Download your marketplace settlement reports and the quarterly Form 26AS or AIS entries for section 194-O. Total the TDS per marketplace by quarter, compare it with the TDS receivable ledger in your books, and classify each difference as timing, PAN mismatch, deduction basis or an unfiled return. Raise a correction request for genuine gaps, and claim only credit that appears in your 26AS.
Why 194-O TDS drifts from your books
Under section 194-O, an e-commerce operator deducts income tax on sales of goods or services facilitated for sellers on its platform. The marketplace deducts this before paying you, so your bank credit is lower than your sales. The TDS shows up as a line in the settlement report, but the government credit appears only after the marketplace deposits the tax and files its quarterly return.
That gap between what you recorded and what the tax department shows is where mismatches begin. The rate, thresholds and the value on which tax is deducted change from time to time, so confirm the current position on the Income Tax Department website or with your tax adviser. Do not rely on an old blog post, including this one, for rates.
Gather the documents you need
Collect these for each marketplace and each quarter before you start:
- Settlement or payment reports showing gross sales, returns, commission, fees and the TDS line.
- Form 26AS or AIS entries under section 194-O, with the deductor's name and TAN.
- Form 16A certificates issued by the marketplace, once available.
- Your ledgers: the TDS receivable account and the marketplace receivable or clearing account.
- Your seller agreement, to see how the marketplace describes TDS and what it says about corrections.
Step-by-step reconciliation
- Total TDS from settlements. Sum the TDS lines from every settlement report in the quarter, by marketplace. Use the deduction date or settlement date shown in the report consistently.
- Total TDS in your books. Pull the TDS receivable ledger for the same marketplace and quarter.
- Compare books with settlements. If these differ, the error is internal: a missed settlement, a wrong posting or a duplicate entry. Fix it first.
- Compare with Form 26AS. Match the TAN and the quarter, and compare the amount deducted and deposited against your settlement total.
- Classify each difference using the causes in the next section.
- Raise queries. Write to the marketplace with the settlement references, dates and amounts for items missing from 26AS.
- Document and carry forward. Keep a schedule of open items, and recheck them after the next quarter's return is filed.
Common reasons for mismatch
| Cause | What you see | What to do |
|---|---|---|
| Timing | Settlement TDS booked in one quarter, reported by the marketplace in another | Hold as a reconciling item and recheck after the next filing |
| Return not yet filed | No 26AS entry for the quarter | Wait until after the due date, then follow up |
| PAN error | TDS appears under a different PAN or is missing | Ask the marketplace for a correction statement |
| Deduction basis | TDS differs from what your sales suggest | Check the report's basis, such as the treatment of GST, returns or cancellations, and confirm with your tax adviser |
| Returns and credit notes | Net and gross values do not match | Reconcile the sales and returns report first |
| Posting error | Books differ from the settlement total | Correct the entry in your ledger |
Book entries and claiming the credit
A common treatment is to record the full sale in the marketplace receivable account, then on settlement debit bank for the amount received, debit commission and fee expenses (and any GST input on them), debit TDS receivable for the 194-O amount, and credit the marketplace receivable. Your accountant may structure this differently, which is fine as long as the TDS amount is isolated in its own account.
- Claim credit in your return only for TDS that is visible in Form 26AS or AIS. Confirm the correct year of claim with your tax adviser.
- Keep unmatched amounts in the receivable ledger with a clear status, rather than writing them off early.
- If a marketplace deducted more than the correct amount, pursue the correction through them rather than adjusting on your own.
Make it a monthly routine
Doing this once a year is painful because settlements run into the thousands of lines. A lighter approach is to tag the TDS line in every settlement as it arrives, total it monthly, and run the 26AS comparison as soon as each quarter's return is due. MarketplaceMetrics by Fundle reconciles marketplace sales and settlements for Indian brands, and it can check commissions and fees against agreed terms. Myntra Excel reports are reviewed today, while other marketplaces are in scope discussion, so ask for the current coverage before assuming it fits your channel mix.
Worked example
Illustrative example only. All figures are made up to show the method, not actual TDS rates or amounts.
| Item | Amount (₹, illustrative) |
|---|---|
| TDS per settlement reports, Q1 | 48,200 |
| TDS in your TDS receivable ledger, Q1 | 48,200 |
| TDS shown in Form 26AS, Q1 | 45,900 |
| Difference to explain | 2,300 |
| Cut-off item: deduction reported by marketplace in Q2 | 1,300 |
| Not in 26AS, to follow up with marketplace | 1,000 |
| Unexplained | 0 |
Your books agree with the settlements, so the work is outside your ledger: ₹1,300 is a timing item to recheck next quarter, and ₹1,000 goes to the marketplace with settlement references.
Questions and answers
Where can I see the 194-O TDS deducted by a marketplace?
Check Form 26AS or the Annual Information Statement on the income tax portal, where entries appear against the marketplace's TAN under section 194-O. The marketplace's Form 16A and your settlement reports are the supporting documents. Entries appear only after the deductor files its quarterly return.
Why does my settlement TDS not match Form 26AS?
Common reasons are timing differences between settlement date and the marketplace's reporting quarter, an unfiled or delayed return, PAN errors, differences in the value on which tax was deducted, and posting mistakes in your own books. Classify each difference before contacting the marketplace.
Can I claim TDS credit that is not in Form 26AS?
Generally, credit depends on the deductor having reported the deduction, so claiming amounts not visible in 26AS or AIS risks a mismatch notice. Keep such amounts as open receivables, chase the marketplace for correction, and take your tax adviser's view on the claim.
How often should I reconcile 194-O TDS?
Total TDS from settlements monthly so errors surface early, then do the full comparison with Form 26AS each quarter after the marketplace's return is due. A final check before filing your income tax return catches anything still unmatched.