In this post I am going to discuss about the procedure of payment of TDS and quarterly filing of TDS (Tax Deduction at Source) for Indian e-commerce websites like Flipkart, Amazon and others.
Please refer to this wikipedia article in order to understand what is TDS https://en.wikipedia.org/wiki/Tax_Deducted_at_Source
From e-commerce perspective the following are liable to deduct TDS
TDS payments are to be done within 7 days of Invoice generation. Most of the e-commerce companies generate their Invoice on the last day of the month, as a result you are liable to pay TDS on or before 7th of every Month.
TDS filing happens every quarterly and the time for filing is by the end of the month. This date changes from year to year and can be searched on google by typing "TDS date filing for current year" . For example this year for first quarter from 1-Apr-2016 to 30-Jun-2016 the last date of filing is 31st July 2016.
What is the percentage of TDS to be deducted and paid ?
Please refer to this link
http://www.incometaxindia.gov.in/charts%20%20tables/tds%20rates.htm
to understand the percentage deduction for each section.
For e-commerce sellers only two section are of importance
1) Section 194C: Payment to Contractors/Sub-Contractors. This section is for deduction of courier charges/Shipping charges since courier partners are our indirect contractors. Though the section says that for Individual the deduction is 1% we deduct 2% for all Invoices.
2) Section 194H: Commission or brokerage. Since e-commerce websites are like commission agents we are liable to deduct TDS on the service provided by them. So in your Invoice apart from Shipping charges (Section 194C) all others will go in this section. For example commission Fee, Collection Fee, Fixed Fee, Marketing Fee and others will go under this section.
Please Note: All Invoices generated till 31-May-2015 attract 10% TDS and after that 5% TDS.
Lets take it with an example. Assume in your Flipkart invoice first month (April 2016) commission fee is not more than Rs 2000 then you need not pay TDS. In the month of May 2016 the commission is Rs 3200. Now the total commission fee is Rs 5200 for two months. Since it is crossed the limit of Rs 5000 (Remember up to 31 May 2016 limit is Rs 5000 after that 15000) you are liable to pay TDS on Rs 5200 totally. Some may argue that since it is just Rs 200 above the threshold limit of Rs 5000 so TDS is applicable only on Rs 200. That is not the case. Please remember that this is threshold limit and not exemption limit.
For 194C also if the courier fees does not cross 75k (before 31st May) you can choose not to deduct TDS but if it crosses that limit you need to deduct TDS from the first rupee itself.
Let's make payment of TDS with an example of Amazon and Flipkart Invoice
Click on the images to enlarge.
The calculation is as follows
TDS Payment
Before making a payment make sure you have a TAN number. TAN can be applied by going to the website https://tin.tin.nsdl.com/tan/ and making an online payment of Rs 63 + taxes. Your TAN number will be available within 10-15 days after you send the documents to the TAN department in Pune.
Once the TDS calculation completed, payment for the TDS can be made at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp.
Select ITNS 281.
Select the following (0021)NON-COMPANY DEDUCTEES and (200)TDS/TCS Payable by Taxpayer.
Fill the remaining details accordingly. The Assessment year will be next of the financial year. For example we are paying TDS for 2016-17 then the assessment year will be 2017-18
Separate payments have to be made for 194C and 194H. Select accordingly. Please note that you will not find 194C in drop down menu but 94C and 94H. You can make all the payments for each section together. In our case for 194 C we can combine Rs 5.2 and Rs 1972.6 and make a single payment.
Please refer to this wikipedia article in order to understand what is TDS https://en.wikipedia.org/wiki/Tax_Deducted_at_Source
From e-commerce perspective the following are liable to deduct TDS
1) Any Individual/Proprietor who was under first year of audit in the previous financial year is liable to deduct TDS.
Currently from 2016-17 any Individual/Proprietor who has a turnover of Rs 2 crore and shows 8% nett profit is not liable to be under audit. For last year i.e 2015-16 the limit was 1 crore.
So if you have crossed 1 crore turnover in the last year as an Individual/Proprietor you are liable to deduct TDS from this year. If the previous year was not your first year of audit then you should have deducted TDS in the previous year itself.
2) For Companies like Private Limited, LLP, Partnership Firm and Public limited TDS deductions are from day one
TDS payments are to be done within 7 days of Invoice generation. Most of the e-commerce companies generate their Invoice on the last day of the month, as a result you are liable to pay TDS on or before 7th of every Month.
TDS filing happens every quarterly and the time for filing is by the end of the month. This date changes from year to year and can be searched on google by typing "TDS date filing for current year" . For example this year for first quarter from 1-Apr-2016 to 30-Jun-2016 the last date of filing is 31st July 2016.
What is the percentage of TDS to be deducted and paid ?
Please refer to this link
http://www.incometaxindia.gov.in/charts%20%20tables/tds%20rates.htm
to understand the percentage deduction for each section.
For e-commerce sellers only two section are of importance
1) Section 194C: Payment to Contractors/Sub-Contractors. This section is for deduction of courier charges/Shipping charges since courier partners are our indirect contractors. Though the section says that for Individual the deduction is 1% we deduct 2% for all Invoices.
2) Section 194H: Commission or brokerage. Since e-commerce websites are like commission agents we are liable to deduct TDS on the service provided by them. So in your Invoice apart from Shipping charges (Section 194C) all others will go in this section. For example commission Fee, Collection Fee, Fixed Fee, Marketing Fee and others will go under this section.
Please Note: All Invoices generated till 31-May-2015 attract 10% TDS and after that 5% TDS.
What is Threshold Limit ?
Refer to the image for threshold limit under each section
As seen in the image for Section 194C the limit is Rs 1 lakh (From June
1st) and 194H Rs 15000 (From June 1st). The threshold limit is given by
the government just to define a limit beyond which TDS is compulsory. It
also gives you additional time for payment in case you have yet to
reach the limit.
Lets take it with an example. Assume in your Flipkart invoice first month (April 2016) commission fee is not more than Rs 2000 then you need not pay TDS. In the month of May 2016 the commission is Rs 3200. Now the total commission fee is Rs 5200 for two months. Since it is crossed the limit of Rs 5000 (Remember up to 31 May 2016 limit is Rs 5000 after that 15000) you are liable to pay TDS on Rs 5200 totally. Some may argue that since it is just Rs 200 above the threshold limit of Rs 5000 so TDS is applicable only on Rs 200. That is not the case. Please remember that this is threshold limit and not exemption limit.
For 194C also if the courier fees does not cross 75k (before 31st May) you can choose not to deduct TDS but if it crosses that limit you need to deduct TDS from the first rupee itself.
Let's make payment of TDS with an example of Amazon and Flipkart Invoice
Click on the images to enlarge.
| Flipkart | Amazon | |
| 194 C (2%) | Rs 5.2 (2% of 260) Shipping Charges | Rs 1972.6 (10% of 98630) Easyship Handling Fee |
| 194 H (10% before June 1st and 5% after that) | Rs 52.1 (10% of 521). Adding commission fee, collection fee fixed fee. | **Rs 20682.4 (10% of 206824.4). Adding Fixed Closing Fee, Listing Fee and Refund Processing Fee |
Note: Service Tax and Swatch Bharat Cess and any other cess should not be added with the commission or Shipping Charges.
**Simplest way to get the commission amount on Amazon is to deduct "Easyship Handling Fee" from "Subtotal of fees amount".
Rs 305454.44 - Rs 98630 = Rs 206824.4 (Commission Amount)
**Simplest way to get the commission amount on Amazon is to deduct "Easyship Handling Fee" from "Subtotal of fees amount".
Rs 305454.44 - Rs 98630 = Rs 206824.4 (Commission Amount)
TDS Payment
Before making a payment make sure you have a TAN number. TAN can be applied by going to the website https://tin.tin.nsdl.com/tan/ and making an online payment of Rs 63 + taxes. Your TAN number will be available within 10-15 days after you send the documents to the TAN department in Pune.
Once the TDS calculation completed, payment for the TDS can be made at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp.
Select ITNS 281.
Select the following (0021)NON-COMPANY DEDUCTEES and (200)TDS/TCS Payable by Taxpayer.
Fill the remaining details accordingly. The Assessment year will be next of the financial year. For example we are paying TDS for 2016-17 then the assessment year will be 2017-18
Separate payments have to be made for 194C and 194H. Select accordingly. Please note that you will not find 194C in drop down menu but 94C and 94H. You can make all the payments for each section together. In our case for 194 C we can combine Rs 5.2 and Rs 1972.6 and make a single payment.
TDS payment has to be done monthly. Flipkart has started providing the TDS calculation for every month in their Invoices. You can use this feature to avoid calculation errors. Flipkart also provides a Nill TDS Certificate if you update your TAN on to the seller portal. This certificate ensures that you are not liable to pay TDS up to a certain limit. The limit details can also be found in the Invoice.
TDS Filing
At the end of every quarter you are required to file TDS. When filing TDS you need the Service Tax Number, PAN number, Address of the company and the amount paid for each month. All the above details are available in the invoice. In case you cannot find the PAN number it is nothing but first Ten numerals of Service Tax number from the left.
The government has provided a Tool for filing of TDS and it is available at this link.
Using this tool you have to generate a particular file and then submit this file on a pen drive or CD to the nearest TIN-NSDL center. This process is a bit complex and most of them delegate it to their CA's. They use a software WINMAN TDS to file the return. The charges are Rs 500-750 for complete filing. If anyone reading this article has filed TDS using the tool provided by government please share the procedure with me.
Once the TDS is filed and submitted with the department, the certificate is generated after 15 days. This certificate can be submitted to the respective marketplace for claiming reimbursement of TDS paid.
Failing to pay TDS on time will attract huge penalties. You need to add penalties when paying TDS after the specified time period has elapsed. Please refer to the following link in order to understand the penalties involved.
TDS is a complex and cumbersome process. There has been many requests from Individuals and organizations to simplify this process and government is listening to it. Hopefully we will see some changes in the near future.
If there are any errors or misinformation please add in the comments section I will update them accordingly. If you are interested in knowing the Tally or account entries for TDS payment and adjustments let me know in the comments section, will write a separate article for it.
