amazon included in\nabove sales = Rs. 42,480<\/li>\n\n\n\n<li>Champak directly made payment to Arun of Rs.\n30,000 (including GST)<\/li>\n<\/ul>\n\n\n\n<p><strong>Solution:<\/strong><strong>&#8211;<\/strong><\/p>\n\n\n\n<ul>\n<li><strong>Amazon India is the E-Commerce Operator<\/strong><\/li>\n\n\n\n<li><strong>Arun is the E-commerce Seller <\/strong><\/li>\n<\/ul>\n\n\n\n<p>Aggregate Sales = Rs. 7,08,000+ Rs. 30,000 = Rs. 7,38,000. <\/p>\n\n\n\n<p>Since the aggregate sales surpass Rs. 5, 00,000 and Arun is\nan Indian national, the eCommerce operator i.e. Amazon India is liable to\ndeduct TDS @ 1% on aggregate sales before making payment Arun. <\/p>\n\n\n\n<ul>\n<li>TDS = 1% of 7,38,000 = Rs. 7,380<\/li>\n\n\n\n<li>Payment to Arun = 7,38,000 &#8211; 42,480 \u2013 7380 =\n688,140<\/li>\n\n\n\n<li>The ecommerce operator shall deposit TDS of Rs\n7380 with the IT department also file Form 26Q<\/li>\n<\/ul>\n\n\n\n<p>If Arun do not posses Aadhar or PAN, then TDS @ 5% shall be\ndeducted regardless of the aggregate sales amount <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Example 2<\/h3>\n\n\n\n<p>Magnus global Pvt Ltd is a registered Amazon client engaged\nin selling FMCG products to the customers. Following are the particular sales\nmade by the company on Amazon: <\/p>\n\n\n\n<ul>\n<li>Total Sales = Rs. 2,36,000<\/li>\n\n\n\n<li>GST @ 18% included in the above sales = Rs.\n36,000<\/li>\n\n\n\n<li>Commission @ 6% charged by Amazon included in\nabove sales = Rs. 14160<\/li>\n\n\n\n<li>Sales from Magnus global to Rakesh through\nAmazon. However, Rakesh directly made a payment to Magnus global of Rs. 10,000\n(including GST)<\/li>\n<\/ul>\n\n\n\n<p><em><strong>Solution<\/strong><\/em><em><strong>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <\/strong><\/em><\/p>\n\n\n\n<ul>\n<li>E-Commerce Operator \u2013 Amazon India<\/li>\n\n\n\n<li>E-Commerce Seller \u2013 Magnus global Pvt. Ltd<\/li>\n\n\n\n<li>Gross Sales = Rs. 2,36,000+ Rs. 10,000 = Rs.\n2,46,000<\/li>\n<\/ul>\n\n\n\n<p>Amazon India is liable to deduct TDS @ 1% of Aggregate sales\nbefore making payment to Magnus Global, TDS ought to be deducted regardless of\nthe sales amount. <\/p>\n\n\n\n<ul>\n<li>TDS = 1% of 2,46,000= Rs. 2460<\/li>\n\n\n\n<li>Payment to Magnus global Pvt. Ltd =2,46,000\u2013\n14160 \u2013 2460 = Rs. 229,380<\/li>\n\n\n\n<li>Amazon shall deposit the TDS of Rs 2460 with the\nIT Department and file return form 26Q.<\/li>\n\n\n\n<li>TDS should be deducted @5% if Magnus global Pvt.\nLtd does not holds PAN Card for verification and authentication processes.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TDS_process_Chart\"><\/span>TDS process Chart<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/TDS-process-Chart.png\" alt=\"TDS process Chart\" class=\"wp-image-21268\" width=\"548\" height=\"548\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/TDS-process-Chart.png 1000w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/TDS-process-Chart-150x150.png 150w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/TDS-process-Chart-300x300.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/12\/TDS-process-Chart-768x768.png 768w\" sizes=\"(max-width: 548px) 100vw, 548px\" \/><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In past, the eCommerce operators rejoice many tax exemptions due to the unavailability of a proper framework. The advent of Section 194O will make them liable to deduct TDS every time whenever made payment to the participant. Get in touch with <a href=\"https:\/\/corpbiz.io\/\"><strong>Corpbiz<\/strong><\/a> expert to get in-depth information and services on tax-related matters.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/form-16b-tds-certificate-regarding-sale-of-property\/\">Form 16B \u2013 TDS Certificate Regarding Sale of Property<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A new TDS section 194O was unveiled in the Union Budget 2020. E-commerce has become the primary choice for traders and buyers in the recent past. With the increase in online sales, there has been a significant increase in the number of buyers and sellers who trade via online platforms (e-Commerce website). The seller must [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":21298,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[237],"tags":[1292],"acf":{"service_id":"90"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5724,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/21266"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=21266"}],"version-history":[{"count":10,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/21266\/revisions"}],"predecessor-version":[{"id":65065,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/21266\/revisions\/65065"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/21298"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=21266"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=21266"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=21266"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}