Guidelines under section 194-O(4) and section 206C(1-I) of the Income-tax Act, 1961

Last updated: 30 September 2020

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New guidelines have been issued under sections 194-O(4) and 206C(1-I) of the Income-tax Act, 1961, effective from 1st October 2020. These sections introduce tax deductions for e-commerce operators on sales facilitated through their platforms and tax collection by sellers on goods exceeding a certain value. The guidelines aim to address difficulties and clarify the implementation of these provisions.

Circular No. 17 of 2020

F. No.370133/22/2020-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

(TPL Division)

Dated: 29th September, 2020

Sub.: Guidelines under section 194-0 (4) and section 206C (1-1) of the Income-tax Act, 1961 - reg.

Finance Act, 2020 inserted a new section 194-0 in the Income-tax Act 1961 (hereinafter referred to as "the Act") which mandates that with effect from 1 st day of October, 2020, an e-commerce operator shall deduct income-tax at the rate of one per cent (subject to the provisions of proposed section 197B of the Act) of the gross amount of sale of goods or provision of service or both, facilitated through its digital or electronic facility or platform. However, exemption from the said deduction has been provided in case of certain individuals or Hindu undivided family fulfilling specified conditions. This deduction is required to be made at the time of credit of amount of such sale or service or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant, whichever is earlier.

2. Finance Act, 2020 also inserted sub-section (1 H) in section 206C of the Act which mandates that with effect from 1 st day of October, 2020 a seller receiving an amount as consideration for sale of any goods of the value or aggregate of such value exoeeding fifty lakh rupees in any previous year to collect tax from the buyer a sum equal to 0.1 per cent (subject to the provisions of proposed sub-section (lOA) of the section 206C of the Act) of the sale consideration exceeding fifty lakh rupees as income-tax. The collection is required to be made at the time of receipt of amount of sales consideration.

3. Sub-section (4) of section 194-0 and sub-section (I-I) of section 206C of the Act empowers the Board (with the approval of the Central Government) to issue guidelines for the purpose of removing difficulties. Various representations have been received by the Board for issuing guidelines for removing certain difficulties. In exercise of power contained under sub-section (4) of section 194-0 of the Act and sub-section (I-I) of section 206C of the Act, the Board, with the approval of the Central Government, hereby issues the following guidelines.

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FAQ :

From 1st October 2020, e-commerce operators must deduct income tax at 1% of the gross sale amount facilitated through their platform, unless certain conditions for exemption are met.

The deduction must be made at the time of crediting the sale or service amount to the e-commerce participant's account or at the time of payment, whichever is earlier.

From 1st October 2020, sellers receiving consideration for the sale of goods exceeding fifty lakh rupees in a previous year must collect income tax at 0.1% of the sale consideration exceeding this threshold.

The tax collection must be made at the time of receipt of the sale consideration.

The guidelines are issued under section 194-O(4) and 206C(1-I) to remove difficulties and clarify the implementation of the new tax provisions introduced by the Finance Act, 2020.