Over the last decade, lots of e-commerce participants have popped up in the Indian market. Due to the ease of doing business online, low set up cost & easy connection to buyers more and more people are selling their goods & services on e-commerce platforms. A lot of these e-commerce participants are small traders who do not file their tax returns. These sellers are difficult to identify by the IT department. In the Union Budget 2020, the government introduced Section 194O. Section 194O covered TDS on e-commerce sales. This section is applicable from 1st October 2020.
What is section 194O?
Section 194O states that an e-commerce operator is required to deduct TDS on the facilitation of any sale by an e-commerce participant.
E-Commerce operators need to deduct TDS at the rate of 1% at the time of credit of the amount to e-commerce participants or at the time of payment for the sale of goods or services or both. The TDS would apply either at the time of credit to the e-commerce participants (or payment by any mode) or when the buyer is making the payment directly to e-commerce participants.
Note: The TDS is applicable on the gross amount exclusive of GST.
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Applicability of TDS on E-commerce Sales
When an e-commerce participant is a resident Individual or HUF: E-commerce operators are liable to deduct 1% TDS for resident individual and HUF e-commerce participants.
If PAN or Aadhaar are not provided then TDS is deducted at the rate of 5% as per Section 206AA.
Raj is a registered e-commerce participant on Amazon India (an e-commerce operator). Raj has total sales of INR 6,10,000 on Amazon (exclusive of 18% GST). Amazon charges a 6% commission on the gross sales.
Since Gross Sales exceeds Rs. 5,00,000 and Raj is a resident Individual, Amazon India should deduct TDS @ 1% on Gross Sales before making the payment.
If Raj has not provided PAN or Aadhaar, then TDS should be deducted at 5% irrespective of the gross sales amount
When an e-commerce participant is a non-resident: In the case of a non-resident e-commerce participant Section 194O is not applicable. For non-residents TDS is deducted under Section 195.
Exceptions for TDS on E-commerce Sales
E-commerce operators are not required to deduct TDS if the gross sale amount from the previous year has been less than INR 5,00,000; and if the E-commerce participant has provided their PAN or Aadhaar.
Non-resident e-commerce participants are not covered under section 194O.
This section will now allow the government to reach the smaller sellers in the market who are currently not filing their taxes. This will also increase tax revenue by reducing tax evasion.
What is E-Commerce?
E-commerce means the supply of goods or services or both, including digital products over digital or electronic networks.
Who is an E-Commerce operator?
An e-commerce Operator is defined as any person who operates, owns, or manages digital or electronic facility/platform for electronic commerce.
Who is an E-Commerce participant?
An e-commerce Participant (must be a resident of India) is defined as a person who sells goods or services, or both through an electronic facility provided by an e-commerce operator.
While filing your Taxes, you need to choose the Assessment year and ITR Form.
You could E-file your taxes on the Income Tax website, where you’re supposed to start with choosing the Assessment Year (A.Y.) and ITR Form.
Assessment Year starts in April and ends in March next year- which occurs after the Financial Year. You need to file ITR not in the year in which you earn the income but after the end of that year i.e, in the assessment year.
Similarly, you need to select an ITR form depending on your income sources. Usually,
ITR- 2 is for Capital Gains - sale of equity shares, mutual funds, house property, etc. and for NRIs
ITR-3 is for business / professional income like trading, proprietor, etc.
ITR-4 is filed by taxpayers opting for presumptive taxation scheme.
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Or here's another way: you can entirely skip all the confusion and just upload Form 16, investment statements, and let Quicko choose the correct ITR form & file taxes online.
Mismatched/Incorrect Personal Information
Make sure the following details match in your PAN, Aadhaar and Income Tax database:
Date of Birth
Mismatch in such details is likely to give you an error while filing your ITR.
It is mandatory to link your PAN with Aadhaar before you file your Income Tax Return.
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Incorrect Bank Details for Tax Refund
If you are eligible to get a tax refund, make sure you enter these bank account details correctly:
Remember, the Income Tax Department may have the information of your bank account transactions using the AIR (Annual Information Report) filed by banks. So, do not forget to report all your bank accounts.
You will get your Income Tax Refund in your primary bank account. Choose the one which you use more frequently, so you don't miss out on saving, splurging & investing it.
Quicko verifies your Bank Account, so your refund reaches you.
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Not disclosing all Income Sources
All of us earn income from various sources like salary, rent, capital gains, bank interest, dividends and more.
Eg: You received interest on your tax refund. Now the interest is taxable under the head 'Income From Other Sources'.
So, it's not uncommon to miss out on reporting all Income Sources. That, however, could get you a notice from the Income Tax Department. Use your Form 26AS to report all your incomes.
Mismatch in TDS declared vs. Form 26AS
You should check Form 26AS for details of your tax credits and high-value transactions. It includes details such as:
A GDP decline of 23.9% in the First Quarter! Fiscal Deficit at INR 8.21 tr. - 103% of the entire 2020-21 budget estimate! GST collection 12% lower compared to last year (for the same month)...these are scary numbers and huge words!
The Tom & Jerry Bond
While people are finding fault with the Indian tax system, the taxpayer base might be just alright. Cannot believe it? Out of 130cr. Indians, only 1.5cr. pay income taxes. And the millions of other Indians simply evade it. This is one of the most common or cliche notions about Indian taxation. And now with the colossal GDP decline, the taxpayer base might just decrease further. Agreed?
People are convicted of having large amounts of income stashed away in their tijori. And the Income Tax Department is inevitably hot on their trail. And this leads to one of the biggest economic conclusions in Indian history - demonetization. Was this a blunder? Or did it help the nation?
Please note that India’s tax structure is designed in a certain way. This allows millions to escape taxes.
Firstly, the income tax threshold.
Only people earning above a certain threshold are liable to pay income tax. Currently, the minimum threshold is INR 5 lakh per year. Any guesses what is India’s per capita income? It’s approximately INR 1.4 lakh which is less than one-third of the lowest threshold! That clears out a lot of doubt. With the contraction of the economy in these testing times (COVID-19), the per capita income is going to decrease further.
Nations around the world have their income tax threshold below their per capita income. And India’s a total exception. Americans pay an average of 22% income tax, the Chinese pay 10%, Mexicans pay 15%, Germans pay 14%, and so on.
Secondly, India’s high-income inequality.
A very small fraction of Indians earn more than the per capita income. An even smaller fraction will earn thrice the amount to reach the minimum tax threshold. Only 3% of the working population (aged 25 to 65 and summing up to 2.5 cr.) earn thrice more than the per capita income.
This is comparable to nations around the world. Only 5% of Americans and 4% British earn more than three times their per capita income.
India has raised it’s tax threshold thirteen times in the last three decades. China has done it only thrice for the same era. This resulted in China’s taxpayers' base increasing from 3% to 25% since 1986.
A conclusion can be drawn here - the higher the income tax threshold compared to the per capita income of a nation, the higher the number of people that fall outside the bracket. India’s tax threshold is just exorbitantly high for its levels of prosperity.
Coming to the crux of the matter, is it possible that India’s per capita income is artificially low because millions hide their income? Not really. Even if people hide their incomes, it should be accounted for in India’s GDP decline. The per capita income should be effected. The hidden income is being used eventually to buy goods, real estate, gold, and so on. It makes no sense that millions of hoarders are stocking piles and piles of cash in an attic every year without ever using it. Even if that is the case, it will get accounted for in the “currency in circulation” data provided by the Reserve Bank of India.
If one believes India’s GDP, economic, and per-capita income data, then one has to accept the current taxpayer base to be true - only 3% of working Indians qualify to pay income taxes.
The entire fiscal math is perturbed due to the current GDP decline. The GDP budget estimate for 2020-21 was - 10% increase. The Fiscal Deficit estimate was - 3.5% of GDP. Tax Revenue and Non-Tax Revenue growth were predicted at - 12% increase and 11.4% increase respectively.
Instead, the Fiscal deficit now stands at a massive 17.4% of GDP. Net tax revenue was 12.4% of the FY21 BE compared with 20.5% for the same period last year. Non-tax revenue was 6.4% compared to 14% last year.
(all figures in INR trillion)
2020-21 Budget estimates
April-July (Figures in % of BE)
Net Tax Revenue
Non Tax Revenue
Non-Debt Capital Receipt
Fiscal Deficit (Total Revenue - Total Expenditure)
We’re trying to make tax filing seamless. How you ask? Salaried individuals can directly upload their statements like Form 16 (tax certificate from employer). Investors and traders can directly import their trades by logging into their brokerage account. Along with this & much more, users can choose from over 50 different deductions and maximize their tax refund!
As per the Income Tax Notification on 29th July, the due date for belated / revised ITR for FY 2018-19, has been extended to 30th September 2020. (Update: Further extended to 30th Novemeber 2020)
Revised return can be filed to rectify the details such as incomes, losses, balance sheet, etc reported while filing the original Income Tax Return.
Investors and traders can also carry forward losses by filing a revised return, provided they have filed the initial ITR before the due date.
Taxpayers having capital gains from the sale of house property, land, etc in FY 2019-20 can continue to make specific investments to claim the rollover benefit and reducing their tax liability.
Also, taxpayers have additional time to make specific investments and claim the rollover benefit for capital gains from 30th June to 30th September 2020.
Availment of Vivad se Vishwas Scheme - This is an initiative by the Government to put an end to pending direct tax disputes of Taxpayers. The Scheme aims to cater to all the taxpayers having income tax disputes in India. Taxpayers having an extension of an additional 6 months to avail benefits of Vivad Se Vishwas for settlement of Tax disputes. The due date for the same is extended from 30th June 2020 to 31st December 2020.
Income Tax compliance due dates for FY 2019-20 (AY 2020-21) - 31st October to file Tax Audit Report and 30th November to file ITR.
Update: The date was further extended on account of COVID-19, for taxpayers, under tax audit, the due date to submit the tax audit report is 31st December 2020, and the due date to file ITR is 31st January 2021. For taxpayers, when a tax audit is not applicable the ITR due date is 31st December 2020.
Note: Interest on belated Tax Payment was reduced from 12% to 9% as announced on 31st March 2020. This relief has been rolled back, and the interest penalty for belated tax payment continues to be 12% from 30th June 2020.
Note: Reduced Rates for TDS/TCS by 25% on certain non-salary payments to residents for FY 2020-21 remains unchanged.
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Which ITR to File?
There are 2 types of ITR Utilities:
Excel ITR Utilities - Utilities for ITR-2, ITR-3 and ITR-4 are out.
Java ITR Utilities - Utilities for ITR-1, ITR-2 and ITR-4 are out.
Let's check out which ITR Form applies to you.
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Income Tax Slab Rates
The tax rates applicable for A.Y. 2020-21 are as follows:
Up to INR 2,50,000
INR 2,50,000 to 5,00,000
INR 5,00,000 to INR 10,00,000
Above INR 10,00,000
(for resident or non-resident below the age of 60 years)
Up to INR 3,00,000
INR 3,00,000 to INR 5,00,000
INR 5,00,000 to INR 10,00,000
Above INR 10,00,000
(for individuals who are of the age of 60 years or more but less than the age of 80 years):
Up to INR 5,00,000
INR 5,00,000 to INR 10,00,000
Above INR 10,00,000
(for individuals of the age of 80 years and above)
An additional 4% Health and Educational Cess will be applicable to the tax amount calculated in the above 3 categories.
10% of Income Tax when total income exceeds INR 50,00,000 and 15% of income tax when total income exceeds INR 1,00,00,000.
An individual (resident) is entitled to rebate under section 87A if his total income does not exceed INR 5,00,000. The amount of rebate shall be 100% of income-tax or INR 12,500, whichever is less.
Finance Minister, in her Budget Speech 2020 had introduced a New Tax Regime. Individuals and HUFs can choose between the two regimes. Taxpayers can inform their deductor about the choice of the regime. This lets the deductor deduct the accurate TDS.Here is a table showing the Old Tax regime vs New tax Regime.
Note: Individuals opting for the New Tax Regime and having net taxable income up to INR 5 lakh will be eligible for a rebate up to INR 12,500 under both the tax regimes.
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List of Important Documents
Here are the key documents that you must have before you begin to file your Income Tax Return (ITR)
1. Form 16 -
Employers issue Form 16, TDS certificate to employees every year. Due date (under normal circumstances) to issue Form 16 is 15th June. Due to Covid-19, the due for this year was extended to 15th August.
It is divided into 2 parts:
Part A- Contains details of income earned and the taxes deducted. It also the Permanent Account Number (PAN) and the Tax Deduction Account Number (TAN) of the employer
Part B- Includes the break-up information of the employee’s gross salary.
2. Form 26AS - Form 26AS is a consolidated Tax Credit Statement which provides the following details to a taxpayer:
Details of Tax Deducted at Source (TDS) from the taxpayer’s income
Details of Tax Collected at Source (TCS) from taxpayer’s payments
Advance taxes, Self-Assessment taxes, and Regular Assessment taxes paid by the taxpayers
Details of the Income Tax Refunds received during the year
Details of any high-value transactions (for eg. Shares, Mutual Funds, etc.).
It is a very important document to have while filing ITR. However, you would not want to miss out on tax credits while filing ITR. You can download Form 26AS from the Income-tax e-filing website. The file that the user's download is password protected. Form 26AS passwordis the D.o.B (Date of Birth) of the deductee. Read all about it over here.
3. Form 12BB - Form 12BB (Investment Declaration)is an essential document for a salaried person. It is basically a disclosure of all their tax-saving investments in that particular Financial Year. Form 12BB is required by the employer for an accurate calculation and deduction ofTDS on salary income. It needs to be submitted at the beginning of every financial year.
4. Link PAN and Aadhar Link - The government has made it mandatory to link PAN and Aadhar. Also, according to Section 139AA of Income Tax Act, Aadhaar details is mandatory to successfully file ITR.
5. Home Loan Statements from Bank/NBFC - This statement will provide the break-up details of how much principal and interest you've paid. The interest paid on the home loan can be claimed under Section 24. The maximum amount one can claim under section 24 is INR 2 lakh.
6. Capital Gains - If you have gained from the sale of property/mutual funds or if you are a trader, then you will have to report such gains. On the sale of the property, you need to have the purchase and sale deed of that property. In the case of capital gains, statements from mutual fund houses/brokers can prove to be important.
Consolidated Capital Gains statement from CAMSandKARVY.
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7. Tax Saving Investments - If you have claimed tax deductions under any section of the Income Tax Act, it is important to have the statements for the same. Although it is not mandatory, it might come in handy.
The most common available tax breaks under section 80Care as follows: a) Employees Provident Fund (EPF) b) Public Provident Fund (PPF) c) Investments in ELSS schemes of mutual funds d) Life insurance premium paid e) National Pension System (NPS) etc.
Prime Minister Narendra Modi launched the platform for ‘Transparent Taxation – Honoring the Honest’. The aim is to ease compliance by making the tax system, “People-Centric & Public Friendly” & issue refunds faster to benefit honest taxpayers.
The Tax reforms are promised to change how we pay taxes by making the process:
The number of taxpayers in the country is quite low at a mere 1.5 cr. As a way to celebrate honest taxpayers, from 2016 the Income Tax department is also issuing a certificate of appreciation.
But, seems like that wasn’t enough. Therefore, to increase tax compliance, it was needed to ease the process. And as a step closer to that ‘Transparent Taxation’ is launched.
That will be all folks. The tax season is around the corner. And we are here to simplify compliances for you. If you have any questions regarding taxes, drop your query in the comments section below or ask us anything on Tax QnA thread here.
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