TDS on E-Commerce Transactions, Virtual Digital Assets and Cryptocurrency in India
- Section 194O applies when an e-commerce operator facilitates the sale of goods or services by a resident e-commerce participant through a digital or electronic platform.
- The TDS rate under Section 194O was reduced from 1% to 0.1% with effect from 1 October 2024.
- Section 194S applies to payment for transfer of Virtual Digital Assets, including cryptocurrency and NFTs, when consideration is paid to a resident transferor.
- The TDS rate under Section 194S is 1% of the consideration. If PAN is not provided, tax may be deducted at 20% under Section 206AA.
- From 1 April 2026 onward, the Income-tax Act, 2025 applies. Older section references such as Section 194O and Section 194S should be read with the corresponding TDS entries under Section 393 of the new Act.
- For VDA challan-cum-statement cases, Form 26QE applies to old Act transactions up to 31 March 2026. For transactions from 1 April 2026 onward, use Form 141, Schedule D.
- From April 2026, use Form 140, not Form 26Q, for quarterly non-salary resident TDS returns.
This guide explains how TDS works on e-commerce platform payments and VDA transactions in India, with current form references, rates, thresholds, examples, and practical compliance steps.
TDS on E-Commerce Transactions
Section 194O was introduced to bring e-commerce marketplace transactions into the TDS reporting system. It applies when an e-commerce operator facilitates the sale of goods or services of an e-commerce participant through a digital or electronic platform . In simple terms, the platform deducts TDS before paying the seller or service provider.
For example, if a seller sells products through a marketplace, the platform has to check whether Section 194O applies before releasing the payout. The same logic can apply to service marketplaces where the platform facilitates services between customers and service providers.
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Section 194O Rate, Threshold and Deduction Timing
The current TDS rate under Section 194O is 0.1% of the gross amount of sale or service value. This rate applies from 1 October 2024. Before this change, the rate was 1%.
| Particulars | Rule |
|---|---|
| TDS rate with PAN/Aadhaar | 0.1% |
| TDS rate if PAN is not furnished | 5% under Section 206AA relaxation for 194O |
| Deductor | E-commerce operator |
| Deductee | Resident e-commerce participant |
| Deduction timing | At credit or payment, whichever is earlier |
| Threshold exemption | Resident Individual/HUF with gross sales or services up to ₹5 lakh and PAN/Aadhaar furnished |
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The ₹5 lakh threshold is not a blanket exemption for every seller. It applies only when the e-commerce participant is a resident individual or HUF and has furnished PAN or Aadhaar. If the participant is a company, firm, LLP or another entity, TDS can apply without this ₹5 lakh individual/HUF exemption.
For example: A resident individual seller sells goods worth ₹8,00,000 through an online marketplace during the year and has furnished PAN.
TDS under Section 194O = 0.1% of ₹8,00,000 = ₹800.
If the seller had sales of only ₹4,50,000 and had furnished PAN, Section 194O TDS would not apply because the ₹5 lakh threshold condition is satisfied.
Direct Customer Payments Through E-Commerce Platforms
A common misunderstanding is that Section 194O applies only when money first comes to the platform and then goes to the seller. That is not correct. If a customer pays the seller directly, but the sale or service was facilitated by the e-commerce operator , the law treats that amount as if it was paid or credited by the operator to the participant.Â
This amount is included in the gross sales or service value for TDS purposes. This matters for marketplace models where payment settlement does not always flow in a straight line through the platform.
Compliance for E-Commerce Operators
For e-commerce operators, compliance does not stop at deducting TDS. They must also deposit the deducted tax , file the applicable TDS statement and issue the TDS certificate to the seller or service provider.
For transactions up to 31 March 2026, the old Income-tax Act, 1961 framework applies. For transactions from 1 April 2026 onward, the Income-tax Act, 2025 framework applies. The detailed form changes are covered in the next section. In practice, e-commerce operators should ensure that:
- PAN/Aadhaar details of sellers are correctly captured.
- Gross platform sales are reconciled with seller payout reports.
- TDS is deposited within the prescribed timeline.
- The correct quarterly TDS statement and certificate are used based on the transaction date.
TDS on Virtual Digital Assets and Cryptocurrency
Section 194S was introduced for TDS on payment for transfer of Virtual Digital Assets. It covers crypto and other VDAs when consideration is paid to a resident transferor. The Income Tax Department states that a person responsible for paying consideration to a resident for transfer of a VDA must deduct TDS at 1%.Â
Virtual Digital Assets generally include cryptocurrencies, NFTs and other notified digital assets. However, do not assume every digital item is automatically a VDA. For example, normal loyalty points, gift cards or in-game points may need separate validation depending on the facts and notifications. This makes it important to identify whether the transaction is actually a VDA transfer before applying the TDS rule.
VDA TDS Rate, Threshold and Deduction Timing
| Particulars | Rule |
|---|---|
| TDS rate | 1% |
| If PAN is not furnished | 20% under Section 206AA |
| Deduction timing | At credit or payment, whichever is earlier |
| Recipient condition | Consideration paid/payable to resident transferor |
| General threshold | ₹10,000 in a financial year |
| Specified person threshold | ₹50,000 in a financial year |
| TAN for specified person | Not required, PAN is used |
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Example: A salaried individual buys cryptocurrency worth ₹70,000 from a resident seller in a peer-to-peer transaction. Since the buyer is a specified person and the value exceeds ₹50,000, TDS at 1% applies.
TDS = ₹70,000 × 1% = ₹700.
The buyer should deduct ₹700 and pay the balance ₹69,300 to the seller, subject to correct reporting and form filing.
Crypto-to-Crypto and In-Kind VDA Transactions
TDS can also apply when the consideration is not paid fully in money. This is important in crypto-to-crypto swaps , barter transactions and cases where one VDA is exchanged for another. For exchange-based transactions, CBDT’s guidance allows alternate mechanisms where the exchange may deduct tax for both legs of the transaction and report accordingly, subject to conditions and written arrangements.Â
Where tax is deducted in kind, it has to be converted into cash before deposit with the government. The Income Tax Department’s VDA guidance explains that VDAs withheld as tax need to be converted through the prescribed exchange mechanism before payment to the government .Â
Example: Rohan swaps Bitcoin worth ₹4,00,000 for Ethereum worth ₹4,00,000 through a platform. This is not tax-free just because INR was not received. The transaction still involves transfer of a VDA. The exchange or the relevant buyer may need to ensure that applicable TDS has been handled before the VDA is released.
Forms and Compliance After 1 April 2026
| Period | Applicable Form |
|---|---|
| Up to 31 March 2026 | Form 26QE |
| From 1 April 2026 onward | Form 141, Schedule D |
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Applicable Form
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Applicable Form
Form 141 consolidates earlier Forms 26QB, 26QC, 26QD and 26QE. Schedule D is specifically for TDS on payment by an individual/HUF for transfer of Virtual Digital Assets. It applies only to resident deductees and must be filed through PAN login. For regular quarterly TDS reporting:
| Case | Up to 31 March 2026 | From 1 April 2026 onward |
|---|---|---|
| Non-salary resident TDS return | Form 26Q | Form 140 |
| TDS certificate for quarterly returns | Form 16A | Form 131 |
| Challan-cum-statement certificate | Earlier transaction-specific certificates | Form 132 |
Case
Up to 31 March 2026
From 1 April 2026 onward
Case
Up to 31 March 2026
From 1 April 2026 onward
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Up to 31 March 2026
From 1 April 2026 onward
Form 140 is the new quarterly statement for non-salary TDS on payments to Indian residents under the Income-tax Rules, 2026. It is the relevant form for e-commerce operator TDS and exchange/company-level resident TDS reporting from April 2026 onward.
Tax on VDA Income and Schedule VDA
TDS is not the final tax on crypto or VDA income. It is only a tax deduction mechanism. Income from transfer of VDAs is taxed separately under Section 115BBH at 30%, with only the cost of acquisition allowed as a deduction. The ITR forms also require separate reporting of VDA income, so taxpayers should match their exchange records, AIS/Form 26AS and final tax computation before filing.
Section 509 of the Income-tax Act, 2025 creates a separate reporting obligation for prescribed reporting entities in respect of crypto-asset transactions. Such entities must furnish transaction information in the prescribed statement, period, form and manner. This is mainly a reporting framework for crypto-asset transaction data and is separate from the taxpayer’s own VDA income tax calculation.
Practical filing points
- Match exchange statements with AIS and Form 26AS before filing.
- Report VDA income in the correct ITR schedule.
- Keep transaction-wise records of purchase date, sale date, cost, sale value, exchange fees, wallet movement and TDS deducted.
- Do not treat TDS as full settlement of tax. A 1% TDS deduction does not replace the 30% tax computation on taxable gains.
Loss Set-Off Rules for Crypto and VDAs
VDA loss rules are strict. Loss from transfer of one VDA cannot be set off against income from another VDA or any other income. Such loss also cannot be carried forward to later years.Â
Example: Priya sells Ethereum at a gain of ₹2,00,000 and Bitcoin at a loss of ₹1,50,000. She cannot reduce the Ethereum gain by the Bitcoin loss. The taxable VDA income remains ₹2,00,000, subject to the applicable VDA tax rules. This is one of the biggest practical risks for active crypto traders. Profit and loss cannot be freely netted like many other asset classes.
Section 194O vs Section 194S Comparison
| Point | E-Commerce TDS | VDA/Crypto TDS |
|---|---|---|
| Old Act section | Section 194O | Section 194S |
| New Act mapping from 1 April 2026 | Section 393(1), Table Sl. No. 8(v) | Section 393(1), Table Sl. No. 8(vi) |
| Applies to | E-commerce platform payouts to resident participants | Payment to resident for transfer of VDA |
| TDS rate | 0.1% | 1% |
| No PAN rate | 5% | 20% |
| Main deductor | E-commerce operator | Buyer, exchange or responsible payer |
| Key threshold | ₹5 lakh for resident Individual/HUF | ₹10,000 generally, ₹50,000 for specified persons |
| Old form | Form 26Q | Form 26Q or Form 26QE |
| New form from 1 April 2026 | Form 140 | Form 140 or Form 141 Schedule D |
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Practical Compliance Checklist
For e-commerce sellers
- Keep PAN/Aadhaar updated on every marketplace.
- Reconcile platform payout statements with Form 26AS and AIS.
- Check whether marketplace TDS has been deducted at the current applicable rate.
- Record gross sales, platform fees, GST, returns and net payout separately.
- Use accounting software to track sales, GST, inventory and TDS credits properly.Â
For e-commerce operators
- Build a payout workflow that checks TDS before seller settlement.
- Include qualifying direct customer-to-seller payments facilitated through the platform.
- Use the correct post-April 2026 TDS statement and certificate forms based on the transaction date.
- Issue the applicable TDS certificate after filing the relevant statement.
For crypto investors and traders
- Match exchange TDS entries with the final tax calculation before filing ITR.
- Keep transaction-wise purchase and sale records.
- Track crypto-to-crypto swaps separately.
- Check AIS and Form 26AS before filing ITR.
- Review VDA loss restrictions before calculating final tax liability.
For crypto exchanges and platforms
- Identify whether the exchange, broker or buyer is responsible for TDS in each transaction model.
- Maintain written arrangements where alternate exchange-level mechanisms are used.
- Report transactions using the correct old or new form depending on the transaction date.
- Keep records for crypto-asset reporting obligations under Section 509 , where applicable.
Conclusion
TDS on e-commerce and cryptocurrency transactions is no longer a niche compliance topic. Marketplace sellers, platform operators, crypto investors and exchanges all need to understand who deducts TDS, when it is deducted, which rate applies and which form must be used.
For e-commerce transactions, the key update is the reduction of Section 194O TDS from 1% to 0.1% from 1 October 2024. For VDA and cryptocurrency transactions, the 1% TDS under Section 194S continues, but the form and section references have changed from 1 April 2026 under the Income-tax Act, 2025.
The safest approach is to track transactions monthly, reconcile AIS/Form 26AS, use the correct form based on the transaction date and avoid relying on old section numbers where the new Act applies. For crypto users, TDS is only one part of compliance. VDA income still needs separate tax reporting, and VDA losses remain heavily restricted under the current law.
