TDS and TCS for Online Sellers: What E-Commerce Platforms Deduct and Collect

Sell something on Amazon, Flipkart, or a Meesho-style marketplace, and the amount that lands in your bank account a few days later is smaller than what the customer paid. Part of that gap is the platform's own commission and fees, a straightforward cost of doing business through them. Another part is tax the platform is legally required to withhold before it pays you, and that part is not a cost at all. It is money that already belongs to you and comes back once you file. The moment you sell through a marketplace rather than your own website, you pick up a compliance layer that sits on top of your regular income tax and GST obligations: the platform itself becomes a withholding agent on what it pays you. This post walks through how that withholding actually works, why there are two separate mechanisms doing it for two different reasons, and what you need to check to make sure the money withheld actually finds its way back to you.

The Marketplace Becomes a Withholding Agent on What It Pays You

There is a real difference between selling through your own website, where a customer pays you directly through a payment gateway, and selling through a platform that is legally an e-commerce operator, one that runs the marketplace, lists your products alongside other sellers, and processes the payment before passing on your share. Once a platform fits that second description, income tax law treats it as more than a neutral pipe for the money. It makes the operator responsible for deducting tax at source on what it credits or pays to you as a seller, before you ever see the funds, in much the same way an employer deducts TDS from salary or a bank deducts TDS from fixed deposit interest.

Mechanically, it works the way any other TDS does. The platform computes the relevant amount for the period, withholds a portion under this provision, pays the rest into your bank account, and reports what it withheld to the tax department against your PAN. That withheld amount is not gone. It sits as a credit against your PAN, the same way TDS deducted by any other payer eventually shows up as a credit you can claim when you file your return, once the platform deposits what it withheld and reports it in its own TDS filings, the same way any deductor does for anyone it pays.

This obligation traces back to what was Section 194-O of the Income-tax Act, 1961, the provision that first brought e-commerce operators into the TDS net on payments to sellers on their platforms. What this post will not do is hand you a specific rate or threshold figure for it. We checked this site's own current TDS rate table, the one we maintain for the sections individuals and small businesses actually encounter, salary, rent, professional fees, contractor payments, and more, and it does not carry a separate line for e-commerce operator deductions. Rather than reconstruct a figure from memory on a topic where getting it wrong costs you money either way, over-withholding you fail to notice or under-withholding you get flagged for later, treat the rate and threshold as something to confirm directly. Your seller dashboard on the platform will show you what was actually deducted and at what rate, and the income tax portal is the authoritative source for the current provision. Confirm it there before you plan around a number from any general article, including this one.

GST TCS Is a Different Withholding, for a Different Law

Alongside the income tax deduction above, e-commerce operators carry a second, entirely separate obligation under GST law: collecting tax at source on the net value of taxable supplies made through them by their sellers. It is easy to see both figures on the same payout statement and assume they are the same thing counted twice, and that mix-up is common enough to be worth stating plainly. These are two different withholding mechanisms, run under two different laws, for two different purposes. One is an income tax deduction against your eventual income tax liability. The other is a GST collection against your eventual GST liability. They do not offset each other, and confirming one does not confirm the other.

As with the income tax side, we are not printing a specific GST TCS percentage here. This site's calculators do not currently carry a GST TCS rate figure, and repeating a percentage from general recollection on a topic like this is exactly the kind of shortcut that leads someone to under-collect or misreconcile later. The mechanism itself, an operator collecting tax on the net value of taxable supplies made through it and depositing that against your GSTIN, is settled and worth understanding on its own terms. The exact current percentage is not something to assume from an article. Confirm it on the GST portal or from your platform's own seller documentation before you rely on it for your own reconciliation.

How This Fits Into the Income-tax Act, 2025 Renumbering

If you have read anything on this site about the Income-tax Act, 2025, you already know the old 194-series of TDS sections, 194C for contractors, 194H for commission, 194J for professional fees, and more, was consolidated into a single table-driven provision, Section 393, for any payment or credit falling on or after 1 April 2026. Salary is the one deliberate exception, sitting on its own in Section 392. Section 194-O sat inside that same 194-lettered series, so structurally, the e-commerce operator deduction is expected to be folded into Section 393's tables along with the rest of it, rather than surviving as a standalone provision.

We are deliberately not quoting which serial number inside that table it lands on. Our own detailed page on Section 393 flags this exact entry as one of the handful not yet corroborated against a departmental source, resting only on the bare text of the Act as reproduced by a single host rather than something the tax department has confirmed in its own published material. It is very likely correct, but printing an unconfirmed serial number with confidence is exactly the kind of error this post is trying to avoid. What does not change for you as a seller: whichever row it turns out to be, the platform stays responsible for deducting, depositing, and reporting it correctly using the payment code the return requires. That is the platform's filing problem to get right, not yours. Your job is to confirm that whatever it withheld actually reaches you as a credit, which is what the next section covers.

Why Your Bank Payout Is Never the Full Sale Value

Put the pieces together and a single payout from a marketplace can have three separate deductions sitting inside the gap between what the customer paid and what actually reaches your bank account: the platform's own commission and fees, the income tax TDS covered above, and the GST TCS covered above. Only the first of those three is an actual expense. The other two are advance payments of tax and GST that already belong to you in every meaningful sense. They just have not been applied against your liability yet. Sellers who treat all three as equally gone are quietly overstating what selling through a marketplace really costs them, and understating what they are entitled to claim back.

Reconciliation is where this actually gets handled, and it runs across three records that rarely update on the same schedule. Your platform's seller dashboard or payout statement shows what it withheld for that cycle, but that is the platform's own record, not a filed government record yet. The income tax TDS becomes a usable credit only once the platform files its own quarterly TDS statement and it reflects in your Form 26AS and AIS against your PAN, so do not expect it to appear the day after a sale. The GST TCS works the same way on the GST side. It becomes visible and usable once the platform files its own TCS statement and it reflects in your GST records against your GSTIN. Treating the platform statement as final, without checking that it actually turned up in these government-side records, is how a seller ends up under-claiming credit they were always entitled to, simply because nobody went back to check.

A Practical Checklist for a New Online Seller

If you are just getting started selling through a marketplace, a handful of habits early on save a lot of reconciliation trouble later.

• Check whether you need GST registration before you list your first product. Selling through an e-commerce operator generally brings a registration requirement even if your turnover would otherwise stay under the usual small-business threshold, though a narrower relaxation lets some small intra-state goods sellers list using PAN-based enrolment instead of full registration. Work out which situation applies to you using the general GST registration threshold rules rather than assuming turnover alone decides it.
• Stop treating the TDS and TCS shown on your payout statement as money you have lost. Both reduce your actual income tax and GST liability when you file. Counting them as a cost on top of the platform's commission overstates what selling through the marketplace is really costing you.
• Keep your PAN and GSTIN accurate and consistent on your seller profile from day one. A mismatched or outdated PAN is one of the most common reasons a TDS credit fails to land against the right person, and fixing it after months of sales is far more work than getting it right at registration.
• Save or log each payout statement as it arrives, not just the annual summary the platform sends at year end. A running record of what was withheld each cycle is what you need to check against your government-side records later.
• Reconcile periodically rather than only at year end. Check Form 26AS and AIS for the TDS credit and your GST returns or credit ledger for the TCS credit every quarter or so, roughly in line with when platforms file their own statements, rather than discovering a mismatch for the first time while filing your annual return.
• If a figure on your platform statement does not match your government-side records, raise it with the platform's seller support rather than assuming either number is correct. Sometimes it is a filing lag on the platform's side working itself out. Sometimes it is a genuine error worth correcting early.
• When you file your income tax return and your GST returns, claim these credits explicitly rather than assuming a portal applies them for you automatically. Confirm the numbers you are claiming against Form 26AS, AIS, and your GST records before you submit.

None of this is about avoiding the withholding. It happens whether you understand it or not. It is about not leaving money on the table that already belongs to you. Confirm the current rate and threshold directly with your platform or the relevant government portal rather than assuming a figure, keep your own record of what each payout statement shows, and check periodically that it has actually turned up as a credit in Form 26AS and your GST returns. That habit, more than any single number in this post, is what actually gets the withheld money back to you.