Analysis, Income Tax, Law & Society

Simplifying Section 194-O of Income Tax Act

This year we saw the birth of section 194-O of Income Tax act. We feel that this section will go through a few amendments and see much litigation in the future as there are still unanswered questions. Do read on. See full text here.

Text of Section 194-0 in Simple Language

1

E-commerce operators (likes of Amazon, Flipkart), when crediting or paying sales or services money to the sellers on its site must deduct income tax at 1%.

2

No deduction necessary if the following conditions are met:

  • Sellers are HUFs or individuals
  • Have furnished PAN or Aadhaar
  • Gross amount is less than 5 lakhs

3

TDS under any other provision would not be applicable if:

  • Tax is deducted as per sub-section 1
  • Tax is not applicable as per sub-section 2

Condition: Sub-section 3 does not apply to amounts received by e-commerce operator for hosting advertisements or providing any other services, which are not in connection to sub-section 1.

4. CBDT with the approval of central government can issue guidelines to remove difficulties that could arise in giving effect to provisions of this section. 

5. Guidelines issued by Board, per sub-section 4, will have to be laid before (sic) each house of the parliament and will be binding on income tax authorities and e-commerce operators.

6. E-commerce operators are responsible for paying e-commerce participants.

Section 194-O articles

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