E-commerce Transaction and Liability in Special Cases: formula sheet

Key formulas

TDS on e-commerce sales or services

TDS = 0.1% × gross amount of sales or services or both

Section 393(1), Table serial no. 8(v). Payer is the e-commerce operator. Threshold limit is nil.

Gross amount includes direct payments

Gross amount = amount paid by the operator + amount paid by buyers directly to the participant

Note 3(b). Direct payments are deemed paid by the operator.

No-deduction test for small participants

No TDS if: participant is an individual or HUF AND gross sales/services in the tax year ≤ ₹5,00,000 AND PAN or Aadhaar furnished

Section 393(4), Table serial no. 11. If gross exceeds ₹5,00,000, the exemption fails and 0.1% applies.

Time of deduction

Earlier of credit to the payee's account or payment

Section 393(1)(c).

Priority rules

8(vi) overrides 8(v) on the same transaction; 8(v) overrides other provisions of the Chapter

Note 4 and Note 3(a). Note 3(e) excludes advertisement and unrelated service fees.

SEP by transactions

Aggregate payments from transactions with persons in India in the tax year > prescribed amount

Covers goods, services, property and download of data or software. The amount is prescribed by rules.

SEP by users

Systematic and continuous soliciting or interaction with prescribed number of users in India

Applies whether or not the agreement is made in India or the non-resident has a place of business there.

Attribution rule

Taxable in India = income reasonably attributable to operations in India or to SEP transactions/activities

Section 9(9)(f). Not global income.

Exclusion

Purchase of goods in India for export is outside SEP

Section 9(9)(e). The independent-agent exclusion in section 9(9)(c)(i) applies only to business carried out in India. It does not remove SEP under section 9(9)(d).

Digital income included in attribution

Advertisements targeting India + sale of data from India + sale of goods/services using Indian data

Section 9(9)(g). Based on residence of customer or Indian IP address.

Indirect transfer test

Assets in India > ₹10 crore AND ≥ 50% of total assets

Section 9(10). Value is fair market value without reducing liabilities.

Representative assessee (section 303(1))

Agent of non-resident | guardian or manager of minor or person of unsound mind | court-appointed receiver, manager or similar | trustee (written trust) | trustee (oral trust)

Five categories. Learn them as a list; questions ask you to classify a person.

Agent of non-resident (section 306(1))

(a) person in India: employed by or on behalf of / business connection / from or through whom income is received / trustee of the non-resident; (b) any person who acquired a capital asset in India by transfer

Limb (a) needs the person to be in India. Limb (b) covers residents and non-residents.

Broker exception (section 306(2))

Indian broker dealing with or through a non-resident broker is not an agent if (a) transactions are in ordinary course through him and (b) non-resident broker acts in ordinary course, not as principal

Both conditions must be met.

Hearing before agency (section 306(3))

No treatment as agent without opportunity of being heard by the Assessing Officer

Natural justice requirement.

Liability of representative assessee (section 304)

Same duties, responsibilities and liabilities as if the income were his own; assessed in own name but in representative capacity only

Section 304(2): no separate assessment under other provisions for that income. Section 304(3): the AO may also assess the principal directly.

Recovery from assets (sections 304(5) and 422)

AO may proceed against all property under the representative's control; for non-resident income, tax may be recovered by deduction under Chapter XIX-B and from the non-resident's assets in India

Section 422 applies irrespective of section 304(1) or (5).

Right to recover (section 305)

Recover sums paid from the principal, or retain from money in hand; may retain estimated liability; AO certificate if there is a disagreement

Under the certificate, recovery at final settlement is capped at the certified amount, except for additional assets of the principal in his hands.

Legal representative (section 302(1))

Liability of representative = sum the deceased would have paid, in like manner and to the same extent

The representative is deemed to be an assessee (section 302(3)).

Limit on representative's liability (section 302(4))

Liability ≤ value of the estate able to meet it

Subject to the personal liability rule in section 302(5) and (6).

Personal liability (section 302(5) and (6))

Personal liability = tax unpaid, capped at the value of the asset charged, disposed of or parted with

Applies only if the representative deals with estate assets while tax is undischarged.

Firm dissolved (section 330)

Assess the firm as if no dissolution had taken place; partners at the time of dissolution are jointly and severally liable

Legal representative of a deceased partner is also jointly and severally liable.

AOP dissolved (section 321)

Same as section 330, with members of the AOP in place of partners

Section 302(4) is preserved for deceased members.

Partners during the year (section 329)

Every person who was a partner during the tax year is jointly and severally liable with the firm for that year's tax, penalty or other sum

Applies to the firm's liability for the tax year, even without dissolution.

Assessment as a firm (section 325(1))

Firm assessed as a firm if partnership is evidenced by an instrument AND individual shares are specified in it

Both conditions are needed. A certified copy goes with the return of the first year.

HUF presumption

Family assessed as undivided = deemed HUF until a finding of partition is recorded

Section 315(1). The AO records the finding and the date after notice to all members (section 315(2), (3)).

Partition during the tax year

Income up to date of partition: assessed as if no partition; members jointly and severally liable

Section 315(4). Income after partition is assessed in the members' own hands.

Partition after the tax year

Total income of the whole tax year assessed as if no partition

Section 315(5). Joint and several liability applies as in sub-section (4)(b).

Several liability of members

Several liability is computed by the share of joint family property allotted at partition

Section 315(9). Joint and several liability allows recovery from any member, subject to this computation.

Meaning of partition

Physical division of property (where divisible); division of income alone or severance of status alone is not partition

Section 315(10)(a).

Partial partition after 31-12-1978

No inquiry, no finding; family assessed as if no partial partition

Section 315(8). Members and the family are jointly and severally liable for tax, penalty, interest, before or after the partial partition.

Executor assessment

One executor: taxed as an individual. More than one: taxed as an association of persons

Section 312(1). Residential status is that of the deceased for the year of death (section 312(2)). Assessed separately from the executor's own income (section 312(4)).

Specific legatee income

Estate income distributed to a specific legatee in the year is excluded from the estate and included in the legatee's income

Section 312(6).

Legal representative liability

Liability limited to the estate's capacity to meet it; personal liability up to the value of the asset charged or disposed of

Section 302(4)-(6). Personal liability applies if the representative parts with estate assets while the tax is undischarged.

Notices after total partition

Serve on the last manager; if dead, on all adults who were members just before partition

Section 503(1). For a dissolved firm or association, notice may be served on a partner (not a minor) or member immediately before dissolution (section 503(2)).

Verification of HUF return

By the karta; if the karta is absent from India or mentally incapacitated, by another adult member

Section 265, Table serial 2.

Quick revision

• First identify the person liable, then the income, then the provision.
• E-commerce TDS applies on payments by the operator to e-commerce participants; check the current rate and threshold in your material.
• The equalisation levy is separate from income tax; confirm which levies are still in force before answering.
• Section 174: a person who gets power to enjoy a non-resident's income through a transfer can be taxed on that income.
• Section 174(5): the person must show, to the satisfaction of the Assessing Officer, either that neither the transfer nor any associated operation had tax avoidance as a purpose, or that the transfer and all associated operations were bona fide commercial transactions and were not designed for the purpose of avoiding liability to taxation.
• Under section 174, a body corporate incorporated outside India is treated as non-resident.
• Section 174(4): income already taxed as deemed income is not taxed again when later received.
• Section 159: where an agreement exists, the Act's provisions apply to the extent they are more beneficial to the assessee; Chapter XI applies even if not beneficial (section 159(6)).
• A non-resident needs a residence certificate from his country to claim treaty relief under section 159.
• For a deceased person, the legal representative answers for tax, to the extent of the estate.
• Firm, company, AOP, HUF and trust each have their own rules on who is assessed and at what rate; keep a comparison list.
• Minor's income is generally clubbed with the parent's, subject to exceptions; confirm each exception in your material.

Common mistakes

• Applying 0.1% to the operator's commission instead of the gross amount. Fix: Section 393(1) Table 8(v) says gross amount of the sale or services. Use the full value.
• Applying a threshold of ₹5,00,000 to every participant. Fix: The threshold limit in 8(v) is nil. The ₹5,00,000 relief is an exemption only for an individual or HUF who has furnished PAN or Aadhaar.
• Saying SEP needs an office or server in India Fix: SEP applies irrespective of residence, place of business or services rendered in India.
• Taxing the full global income of the foreign company Fix: Only income reasonably attributable to Indian operations or SEP activities is deemed to accrue in India.
• Treating agent and representative assessee as the same thing. Fix: Remember: the agent of a non-resident is one type of representative assessee. Guardians, receivers and trustees are representative assessees but not agents.
• Treating a person as agent without a hearing. Fix: Quote section 306(3): the person must have had an opportunity of being heard by the Assessing Officer.
• Saying the legal representative pays from his own pocket without limit. Fix: State that liability is limited to the extent the estate can meet it, unless he disposes of estate assets while tax is unpaid.
• Ignoring personal liability when the representative distributes estate assets before paying tax. Fix: Apply section 302(5) and (6): personal liability, limited to the value of the asset charged, disposed of or parted with.
• Treating a division of income, or a mere change of status, as partition. Fix: Recall section 315(10): partition needs a physical division of property where it can be divided. A division of income alone or severance of status alone is not enough.
• Accepting a claim of partial partition made after 31 December 1978. Fix: Under section 315(8), no inquiry is made and no finding is recorded for such a partial partition. The family continues to be assessed as if it had not occurred.

Exam tips

• In MCQs, the usual traps are the rate (0.1%), the nil threshold, and the ₹5,00,000 exemption being only for individual or HUF with PAN or Aadhaar.
• Always write the section reference: section 393(1), Table serial no. 8(v), and section 393(4), serial no. 11 for the exemption.
• In case-based questions, scan for direct buyer payments and ad fees. These are the usual hidden twists (Note 3(b) and 3(e)).
• Show the gross amount build-up line by line, then the 0.1% calculation. Marks go to the working.
• Remember Note 4: a virtual digital asset sale on the platform is taxed under 8(vi) at 1%, not at 0.1%.
• Write the section 9(9) structure: business connection, then business carried out, then SEP, then exclusions, then attribution.
• In case MCQs, look for words like 'confined to purchase of goods for export' or 'independent agent'.
• Never invent threshold figures. Say 'the prescribed limit' unless given.