Under Section 194-O, a marketplace deducts TDS on the gross sales it credits to sellers. As generally understood, an individual or HUF seller whose gross sales in the previous year do not exceed ₹5 lakh, and who has given PAN or Aadhaar, is exempt. Companies, firms and LLPs get no such relief. Confirm the latest provisions with your tax adviser.
What Section 194-O requires from a marketplace
Section 194-O of the Income-tax Act puts the TDS obligation on the e-commerce operator, meaning the marketplace, not on you as the seller. When the marketplace credits or pays you for goods or services sold through its platform, it deducts income-tax at source and deposits it with the government.
For you, this is not an extra cost. It is an advance income-tax payment that should show up as credit against your final tax liability. The practical problem is that your settlement is lower than your sales value, and you must be able to prove the difference was TDS and not an unexplained deduction.
The small seller threshold: who is exempt
As generally understood, the law gives relief to small sellers who meet all of these conditions:
- The seller is an individual or HUF (not a company, firm or LLP).
- Gross sales of goods or services through the operator during the previous financial year do not exceed ₹5 lakh.
- The seller has furnished their PAN or Aadhaar to the operator.
| Seller type | Threshold relief? |
|---|---|
| Individual or HUF, PAN/Aadhaar given, within limit | Generally no TDS under 194-O |
| Individual or HUF, above the limit | TDS applies |
| Individual or HUF, PAN/Aadhaar not given | Relief not available; confirm treatment |
| Company, LLP, partnership firm | No small-seller relief |
Thresholds, rates and wording have been amended before and the income-tax law framework is itself being revised. Check the current provision, relevant CBDT circulars and your tax adviser before relying on any figure, including those above.
What counts towards the sales limit
The limit is tested on gross sales through that operator, not on your profit or on net settlement. Two points trip sellers up:
- Per operator, per year. The test is applied by each marketplace on what it has credited to you, so check how each platform treats it.
- Gross, not net. Sales later reversed through returns may still affect the gross figure the platform uses. Treatment of GST, shipping and similar components has been the subject of clarifications, so confirm with your adviser.
Your settlement report and the platform's TDS statement are the best evidence of what the marketplace actually treated as the base.
When TDS applies despite being a small seller
Do not assume you are exempt because you are small in business terms. TDS can still be deducted if:
- You operate as a private limited company, LLP or firm, as the threshold relief is for individuals and HUFs.
- Your gross sales cross the limit during the year.
- Your PAN or Aadhaar is missing, wrong or not linked properly in the seller profile.
If TDS is deducted on a seller who believes they qualify, first check the seller profile details and the TDS section in the settlement report. Then raise a documented query with the marketplace. Rates and conditions for higher deduction on missing PAN sit in the Income-tax Act, so confirm the latest position with your adviser.
How to reconcile TDS against settlements
Whether or not you are above the threshold, reconcile every quarter. A simple routine:
- Pull settlement reports and note TDS deducted per period.
- Download the TDS statement or certificate from the marketplace.
- Compare with Form 26AS or AIS on the income-tax portal.
- Flag mismatches: TDS in settlement but missing in 26AS, or deduction on a seller who should be exempt.
- Raise the case with the marketplace and track it until the correction or credit is visible.
MarketplaceMetrics by Fundle reconciles marketplace sales and settlements, so TDS lines can be tied back to the orders and periods they relate to. Myntra Excel reports are reviewed; other marketplaces are in scope discussion.
Where to confirm the latest rules
Do not rely on blog posts, including this one, for rates. Use these sources:
- The Income-tax Act text and CBDT circulars on the Income Tax Department website.
- Your seller agreement and the marketplace's tax policy page.
- The TDS section of your settlement report, which shows what was actually deducted.
- Your chartered accountant, especially if you are near the limit or switching from proprietorship to a company.
Worked example
Illustrative example only. Figures are not real and no rate is implied.
Seller A is an individual proprietor with PAN on file. Gross sales on one marketplace in the previous year were ₹4,20,000 (illustrative). Based on the threshold conditions, TDS should generally not be deducted. In the next quarter, the settlement report shows TDS of ₹1,200 (illustrative) on orders worth ₹1,20,000 (illustrative).
- Step 1: Check the seller profile for a PAN or Aadhaar mismatch.
- Step 2: Check whether the platform counted gross sales from another entity or period.
- Step 3: Check Form 26AS to see whether the ₹1,200 appears there.
- Step 4: If the deduction is wrong, raise a documented query with order-level evidence, and track the correction.
If 26AS shows only ₹1,000 (illustrative), the ₹200 gap needs a separate query to the marketplace about its TDS filing.
Questions and answers
What is the Section 194-O TDS threshold for small sellers?
As generally understood, an individual or HUF seller with gross sales through the platform not exceeding ₹5 lakh in the previous year, who has furnished PAN or Aadhaar, is not subject to 194-O deduction. Confirm the latest provision with your tax adviser before relying on it.
Does a private limited company get the 194-O threshold?
No. The small-seller relief is for individuals and HUFs. Companies, LLPs and partnership firms selling on a marketplace are generally subject to TDS from the first rupee of sales. Verify with your chartered accountant and the current law.
Where can I see TDS deducted by the marketplace?
Check the TDS section of your settlement report, any TDS certificate or statement the marketplace issues, and Form 26AS or AIS on the income-tax portal. Compare all three to confirm that deducted tax is actually credited to your PAN.
What if TDS is deducted although I think I am exempt?
Check that your PAN or Aadhaar and seller type are correct in the profile and that gross sales are within the limit. Then raise a written query with the marketplace with settlement evidence, and confirm the way to claim credit or correction with your tax adviser.