Our WhatsApp number cannot be used for calls. This is a chat only number.
The e-commerce businesses were free of tax liability until 2020. As online shops grow in number, keeping a check on their taxes is the need of the hour. Section 194O of the Income Tax Act brings these digital facilities within the tax ambit.
The Union Budget 2020 introduced Section 194O with effect from 1st October 2020. It enlarges the TDS base and brings e-commerce participants under the tax laws.
Under Section 194O, e-commerce operators deduct TDS on participants' gross sale amounts. It ensures a TDS of 1% is deducted from the credit amount of a seller. The sale of goods or provision of services from a participant facilitated by an online marketplace falls under this criteria.
The digital facility operator must deduct tax at source at the time of credit regardless of payment methods. Section 194O under the Financial Act 2020 ensures that taxes are imposed on the e-commerce platform, which was not the case earlier.
The primary purpose is to bring e-commerce participants under the Income Tax Act. The preference for digital markets over physical markets has increased lately. This makes identifying the small sellers and tax evaders very difficult. The reason for growth in the electronic marketplace include –
With effect from 1st October 2020, this act brings the e-commerce participants to pay taxes set by the IT department. In case of any purchases made through the electronic platform, every e-commerce operator should deduct TDS at the time of payment to the participant.
A participant is liable for TDS deduction in case of gross sale amount greater than ₹ 5 lakh or fails to furnish Pan and Aadhaar. The applicable rate will be 5% in the latter case as per Section 206AA.
For Example:
Say you are a registered seller (e-commerce participant) on Flipkart (e-commerce operator). Your gross sales in a financial year = ₹ 5,20,000 (18% GST included). According to section 194O, Flipkart should deduct a TDS of 1% from your gross sales. The calculation is as follows:
|
Particulars |
Amount |
|
Gross sale |
₹ 5,20,000 (18% GST included) |
|
Applicable TDS from the gross sales |
1% |
|
Tax Deducted At Source (1% of ₹ 5,20,000) |
₹ 5,200 |
A digital facilitator deducts a TDS of 1% at the time of credit fulfilment or making payment to the participant, whichever is early.
The e-commerce participants were not under any tax laws and hence filed tax returns independently. This resulted in various small participants evading tax. To ensure taxes are paid properly to the IT department by e-commerce participants, Section 194O of the Income Tax Act is effective.
Moreover, this section can increase the revenue of the Government. It reduces tax evasion by bringing minor to significant e-commerce participants under the IT laws.
Here were all the necessary details of Section 194O of the Income Tax Act. Individuals that this section concerns can go through these data for detailed reference.
Please try one more time!
Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
Continue with {{bikeCtrl.lastVisitedData.lastVisitedUrl.indexOf('DigitPaymentGateway/payments')
!== -1 ? 'payment completion': 'previous choice'}}
