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Direct Tax Laws and International Taxation · E-commerce Transaction and Liability in Special Cases

TDS on E-commerce Transactions under the Income-tax Act, 2025

Updated 11 October 2026 · Fact-checked

An e-commerce operator must deduct tax at 0.1% of the gross amount of sales or services (or both) made by an e-commerce participant through its platform. This is serial number 8(v) of the Table in section 393(1). Check the exemption for small individual and HUF participants, then apply 0.1% to the gross amount.

Understand TDS on E-commerce Transactions

An e-commerce operator runs a digital or electronic platform. An e-commerce participant is a seller or service provider who sells goods or services through that platform. The platform brings buyer and seller together and usually collects the money. The law makes the operator deduct tax on what the participant earns.

The rule sits in section 393(1), Table serial number 8(v). It covers any sum on account of sale of goods or provision of services by an e-commerce participant, facilitated by an e-commerce operator through its digital or electronic facility or platform. The payer is any e-commerce operator. The rate is 0.1% of the gross amount of such sale or services or both. The threshold limit is nil.

The base is the gross amount, not the operator's commission and not the participant's profit. Note 3(b) adds a point students miss. If the buyer pays the participant directly, that payment is deemed to be paid by the operator to the participant. It is included in the gross amount. The operator is also deemed to be the person responsible for paying (Note 3(c)).

Two things push this rule aside or limit it. First, section 393(4), Table serial number 11, says no deduction is made where the amount is credited or paid to an individual or HUF participant, whose gross sales or services in the tax year do not exceed ₹5,00,000, and who has furnished PAN or Aadhaar number to the operator. All three conditions must be met. Second, Note 3(d) says if tax is deducted under 8(v), or the transaction is not liable under that exemption, no tax is deducted on it under any other provision of the Chapter. Note 3(e) carves out amounts received for hosting advertisements or other services not connected with the sale or services. Tax on those can fall under other provisions.

If the same transaction also falls under serial number 8(vi) (transfer of a virtual digital asset), Note 4 says tax is deducted only under 8(vi). Note 3(a) says 8(v) overrides other provisions of the Chapter for deduction of tax. Timing follows section 393(1)(c): deduct at the time of credit to the participant's account or payment, whichever is earlier.

Key rules to remember

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.

How to solve TDS on E-commerce Transactions questions

Use this order for any question on TDS by an e-commerce operator.

  1. 1Identify the roles. Confirm the payer runs a digital platform (operator) and the payee sells goods or services through it (participant).
  2. 2Confirm the transaction is a sale of goods or provision of services facilitated by the platform. Separate out amounts such as advertisement hosting fees, which are not part of this rule (Note 3(e)).
  3. 3Check for a virtual digital asset transfer. If one is involved, tax is deducted under 8(vi) only (Note 4).
  4. 4Test the exemption in section 393(4), serial no. 11: individual or HUF, gross not above ₹5,00,000 in the tax year, and PAN or Aadhaar furnished. All three must be true.
  5. 5If not exempt, build the gross amount. Add amounts the buyers paid directly to the participant (Note 3(b)). Do not reduce it for the operator's commission.
  6. 6Apply 0.1% to the whole gross amount. There is no threshold, so tax applies from the first rupee.
  7. 7State the time of deduction (credit or payment, whichever is earlier) and conclude.

Quickest way: Three-check shortcut

When to use it: Use in MCQs and short numerical questions where you must give the TDS figure fast.

  1. Is the payee an individual or HUF with annual gross of ₹5,00,000 or less and PAN or Aadhaar given? If yes, TDS is nil.
  2. Otherwise take total gross value, including direct buyer payments, and exclude unrelated ad or service fees.
  3. Multiply by 0.1%. Quick check: ₹10,00,000 gives ₹1,000.

Common mistakes in TDS on E-commerce Transactions

  • Applying 0.1% to the operator's commission instead of the gross amount.

    Students think the operator only earns the commission, so only that is taxed.

    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.

    The ₹5,00,000 figure is remembered but the conditions are forgotten.

    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.

  • Treating a participant that is a company or firm as exempt when its sales are below ₹5,00,000.

    Students read only the amount test.

    Fix: The exemption is limited to an individual or HUF. Others face TDS from the first rupee.

  • Ignoring payments made by buyers directly to the participant.

    Students include only money that passes through the operator.

    Fix: Note 3(b) deems such payments to be paid by the operator and includes them in the gross amount.

  • Deducting tax on advertisement or listing fees under this rule.

    Everything the operator pays or receives is lumped as e-commerce.

    Fix: Note 3(e): amounts for hosting advertisements or other services not connected with the sale are outside the bar in Note 3(d). Test them under the other provisions.

  • Deducting under both 8(v) and another provision on the same sale.

    Students stack provisions.

    Fix: Note 3(d) stops deduction under any other provision once tax is deducted under 8(v) or the transaction is exempt under the no-deduction table.

Worked examples

Example 1

ShopKart India Pvt Ltd runs an online marketplace. In the tax year 2026-27 it credited ₹18,00,000 to Meera Traders (a partnership firm) for goods sold through the platform. Buyers also paid ₹2,00,000 directly to Meera Traders for the same platform sales. ShopKart's commission was ₹1,50,000. Compute the tax to be deducted.

Show the solution
  1. ShopKart is the operator and Meera Traders is the participant. Rule: section 393(1), Table 8(v).
  2. Meera Traders is a firm, so the individual or HUF exemption in section 393(4) serial no. 11 does not apply.
  3. Gross amount = ₹18,00,000 + ₹2,00,000 direct payments = ₹20,00,000. The commission is not deducted.
  4. TDS = 0.1% × ₹20,00,000 = ₹2,000.

Answer: ShopKart must deduct tax of ₹2,000 (0.1% of gross ₹20,00,000).

Example 2

Ravi Kumar, an individual, sells handicrafts through an online platform run by BharatBazaar Ltd. His gross sales in the tax year 2026-27 are ₹4,60,000. Case A: he has given his PAN. Case B: he has given neither PAN nor Aadhaar. State the TDS in each case.

Show the solution
  1. Rule: section 393(1), Table 8(v), with the exemption in section 393(4), serial no. 11.
  2. Case A: Ravi is an individual, gross ₹4,60,000 does not exceed ₹5,00,000, and PAN is furnished. All conditions are met, so no tax is deducted.
  3. Case B: the PAN or Aadhaar condition fails, so the exemption is not available.
  4. Case B: TDS = 0.1% × ₹4,60,000 = ₹460.

Answer: Case A: nil. Case B: ₹460.

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%.

Practice questions from E-commerce Transaction and Liability in Special Cases

TDS on E-commerce Transactions: frequently asked questions

What is the TDS rate on e-commerce operator payments to participants?

The rate is 0.1% of the gross amount of sales or services or both. It is under section 393(1), Table serial no. 8(v). The threshold limit is nil.

Who is the person responsible for deducting tax?

The e-commerce operator. Note 3(c) deems the operator to be the person responsible for paying the participant, even where buyers pay the participant directly.

When is no TDS required on e-commerce sales?

No tax is deducted if the participant is an individual or HUF, gross sales or services in the tax year do not exceed ₹5,00,000, and PAN or Aadhaar has been given to the operator. All three conditions must be met.

Is TDS deducted on the operator's commission only?

No. The base is the gross amount of the sale or services, not the commission or the participant's profit.