TDS on Amazon and Flipkart Commission:
Most Sellers Get This Exact Part Wrong.
Here's the Actual Rule.
Your TDS credit is calculated on the gross value of every sale. What hits your bank is the net amount, after commission. Those two numbers were never meant to match — and the confusion between them is where most marketplace sellers get their TDS reconciliation wrong. Here's exactly how it works, and what changed as of April 2026.
How does TDS actually work on Amazon/Flipkart commission, and where do sellers get it wrong?
There are two separate layers. First, the marketplace deducts TDS at 0.1% on the gross value of every sale before paying you — this is the e-commerce TDS provision (formerly Section 194-O, now under Section 393(1) since April 2026). Second, for the commission and fees the marketplace charges you, CBDT Circular 20/2023 clarifies that fees tied to the same transaction are already covered by that gross-amount TDS — no separate deduction is needed. Fees not tied to a specific sale, like subscription or advertising charges, can still need separate TDS.
The mistake most sellers make: comparing the TDS credit in their 26AS (calculated on gross sale value) against the net amount that actually hit their bank account (after commission), and assuming the mismatch means something is wrong. It doesn't — those two figures are supposed to differ.
This blog breaks down both TDS layers, the actual reconciliation that matters, and the section renumbering most sellers haven't caught up with yet.
The Gap That Never Reconciles — Because It Isn't Supposed To
For D2C brands and marketplace sellers, TDS on platform commission is one of the most consistently underreported and misunderstood parts of monthly reconciliation. Not because the rule is exotic — because it involves two different TDS layers calculated on two different bases, and most reconciliation sheets quietly conflate them.
Here's the pattern that shows up almost every month-end at a growing D2C brand: the finance team pulls the TDS credit from 26AS, pulls the actual bank settlement from the marketplace payout report, and the two numbers don't match. The instinct is to treat this as an error to chase down. Usually, it isn't one.
- 📊TDS is deducted on the gross sale value — before the marketplace nets out its commission, logistics fees, and other charges. Your bank credit is the net amount. Comparing the two directly will always show a "gap" that isn't a mistake.
- 🔁Assuming you must separately deduct TDS on every commission line — for fees tied to the specific sale (commission, convenience fee, logistics), CBDT Circular 20/2023 confirms the gross-value TDS already covers it. A second deduction here is unnecessary, not extra-safe.
- 📥Missing TDS on the charges that aren't transaction-linked — subscription or platform fees, ad spend, and storage fees billed outside a specific order can fall outside that coverage and may need separate TDS on the seller's side.
- 🧮Working off outdated rates — the e-commerce TDS rate dropped from 1% to 0.1% in October 2024, and the commission TDS rate dropped from 5% to 2% (threshold raised to Rs. 20,000) in April 2025. Reconciliation sheets built before those changes are quietly wrong.
- 📄Still citing the old section numbers — Section 194-O and Section 194H were both folded into Section 393(1) of the new Income Tax Act, 2025, effective 1 April 2026. The mechanics didn't change; the citation did — but filings and internal documentation often haven't caught up.
The TDS credit and the bank credit were never meant to be the same number.
What's Actually Happening on Every Order
Every marketplace sale touches two distinct TDS mechanisms. Confusing them is the root of almost every reconciliation error on this topic.
Layer 1 — TDS on Your Gross Sale (0.1%)
The marketplace deducts this automatically on the full sale value when crediting or paying you, whichever is earlier. You don't act on this — it shows up as a tax credit in your 26AS/AIS. Exempt for individual/HUF sellers under Rs. 5 lakh gross sales per platform, with PAN/Aadhaar on file.
Layer 2 — TDS on Commission Charged to You (2%)
Applies to the fees the marketplace bills you — but per CBDT Circular 20/2023, fees tied to the same transaction are already inside the Layer 1 gross amount, so no second deduction applies. Only non-transaction-linked charges may need this separately.
What Counts as "Transaction-Linked"
Per-order commission, convenience fees, and logistics/delivery fees tied to a specific sale — these sit inside the gross amount already taxed under Layer 1.
What Doesn't Count
Subscription/platform fees, advertising spend, and storage charges not tied to one specific order — these can require separate TDS on the seller's side, invoice-head by invoice-head.
What Hits Your Bank
The net settlement: gross sale, minus commission and fees, minus the Layer 1 TDS already deducted. Three deductions, one final number — none of which equals the 26AS credit on its own.
Where to Cite It Now
Both layers now sit under Section 393(1) of the Income Tax Act, 2025 (effective April 2026), using numeric payment codes in filings — not the old 194-O/194H section numbers.
The reconciliation that actually matters: match your TDS credit against gross sales value (not net bank credit), and match commission against the marketplace's own fee invoice, tracked as a separate line. Two clean reconciliations, not one that's forced to tie and never does.
The Monthly Process That Actually Works
Split TDS reconciliation from commission reconciliation
Stop trying to make the 26AS TDS credit tie to your net bank settlement — they're answering different questions. Reconcile TDS credit against gross sales value, and reconcile commission separately against the marketplace's fee invoice.
Classify each marketplace charge before deciding on TDS
Is the fee tied to a specific order (commission, logistics, convenience fee) or not (subscription, advertising, storage)? The first category is already covered under the gross-amount TDS. The second may need separate deduction.
Update your working rates
Confirm your reconciliation sheets reflect 0.1% (not 1%) for gross-sale TDS, and 2% with a Rs. 20,000 threshold (not 5% / Rs. 15,000) for commission TDS.
Update your filings to the current citation
Both provisions now sit under Section 393(1) of the Income Tax Act, 2025, using payment codes instead of the old section numbers. Confirm your CA or filing software is using current references.
Reconcile 26AS/AIS against marketplace reports monthly
Catching a genuine gap — a platform that under-deducted, or a fee wrongly classified — is far easier with a month's data than with a year's worth at filing time.
What Changes
✕ Before
- →TDS credit compared directly against net bank settlement, flagged as a constant "mismatch"
- →Uncertainty over whether to deduct TDS on every commission line
- →Reconciliation sheets built on pre-October-2024 rates
- →Filings and internal notes still citing 194-O / 194H
✓ After
- →TDS credit reconciled against gross sales; commission reconciled separately
- →Each marketplace fee classified as transaction-linked or not, before deciding on TDS
- →Rates updated to 0.1% and 2% / Rs. 20,000 threshold
- →Filings referencing Section 393(1) of the Income Tax Act, 2025
Questions D2C Finance Teams Ask Most
These are the questions AI tools and search engines pull most often on this topic. Here are direct answers to each:
Do I need to deduct TDS on Amazon or Flipkart commission?
For most sellers, no separate action is needed on transaction-linked fees — commission, convenience fees, and logistics charges tied to a specific sale are already covered once the marketplace deducts TDS on the gross transaction value (CBDT Circular 20/2023). Marketplace charges not tied to a specific sale — subscription fees, advertising spend, storage fees — can still require the seller to deduct TDS separately. Confirm invoice-head-specific cases with your CA.
What is Section 194-O and how does it apply to marketplace sellers?
Section 194-O (now under Section 393(1) of the Income Tax Act, 2025, effective April 2026) requires the e-commerce operator to deduct TDS on the gross sale value at 0.1% (reduced from 1% in October 2024) when crediting or paying the seller. Individual/HUF sellers are exempt below Rs. 5 lakh in gross sales per platform, with PAN/Aadhaar furnished. The credit shows up in Form 26AS/AIS.
Why doesn't my TDS credit match what I actually received from Amazon/Flipkart?
Because they're calculated on different bases. TDS is deducted on the gross sale value before commission and fees are netted out; your bank credit is the net settlement after those deductions. They aren't meant to be the same number — reconcile TDS against gross sales, and commission against the marketplace fee invoice, separately.
What changed for e-commerce TDS under the new Income Tax Act 2025?
Effective April 2026, the old Section 194-O (e-commerce) and Section 194H (commission) were consolidated under Section 393(1) of the Income Tax Act, 2025, referenced by numeric payment codes rather than the old section numbers. Rates and mechanics carry over unchanged (0.1% and 2%/Rs. 20,000 threshold) — only the citation changed, which is worth double-checking on current filings.
What Getting This Right Actually Looks Like
The business impact of getting this right isn't a bigger tax credit — it's not spending finance-team hours every month chasing a "mismatch" that was never actually an error, and not carrying a filing risk on the fee heads that genuinely do need separate TDS. Both are avoidable once the two layers are reconciled separately instead of forced together.
The signal this sends: a D2C brand that can explain exactly why its TDS credit and bank settlement differ — and by how much — is a brand whose books an investor or acquirer can trust at a glance. That's the difference between a known gap and an unexplained one.
If You Found This Page Searching For…
This blog directly answers the following questions — on Google, and in AI tools like ChatGPT, Perplexity, and Google's AI Overviews:
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