Do online marketplaces deduct TDS from payouts to Indian sellers and freelancers?

When you sell through an online marketplace, the platform often collects the buyer's money and pays you after deducting its fees. Indian tax law requires many such platforms, called e-commerce operators, to deduct tax at source (TDS) from what they pass on to Indian sellers. This applies to services as well as goods: for example, online tutors, designers, writers and developers selling through a platform can all see it on their statements.

From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act, and the rule moved from section 194-O to section 393.³¹ This guide explains the 2026 rule. It does not cover GST collected by e-commerce operators, which is a separate regime.

What is TDS on e-commerce payouts under the Income-tax Act, 2025?

TDS on e-commerce payouts is a 0.1% deduction that an e-commerce operator makes from the gross amount of a resident seller's sales or services facilitated through its platform. Section 393(1), Table serial 8(v) covers "any sum on account of sale of goods or provision of services by an e-commerce participant, facilitated by an e-commerce operator through its digital or electronic facility or platform", with the operator as payer, a rate of 0.1% of the gross amount, and a nil threshold.¹

The Act defines the key terms:¹

The text of serial 8(v) and its notes matches section 194-O of the 1961 Act, including the 0.1% rate shown in the current CBDT copy of that section.¹²

Which sellers does marketplace TDS apply to?

Marketplace TDS applies to resident e-commerce participants, except individuals and HUFs whose gross sales through the operator stay within ₹5,00,000 and who have given their PAN or Aadhaar.¹

Whether a particular foreign platform deducts and deposits Indian TDS is a question of how that platform operates; the Act text alone does not settle it.¹ If no Indian TDS appears, your full income is still taxable and you pay tax through advance tax and your return; see Upwork and Fiverr income: GST and tax. Payments from foreign clients outside any platform are covered in TDS on foreign income received in India.

How do you claim credit for TDS a marketplace deducted?

You claim credit for marketplace TDS by reporting the gross income in your return and claiming the TDS as a credit against your tax for the year.

1. Download platform statements: showing gross sales, fees and TDS.
2. Check your annual tax statement: the TDS should appear against your PAN; see AIS mismatch on foreign income if figures differ.
3. Report gross receipts: report the gross amount, not the net payout, as income.
4. Claim the TDS credit: in the return notified for the tax year.

If the TDS is more than your tax for the year, the excess is refunded after your return is processed. Your chartered accountant can confirm how platform receipts fit with presumptive taxation if you use it.

What rate, threshold and timing apply to marketplace TDS?

Marketplace TDS is 0.1% of the gross amount with a nil threshold, deducted at the time of credit or payment, whichever is earlier.¹²

Keep each platform's annual statement with your tax papers.

What happens if a seller does not give a PAN to the marketplace?

A seller who does not give a PAN or Aadhaar number to the marketplace loses the ₹5,00,000 exemption, because the exemption in section 393(4) Table serial 11 requires it.¹ Give your PAN to every platform you sell through. Without it the exemption is lost, and the platform may apply other rules for missing PAN.

Does marketplace TDS replace other TDS on the same payment?

Marketplace TDS replaces other TDS on the sale itself. Note 3(d) says that if tax has been deducted under serial 8(v), or a transaction is exempt under section 393(4) serial 11, no tax is deducted on that transaction under any other provision of the TDS chapter.¹ So a platform paying a consultant does not also deduct the 10% professional-fee TDS on the same amount.

Note 3(e) limits this: it does not apply to amounts the operator receives for hosting advertisements or providing other services not connected with the sale or service.¹

How is marketplace TDS calculated?

Marketplace TDS is calculated as 0.1% of the gross amount of the sale or service, before the platform's fees are taken off.¹ Under the 1961 Act wording, deduction is made at the time of credit to the participant's account or payment, whichever is earlier.² Note 3 to the Table adds two points:¹

• Direct payments: a payment the buyer makes directly to the participant, for a sale or service facilitated by the operator, is treated as credited or paid by the operator and included in the gross amount.
• Payer: the operator is treated as the person responsible for paying the participant.

For example, a Jaipur illustrator sells ₹8,00,000 of commissioned work in tax year 2026-27 through an Indian platform that qualifies as an e-commerce operator. Because the gross amount exceeds ₹5,00,000, the exemption does not apply, and the platform deducts 0.1%, which is ₹800 for the year.¹

What are the common mistakes with marketplace TDS?

The most common mistake is reporting the net payout as income, when the TDS and your income are both based on the gross amount before fees.¹

• Not giving a PAN: the ₹5,00,000 exemption needs PAN or Aadhaar.¹
• Assuming a foreign platform deducts: the Act text alone does not settle it.¹
• Expecting double deduction: Note 3(d) rules out other TDS on the same transaction.¹
• Using the 194-O reference for 2026-27: the rule now sits in section 393.¹³

Reconcile platform statements with your annual tax statement before you file.