If you are selling on Amazon India, understanding the Tax Deducted at Source (TDS) process is crucial for staying compliant and ensuring you don't lose money on eligible reimbursements. This guide explains what TDS is, which fees are applicable, and how you can claim reimbursement smoothly.
What is Tax Deducted at Source (TDS)?
Tax Deducted at Source (TDS) is a mechanism under the Income Tax Act, 1961, where tax is deducted at the time of making specified payments.
- The person making the payment (deductor) deducts tax before paying the recipient (deductee).
- The deducted amount is deposited with the Central Government.
- The deductee can claim credit for the tax deducted.
For Amazon sellers, this typically applies to certain service fees paid to Amazon.
Which Service Fees Are Not Subject to TDS?
As per Circular No. 20 dated December 28, 2023, issued by the Central Board of Direct Taxes (CBDT):
Service fees paid by a seller to an e-commerce operator are not subject to TDS if:
- They are connected to the main transaction of sale of goods or services.
- They are included in the gross amount on which the operator deducts TDS under Section 194-O (1%, reduced to 0.1% from 1 October 2024).
Fees generally not subject to TDS:
- Listing fees
- Closing fees
- Labelling fees
- Pick and pack fees
- Gift wrap fees
Fees that may still attract TDS:
- Advertisement fees
- Multi-Channel Fulfilment (MCF) fees
Always consult your tax advisor to confirm whether your specific fees qualify under the exemption.
Example: How TDS Works in Practice
Let's break it down:
- Seller revenue: INR 100
- Amazon service fees: INR 30, including:
- Referral fees – INR 7
- Closing fees – INR 8
- Easy Ship fees – INR 5
- Advertisement fees – INR 6
- Multi-channel fulfilment fees – INR 4
Amazon deducts INR 30 and remits INR 70 to the seller.
If TDS applies at 2% on Advertisement + MCF fees (INR 10 total):
- TDS amount = INR 10 × 2% = INR 0.20
- Seller deposits INR 0.20 with the government.
- Since Amazon already retained INR 30, this amount includes the TDS component.
- The seller can claim reimbursement of INR 0.20 by submitting Form 16A.
If TDS is applied at 2% on all INR 30:
- TDS = INR 0.60
- Entire INR 0.60 can be claimed as reimbursement (subject to eligibility).
Why Should You Claim TDS?
Under the Income Tax Act, 1961:
- Sellers are responsible for deducting TDS on applicable service fees.
- The service fee retained by Amazon includes the TDS component.
- After depositing TDS with the Central Government, sellers can reclaim the amount from Amazon.
If you do not claim it, you risk losing eligible funds.
How to Claim TDS Reimbursement from Amazon
To receive reimbursement from Amazon Seller Services Private Limited, follow these steps:
Step 1: Deposit TDS
- Pay TDS monthly to the Central Government.
- File quarterly TDS returns.
- Include Advertisement and Multi-Channel Fulfilment fees where applicable.
Step 2: Generate Form 16A
- After filing your return, generate Form 16A (TDS certificate).
Step 3: Contact Selling Partner Support
- Create a case with subject line: “TDS reimbursement”
- Attach a digitally signed PDF copy of Form 16A
If a digitally signed copy is unavailable:
- Submit a manually signed and company-stamped scanned copy.
Step 4: Verification & Reimbursement
Amazon will:
- Verify Form 16A details
- Match the claimed amount with internal records
- Credit the reimbursement to your seller account
- Disburse funds in the next settlement cycle
Documents Required for Claiming TDS
Only a valid Form 16A generated from TRACES is acceptable.
Ensure it includes:
- Amazon's name and address
- Amazon's PAN
- Amount of TDS deducted
- Legible and complete information
Bank challan receipts are not accepted as proof.
Important Disclaimer: This guide is provided on a best-effort basis for general informational purposes. It does not constitute tax or legal advice. Sellers should consult qualified tax professionals to ensure compliance with applicable laws.
Amazon Seller Services Private Limited and its affiliates disclaim any liability arising from reliance on this information.
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