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Section 194-O of the Income Tax Act

Section 194-O of the Income Tax Act mind map
Recent News
Circular No. 20 of 2023
Dated 28th December 2023
Issued by Central Board of Direct Taxes (CBDT)
Guidelines and Clarifications
Treatment of Multiple ECOs
Compliance Based on Actual Seller
Fees and Charges
Inclusion in Gross Amount for TDS
Convenience Fees, Commission, Logistics
GST and State Levies
Deduction Excluding GST if Indicated Separately
Purchase-Returns and Adjustments
Adjustment Against Next Transaction
Discounts
Impact on Gross Amount Calculation
Types: Seller, Buyer ECO, Seller ECO
When
Introduced in 2020
Why
Streamline TDS on E-commerce Transactions
What
TDS Rate
1% on Gross Amount
Applicability
E-commerce Operators
Amazon, Hotel Booking Platforms
Resident Indian Sellers
Exempt below ₹5 Lakh Annual Sales
Definition
E-commerce
Supply over Digital Network
E-commerce Operator
Owns, Operates Digital Platforms
E-commerce Participant
Resident in India
Point of Deduction
Credit or Payment, Whichever is Earlier
Exclusions
Non-Resident Sellers
Individuals or HUF below Threshold
Equalisation Levy
Applicable for Non-Resident Operators
Who
Central Government
CBDT
E-commerce Operators
Responsible for TDS
E-commerce Participants
Subject to TDS
Significance
Enhancing Transparency
Streamlining E-commerce Taxation
Leveraging Large Platforms
For Small E-sellers Tax Net
Challenges
Complexity
In Compliance
For Multiple Operator Models
Way Forward
Regular Updates and Clarifications
Adapting to Evolving Digital Landscape

Section 194-O of the Income Tax Act, introduced in 2020, mandates e-commerce operators in India to deduct Tax Deduction at Source (TDS) at a rate of 1% on the gross amount of sales or services facilitated through their digital platforms. It covers resident Indian sellers and enterprises, termed e-commerce participants, and exempts those with annual sales below ₹5 lakh. The provision aims to streamline the taxation process for e-commerce transactions, enhancing transparency and compliance in the digital economy. The guidelines issued by the Central Board of Direct Taxes (CBDT) address various aspects of TDS deduction, including the treatment of fees, GST, purchase-returns, and discounts, ensuring clarity for multiple e-commerce operator models.

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