New TDS/TCS Rules for E-Commerce: A Simple Guide for Online Sellers Under the New Tax Code

If you’re an online seller in India, you’ve probably looked at your payment statement from Amazon, Flipkart, or another marketplace and felt a pang of confusion. You made a sale for ₹1,000, but the amount credited to your bank account is noticeably less. You see lines for “commission,” “fees,” and then, two more confusing deductions: TDS and TCS. (TDS TCS rules for e-commerce)

For many sellers, this feels like a “double tax.” Why is money being taken out for two different things on the same sale?

You are not alone. This is the single biggest point of confusion for India’s booming e-commerce community. With the introduction of the new Direct Tax Code (DTC) 2025 and other GST updates, these rules are now a permanent part of doing business.

The good news? It’s not a double tax. But it is a double compliance-and-cash-flow problem.

This guide will simply and clearly explain both tax systems. We will demystify the new TDS/TCS rules for e-commerce, show you what’s new in 2025, and most importantly, tell you exactly how to claim all this deducted money back.

The Big Confusion: Why Am I Being Taxed Twice on One Sale? (TDS vs. TCS)

The primary reason for the confusion is simple: you are being subjected to two completely separate laws handled by two different government departments.

1. TDS (Tax Deducted at Source) is governed by the Income Tax Act (now part of the new Direct Tax Code, or DTC, framework).
2. TCS (Tax Collected at Source) is governed by the GST (Goods and Services Tax) Act.

Think of it this way: The e-commerce platform (like Amazon) is required by law to act as a collection agent for both the Income Tax department and the GST department.

Meet Your Two Tax Collectors: The Income Tax Act and the GST Act

• TDS (Income Tax): The government uses this to get an advance on your annual income tax. They are essentially saying, “We know you are earning income from this platform, so we’re taking a 1% advance now. You can claim it back when you file your income tax return.” This is handled by the Central Board of Direct Taxes (CBDT).
• TCS (GST): The government uses this to track all the transactions happening in the e-commerce ecosystem to prevent GST evasion. They are saying, “We need to make sure you pay GST on all the sales you’ve made. We’re collecting 1% as a ‘deposit’ which you can instantly use to pay your monthly GST bill.” This is handled by the Central Board of Indirect Taxes and Customs (CBIC).

A Simple Table: TDS (194-O) vs. TCS (Sec 52) at a Glance

Here is the simplest breakdown of the two systems.

Feature	TDS (Income Tax)	TCS (GST)
The Law	Section 194-O of the Income Tax Act	Section 52 of the CGST Act
The Purpose	An advance on your annual income tax	A credit against your monthly GST liability
The Rate	1%	1% (0.5% CGST + 0.5% SGST)
Calculated On?	Gross Sales Value (The total value of your sale)	Net Taxable Sales Value (Gross value minus sales returns)
How to Claim?	As a credit in your Annual Income Tax Return (ITR).	As a credit in your Monthly GSTR-3B (from GSTR-2B)
Where to See It?	In your Form 26AS or Annual Information Statement (AIS)	In your Electronic Cash Ledger on the GST Portal

Now that you understand the “what” and “why,” let’s dive into the specific rules for each.

Part 1: TDS Under the New Tax Code (DTC 2025) – The Income Tax Rule

This is the first tax you see deducted, and it’s governed by the Income Tax Act. The specific law you need to know is Section 194-O.

Let’s break down exactly what this is, what’s new for 2025, and how it impacts you.

What is Section 194-O? A Simple Definition for Sellers

Section 194-O is a rule that makes your e-commerce platform (the “Operator”) responsible for deducting your income tax in advance.

• In simple terms: The government knows you are earning income on Amazon, Flipkart, Myntra, etc. Instead of waiting for you to pay all your taxes at the end of the year, they ask the platform to deduct a small piece of your income from every sale and deposit it with the government on your behalf.
• Key Point: This is not a new tax. It is an advance payment of the income tax you already owe. You can claim this full amount back when you file your annual Income Tax Return (ITR).

Who Deducts This Tax? (The E-Commerce Operator)

The tax is deducted by the “e-commerce operator.” This is the company that owns, operates, or manages the digital platform.

• Examples: Amazon, Flipkart, Tata CLiQ, Myntra, Meesho, and any other marketplace you sell on.
• They are the “deductor.” You are the “deductee.” They are legally required to do this.

What is the Rate? The BIG Change for 2025

This is the most important update for 2025 and a key part of the new tax code’s framework.

The new TDS rate under Section 194-O is 0.1%.

This rate was reduced from the old 1% to bring parity with offline business transactions (under Section 194Q). This new, lower rate is the standard for the 2025 tax year.

This 0.1% is calculated on the “gross amount of sales.” This means the total value of the sale, including shipping or other fees, but excluding the GST component.

• Warning: If you do not provide your PAN or Aadhaar number to the e-commerce platform, they are required by law to deduct TDS at a much higher penalty rate of 5%.

The ₹5 Lakh Exemption: Do You Qualify?

The law provides a crucial exemption for small sellers. Your e-commerce operator is not required to deduct any TDS if you meet all of the following conditions:

1. You are an Individual or a HUF (Hindu Undivided Family). (This exemption is not for companies, LLPs, etc.)
2. Your total gross sales on that platform in the financial year are less than ₹5,00,000 (5 lakhs).
3. You have provided your PAN or Aadhaar to the platform.

Practical Example:

• You are an individual seller (with PAN provided) on Myntra.
• Your total sales from April 1, 2025, to December 31, 2025, are ₹4,50,000. Myntra will not deduct any TDS.
• On January 10, 2026, you make a sale that pushes your total over ₹5,00,000.
• Myntra will now start deducting TDS at 0.1% on all sales from that point forward for the rest of the financial year.

What’s “New” in 2025? (Stability and Integration into the DTC)

For online sellers, the “New Tax Code 2025” (Direct Tax Code) isn’t about introducing a brand new, scary rule. It’s about formalizing and stabilizing the rules that were already in motion.

The two key takeaways for 2025 are:

1. The 0.1% Rate is Permanent: The new, lower 0.1% rate is now the official, long-term rate, ending the old confusion with the 1% rule.
2. Parity with Offline: This rule makes tax treatment for online sellers equal to that of offline sellers, which was a long-standing demand.

Where to Find Your TDS Credit (Form 26AS & the AIS)

This is the most important part: how to get your money back.

The 0.1% deducted by Amazon or Flipkart is not lost. It’s your money, held by the government. You can see this “tax credit” in two places on the Income Tax Portal:

1. Form 26AS: This is your annual tax credit statement. It’s like a passbook for all taxes paid on your behalf. The TDS deducted by the platform will appear here.
2. Annual Information Statement (AIS): This is a newer, more comprehensive statement that shows all financial transactions tied to your PAN.

When you (or your Chartered Accountant) file your Income Tax Return (ITR) at the end of the year, you will:

1. Calculate your total income and your total tax liability.
2. Claim the TDS amount (shown in your Form 26AS) as a credit.
3. Subtract the credit from your total tax liability.

If the TDS credit is more than your total tax bill, you will receive a tax refund.

Part 2: TCS Under the GST Act – The Goods & Services Tax Rule

Now we come to the second deduction you see on your statements: TCS. This one has nothing to do with your annual income tax and everything to do with your monthly GST compliance.

If TDS (Section 194-O) is the Income Tax department’s way of getting an “advance” on your yearly income, TCS (Section 52) is the GST department’s way of creating a “digital trail” to ensure every sale is accounted for in your monthly GST returns.

What is Section 52 of the CGST Act? A Simple Definition

Section 52 of the Central Goods and Services Tax (CGST) Act is a rule that requires e-commerce operators (Amazon, Flipkart, etc.) to collect a small percentage of tax from your sales and deposit it with the government.

• In simple terms: The government uses the marketplace as a cross-check. By collecting 1% of your sales, they create a real-time record of your turnover. This record is then used to match against the sales you declare in your own GSTR-1 and GSTR-3B monthly returns.
• Key Point: This is not a tax on the platform, and it’s not an extra cost to you. Just like the TDS, this collected amount is your money. It is instantly credited to your GST account and can be used to pay your GST bill for that very month.

Who Collects This Tax? (Again, the E-Commerce Operator)

Just like TDS, this is collected by the e-commerce operator (Amazon, Myntra, etc.). They are legally required to file a monthly return called GSTR-8, where they report the total sales and TCS collected for every single seller on their platform, identified by their GSTIN.

This GSTR-8 filing is what makes the magic happen. The moment your platform files its GSTR-8, the TCS amount they collected from you automatically appears on your personal GST dashboard.

What is the Rate? 1% on Your Net Taxable Sales

This is the most critical difference between TDS and TCS.

• The Rate: The TCS rate is 1% (broken down as 0.5% CGST + 0.5% SGST for sales within your state, or 1% IGST for sales across states).
• The Calculation: This is NOT calculated on the “gross” value. It is calculated on the “net value of taxable supplies.”

Net Value = (Total Taxable Sales) – (Sales Returns)

This is much fairer to you as a seller. Unlike TDS, you don’t have tax locked up on orders that were later returned by the customer. The platform calculates this after returns are factored in.

The BIG GST Change for 2025: Updated GSTR-8 and Invoice-Level Reporting

This is the single most important update for 2025 that all sellers must be aware of.

As per Notification No. 09/2025–Central Tax, the GSTR-8 form that platforms file has been amended. Starting from the 2025 tax year, operators must now report more granular, invoice-level data, including the Place of Supply (POS) for each transaction.

What this means for you:

• No More Mismatches: In the past, platforms often reported a single, consolidated figure for your sales. Now, they must report data that aligns with each invoice. This makes reconciliation for you, the seller, much cleaner.
• Increased Scrutiny: This change gives the GST department unprecedented power to cross-check your returns. They can now automatically flag any discrepancy between the invoice-level data Amazon reports and the invoice-level data you report in your GSTR-1.
• Accuracy is Non-Negotiable: You can no longer afford to make small errors in your GSTR-1, such as reporting an inter-state sale (IGST) as an intra-state sale (CGST/SGST) or vice-versa. The platform’s new GSTR-8 will report the correct Place of Supply, and any mismatch will be caught immediately.

Where to Find Your TCS Credit (Your GST Electronic Cash Ledger)

This is the best part of the TCS system. You don’t have to wait until the end of the year to get this money back.

Here is the step-by-step process to claim your credit every month:

1. Platform Files GSTR-8: Around the 10th of the following month, Amazon/Flipkart files its GSTR-8 return, detailing the TCS it collected from you.
2. Credit Appears on Your Portal: You log in to your GST account. You will navigate to Services > Returns > “TDS and TCS Credit Received” tab.
3. You Must “Accept”: You will see all the TCS entries reported by the platforms. You must review these entries and click “Accept” for each one. (If a platform has made a mistake, you can “Reject” it, which forces them to correct it in their next GSTR-8).
4. Credit Hits Your Cash Ledger: As soon as you “Accept” the entries and file this “TDS/TCS Credit Received” return, the entire amount (e.g., ₹10,000) is instantly transferred into your Electronic Cash Ledger on the GST portal.
5. Pay Your GST Bill: Now, when you file your GSTR-3B for the month, let’s say you have a total GST liability of ₹35,000. You can use the ₹10,000 from your Electronic Cash Ledger (which came from TCS) to pay your bill. You will only have to pay the remaining ₹25,000 in cash.

This TCS system is not a tax, but a compliance mechanism. It’s a “pass-through” that simply ensures your sales are reported correctly while giving you the collected amount back almost immediately to pay your GST dues.

A Practical Guide for Online Sellers: Managing Cash Flow & Compliance

Understanding the theory of TDS and TCS is one thing. Managing the real-world cash flow impact is another.

When both taxes are deducted, your working capital gets hit. A sale isn’t just a sale; it’s a complex transaction with multiple deductions that you must track, reconcile, and claim. This section provides a practical, step-by-step guide to managing this in 2025.

The 0.1% + 1% Problem: How This Impacts Your Daily Cash Flow

For every sale you make (to a non-exempt, registered seller), you are guaranteed to have at least 1.1% of your sales value temporarily locked up.

• 0.1% (TDS) is locked away until you file your annual Income Tax Return.
• 1% (TCS) is locked away until you file your monthly GST return.

While 1.1% might not sound like much, it has a significant impact on high-volume, low-margin businesses. If your net margin is only 5%, having 1.1% of your gross revenue held back can severely strain your ability to pay suppliers and restock inventory.

The key is not to view this as a cost, but as a cash flow management challenge. Your goal is to have an accounting system so efficient that you claim these credits at the earliest possible moment.

Step-by-Step: How to Reconcile Your Sales, Returns, and Tax Credits

Reconciliation is the process of matching the sales you think you made (from your records) with the sales the platform says you made (in their reports) and the taxes they say they deducted (in government portals).

With the new 2025 invoice-level GSTR-8 reporting, this has become easier, but it requires precision.

• Step 1: Download Your Reports (Weekly): Log in to your Amazon, Flipkart, or other seller dashboards. Download the “Date Range Reports” or “Payment Reconciliation Reports.” You need the complete transaction-level data, including order IDs, sale value, GST charged, returns, commissions, and, most importantly, the TDS and TCS deducted for each order.
• Step 2: Match with GSTR-2B (Monthly): Around the 12th-14th of the month, log in to your GST Portal and check your GSTR-2B. This will show the TCS data reported by the platform. It should perfectly match the TCS column in the report you downloaded from the platform.
• Step 3: File Your “TDS/TCS Credit Received” Return (Monthly): As we discussed in Part 2, go to this return on the GST portal, “Accept” the correct TCS entries, and file the return. This moves the money to your Electronic Cash Ledger. Do this before you file your GSTR-3B.
• Step 4: Check Your Form 26AS (Quarterly): The 0.1% TDS (Income Tax) credit won’t appear daily. Platforms deposit this with the government and file a quarterly return. So, every quarter, you or your CA should log in to the Income Tax Portal and check your Form 26AS (or the Annual Information Statement – AIS) to ensure the platform is correctly depositing the TDS they deducted.
• Step 5: Reconcile at Year-End (Annually): When filing your Income Tax Return (ITR), your CA will use the final, consolidated Form 26AS as the “master file” to claim all your TDS credits for the year.

Example Calculation: A Real-World Sale and its Tax Treatment (2025)

Let’s walk through a single transaction for an electronics seller, Mr. Kumar, who is registered in Maharashtra and sells on Amazon. He is not exempt from TDS.

• Product Sale Price (A): ₹10,000
• GST on Product (18%) (B): ₹1,800
• Total Invoice Value (A+B): ₹11,800 (This is what the customer pays)
• Amazon Commission (e.g., 10% on A) (C): ₹1,000
• GST on Commission (18% of C) (D): ₹180

Now, let’s apply the tax rules on the platform’s side:

1. TCS Calculation (GST):
   • Rate: 1%
   • Calculated on: Net Taxable Value (which is ₹10,000)
   • TCS Collected: 1% of ₹10,000 = ₹100
   • This ₹100 will appear in Mr. Kumar’s GST Cash Ledger monthly.
2. TDS Calculation (Income Tax):
   • Rate: 0.1% (As per the new DTC 2025 framework rules)
   • Calculated on: Gross Sales Amount (which is ₹10,000)
   • TDS Deducted: 0.1% of ₹10,000 = ₹10
   • This ₹10 will appear in Mr. Kumar’s Form 26AS annually.

Final Payout to Mr. Kumar:

Description	Amount (₹)
Total Collected from Customer	₹11,800
Less: Amazon’s Deductions
Amazon Commission	₹1,000
GST on Commission	₹180
TCS Collected (Sec 52)	₹100
TDS Deducted (Sec 194-O)	₹10
Less: GST from Sale (Mr. Kumar’s Liability)	₹1,800
Total Payout to Seller’s Bank	₹8,710

This single example makes it crystal clear: the TDS and TCS are calculated on different bases (gross vs. net) and are used for entirely different purposes.

Best Practices for Your Accounting in 2025

1. Use Accounting Software: Stop using Excel. Tools like Zoho Books, Tally Prime, or Busy have modules specifically for e-commerce reconciliation that can import platform reports and save you hundreds of hours.
2. Maintain a “TDS Receivable” Ledger: In your books, create an asset account called “TDS Receivable (194-O).” When the platform deducts ₹10, record it here. When you file your ITR and get the credit, you can clear this account. This prevents you from forgetting about this money.
3. Hire a Pro: The e-commerce space is now too complex for DIY (Do-It-Yourself) accounting. Hire a Chartered Accountant or a specialized e-commerce accounting firm. The money you save by correctly claiming 100% of your GST and TDS credits will almost always pay for their fees.

Real-World Examples & Case Studies

To bring all this information together, let’s look at two different sellers in the 2025 tax year and see how these rules affect them.

Case Study 1: Mrs. Gupta, a New Apparel Seller

• Business: Mrs. Gupta starts a small Kurti business from her home in Jaipur. She is an Individual seller.
• Platform: She registers on Meesho.
• Registration: She provides her PAN and GSTIN (as apparel is a “good,” GST is mandatory for online sales from day one, regardless of turnover).
• Her Goal: She hopes to reach ₹8 lakhs in sales in her first year.

Scenario for Mrs. Gupta:

• Months 1-6 (April to September 2025):
  • Her business starts well. By September 30th, her gross sales on the platform reach ₹4,50,000.
  • TDS (Income Tax) Impact: Because her total gross sales are under the ₹5 lakh exemption threshold for individuals, Meesho has not deducted any TDS under Section 194-O.
  • TCS (GST) Impact: This rule has no turnover threshold. From her very first sale, Meesho has been collecting 1% TCS on her net taxable sales. She has been successfully claiming this ₹4,500 (1% of ₹4.5L) back every month in her Electronic Cash Ledger to pay her GST bills.
• Month 7 (October 2025):
  • Diwali sales are strong. In the first week of October, she makes ₹60,000 in sales.
  • Her total sales for the year now stand at ₹5,10,000.
  • The Switch: The moment her sales cross the ₹5 lakh mark, the TDS exemption ends.
  • TDS Impact: For that ₹60,000 in sales, Meesho must now deduct TDS at 0.1%. (Amount: ₹60). For every sale she makes for the rest of the financial year, 0.1% TDS will be deducted.
  • TCS Impact: No change. 1% TCS continues to be collected as usual.

Key Takeaway for Mrs. Gupta: The ₹5 lakh TDS exemption is a cliff. The moment she crosses it, the rule (194-O) activates, and she must track that 0.1% credit for her year-end ITR.

Case Study 2: Mr. Kumar, an Electronics Seller

• Business: Mr. Kumar runs an established electronics store in Delhi as a Private Limited Company.
• Platform: He is a large seller on Amazon and Flipkart.
• Registration: His PAN, GSTIN, and all details are on file.
• His Turnover: His sales are projected at ₹80 lakhs for the year.

Scenario for Mr. Kumar:

• Exemption Status:
  • TDS (Income Tax): The ₹5 lakh exemption for 194-O only applies to Individuals and HUFs. Since Mr. Kumar’s business is a Private Limited Company, this exemption does not apply to him.
  • TCS (GST): This has no threshold, so it applies.
• From Day 1 (April 1, 2025):
  • On every single sale Mr. Kumar makes, he is subject to both tax collection mechanisms.
  • TDS Impact: Amazon must deduct 0.1% TDS (194-O) on the gross value of every single order. By the end of the year, this will amount to ₹8,000 (0.1% of ₹80L) that his company can claim as an advance tax credit in its corporate ITR.
  • TCS Impact: Amazon must collect 1% TCS (Sec 52) on the net taxable value of every single order. This will amount to ₹80,000 (1% of ₹80L) over the year. His accountant claims this credit every month (approx. ₹6,667) in the GST portal to pay the company’s monthly GST liability.

Key Takeaway for Mr. Kumar: For an established seller (especially a company), the 0.1% TDS and 1% TCS are just a standard, non-negotiable part of doing business. His success depends on a rock-solid monthly reconciliation process to ensure the ₹80,000 in TCS is claimed promptly and the ₹8,000 in TDS is accurately tracked for the annual audit.

Here is the final major section for your article. This FAQ (Frequently Asked Questions) section is a powerful SEO tool. It’s designed to capture “long-tail” search queries the specific, conversational questions that real sellers type into Google.

By answering these questions directly, you build immense trust and authority.

Conclusion

Navigating the new tax code for e-commerce doesn’t have to be overwhelming. While the “double deduction” of TDS and TCS seems complex, it’s simply a system of advance payments and compliance checks.

Your money is not lost—it’s just being held in two different government wallets (one for income tax, one for GST) waiting for you to claim it.

Here is your simple, 3-point action plan to master this system in 2025:

1. Reconcile Monthly, Not Annually: This is the golden rule. Do not wait for your CA to find this money at the end of the year. Every month, log in to the GST portal, file your “TDS/TCS Credit Received” return, and immediately use that 1% TCS credit to pay your GSTR-3B liability. This instantly improves your cash flow.
2. Check Your Form 26AS Quarterly: Log in to your Income Tax portal once every three months. Check your Form 26AS and AIS (Annual Information Statement) to ensure the 0.1% TDS being deducted by platforms is actually being deposited in your name. If there’s a mismatch, raise a ticket with seller support immediately.
3. Hire an E-Commerce Accountant: The days of a “one-size-fits-all” CA are over. Your business needs a professional who understands the specific reconciliation of GSTR-8, GSTR-2B, Section 194-O, and marketplace payment reports. The money they will save you by correctly and promptly claiming 100% of your tax credits will be worth their fee many times over.

By treating this not as a tax, but as a cash flow reconciliation task, you will stay compliant, competitive, and in complete control of your e-commerce finances.

FAQs