E-commerce TCS (Section 194-O)

How section 194-O works

Introduced by Finance Act 2020 and effective 1 Oct 2020, section 194-O requires every e-commerce operator (ECO) to deduct tax at source on the gross amount of sales/services routed through the platform to a participant seller. The rate was 1% until 30 Sep 2024 and was cut to 0.1% from 1 Oct 2024 (Finance Act 2024). The threshold of ₹5 lakh gross sales in the FY applies only to individuals and HUF sellers who furnish PAN/Aadhaar — without PAN, the rate jumps to 5% (section 206AA) and no threshold.

Worked example

A Surat artisan sells fabric on Meesho with ₹8 lakh gross sales in FY 2025-26. From 1 Apr to 30 Sep 2025 sales were ₹3 lakh — no TCS (below threshold). On 1 Oct she crosses ₹5 lakh; from then on Meesho deducts 0.1% on every payout. On the remaining ₹3 lakh sales, TCS = ₹300. That ₹300 appears in her AIS / 26AS and can be claimed as a credit in ITR, refunded if her tax liability is lower.

When to use this

• Side-hustle sellers on Amazon Karigar, Flipkart Samarth, Meesho, Snapdeal
• Etsy / Bigcartel exporters whose Indian payment-aggregator deducts under 194-O
• Freelancers on Upwork-India / Fiverr where the platform routes payouts via an Indian ECO
• Quick-commerce vendors on Zomato, Swiggy Instamart (food sellers, kirana partners)

Don't confuse with equalisation levy (a separate tax on foreign digital firms) or GST ITC tracker — TCS is income tax, not GST.