How Does TDS Work on Payments Received via Payment Platforms and Marketplaces in India?

TDS on marketplace payouts is income tax that an e-commerce operator deducts from the amount it pays to a seller for sales or services made through its platform. The Income-tax Act, 2025 sets the rate at 0.1% of the gross amount of the sale or services, with a nil threshold except for the small-seller exemption.

• Operator: An "e-commerce operator" is defined in section 402(13) of the 2025 Act as a person who owns, operates or manages a digital or electronic facility or platform for electronic commerce.
• Participant: An "e-commerce participant" is a person resident in India selling goods or providing services, including digital products, through such a platform, under section 402(14).
• Services: For this rule, "services" includes fees for technical services and fees for professional services, as section 402(34) states. Freelance professional work sold through a platform can therefore be covered.
• Rate: The rate is 0.1% of the gross amount. It was cut from 1% to 0.1% with effect from 1 October 2024, as proposed in the Finance (No. 2) Bill, 2024 memorandum.
• Direct payments: If a buyer pays the seller directly for a sale facilitated by the operator, that amount is treated as paid by the operator and is included in the gross amount, under Note 3(b) to the Table in section 393(1).

People still search for "194-O" because the rule carried that number until 31 March 2026. The Income Tax Department's TDS FAQ says TDS rates and thresholds were retained under the 2025 Act. For how this tax fits with the rest of your income, see income tax on foreign income for freelancers.

TDS on marketplace payouts applies to residents who sell through a platform for electronic commerce, where the operator facilitates the sale. Section 393(1) of the 2025 Act covers sums paid "to a resident", and the e-commerce participant definition also requires residence in India. Small individual sellers who give their PAN or Aadhaar can be exempt.

The e-commerce operator deducts TDS on marketplace payouts when it credits or pays the seller, whichever happens first, and deposits it with the government. It then files a TDS statement under section 397(3). The amount appears in the seller's annual information statement, and the seller claims it as a credit in the return.

1. Give your PAN or Aadhaar to the platform so the correct rate applies and the small-seller exemption can work.
2. The operator works out the gross amount of sales or services for each credit or payment, including amounts the buyer paid you directly for a sale it facilitated.
3. The operator deducts 0.1% at the time of credit or payment, whichever is earlier, as section 393(1)(c) requires.
4. The operator pays the tax to the government and files its TDS statement, quoting the new Act section for credits from 1 April 2026.
5. The operator issues you a TDS certificate under section 395(4) showing the amount and rate deducted.
6. Check that the deduction appears in your annual information statement for the right year.
7. Report the full gross receipts as income in your return and claim the TDS as a credit against your tax.

The rate for TDS on marketplace payouts is 0.1% of the gross amount, with a nil threshold. An individual or HUF seller is exempt where gross sales or services in the tax year do not exceed Rs 5 lakh and PAN or Aadhaar is furnished, under section 393(4), Table serial number 11. Without PAN, the rate is 5%.

If TDS on marketplace payouts is wrong or missing from your statement, you may be unable to claim the credit until the operator corrects its TDS statement. The Income Tax Department's TDS FAQ tells the deductee to inform the deductor, who must file a revised TDS return. The operator also faces its own consequences.

• No PAN: Tax is deducted at 5% instead of 0.1%, under section 397(2)(b)(i)(C). You can still claim the full amount as credit, but more cash is held back until you file.
• Missing credit: A credit that does not show in your statement often comes from a wrong section number, a wrong year, or an unfiled TDS return. The department's FAQ lists these as transition mismatch causes.
• Operator default: An operator that fails to deduct or pay is an assessee in default under section 398(1). The FAQ adds interest at 1% a month for not deducting and 1.5% a month for late deposit.
• Disallowance: The operator also loses 30% of the related expense in its own business income under section 35(b) of the 2025 Act, as the TDS FAQ explains.
• Your income: TDS does not reduce your taxable income. Under section 396, sums deducted are deemed to be income received, so you report the gross amount.

Download your annual information statement, match it with the platform's payout reports and TDS certificates, and write to the operator about any gap. Under section 397(3)(f), a deductor can file a correction statement within two years from the end of the tax year in which the statement was due. See AIS and 26AS mismatch on foreign income.

TDS on marketplace payouts is calculated as 0.1% of the gross amount of sales or services facilitated by the operator. Say a resident freelancer has Rs 8,00,000 of services through an Indian platform in tax year 2026-27 and has given PAN. The Rs 5 lakh exemption does not apply, so TDS is Rs 800. Without PAN, it would be Rs 40,000. These numbers are hypothetical.

• Net income: Reporting only the amount received after TDS. The deducted tax is part of your income and must be added back before claiming it as credit.
• No PAN: Not furnishing PAN or Aadhaar to the platform. This blocks the Rs 5 lakh exemption and raises the rate to 5%.
• Final tax: Treating 0.1% as the full tax on the income. It is only an advance deduction, and your actual tax depends on your total income and slab or scheme.
• Wrong year: Claiming a March 2026 deduction in tax year 2026-27. Credits follow the year in which the income is assessable.
• Old section: Assuming 194-O still governs payouts from April 2026. Those fall under section 393(1), Table serial number 8(v).
• No reconciliation: Filing the return without matching the platform's statements to the annual information statement, which leads to credit mismatches.

Every rule, deadline and form on this page is linked to its official source, checked on the dates below.

1. The Income-tax Act, 2025 (No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025, Section 393(1) and Table serial number 8(v) with Note 3; section 393(4) Table serial number 11; sections 395(1), 395(4), 396, 397(2)(b)(i)(C), 397(3)(b) and (f), 398(1), 401, 402(12), (13), (14), (34), 404, 405(1) (checked 9 Oct 2026)
2. Finance (No. 2) Bill, 2024, Memorandum explaining the provisions, Section 194-O: reduction of TDS rate from 1% to 0.1% with effect from 1 October 2024 (checked 9 Oct 2026)
3. Income Tax Department e-filing portal: TDS Compliance FAQs (Income Tax Act 2025), FAQ 1 (earlier of credit or payment decides the Act), 3 (rates and thresholds retained), 14 and 17 (interest, assessee in default, section 35(b) disallowance), 22 to 26 (AIS, Form No. 168, mismatches and revised TDS returns) (checked 9 Oct 2026)
4. Income Tax Department e-filing portal: Income Tax Forms FAQs, FAQ 6 to 8 (lower or nil deduction certificate under section 395(1), Form No. 128) (checked 9 Oct 2026)