TDS rate on e-commerce operators to be reduced to 0.1% from 1%: Nirmala Sitharaman

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The tax deducted (TDS) at source for e-commerce operators will be reduced to 0.1 percent from 1 percent, Finance Minister Nirmala Sitharaman said in her Budget speech on July 23.

According to the Section 194-O of the Income Tax Act, 1961, an e-commerce operator shall deduct income tax from the gross amount of sale of goods or provision of service, or both, facilitated through its digital or electronic facility or platform.

Lalit Attal, Partner, Tax & Regulatory Services, BDO India, said, "Keeping the thrust on digitalisation and ease of doing business in India, the Finance Minister in her budget speech, announced to reduce the TDS rate on sale of goods or services with effect from 1 October 2024. This is a welcome move as the reduction on TDS rate will provide enough ammunition to the e-commerce operators to sustain in an already competitive market and bring parity with the offline transactions as far as the rate of TDS is concerned."

The move is expected to help sellers on e-commerce platforms like Flipkart, Amazon, Swiggy and Zomato with their working capital requirements.

"Reducing the TDS rate for e-commerce operators from 1% to 0.1% was a necessary step. This change will benefit vendors on platforms like Flipkart, Amazon, Swiggy, and Zomato by freeing up working capital. This proactive measure will financially support e-commerce companies, enabling innovation and growth," said Rahul Garg, Founder & CEO of B2B e-commerce marketplace Moglix.