RAS question
The TDS rate on e-commerce transactions under Section 194-O is:
Correct answer: (A) 0.1%.
Under Section 194-O, the TDS rate on e-commerce transactions is 0.1% of the gross amount of sale of goods or services facilitated through the platform.
Explanation
Section 194-O applies when an e-commerce operator facilitates the sale of goods or provision of services by an e-commerce participant through its digital or electronic platform. The tax is deducted on the gross amount credited or paid to the participant, whichever is earlier. The rate was 1% when the provision was introduced in October 2020, but the Finance Bill, 2024 amends Section 194-O by substituting 0.1% for 1%, with effect from 1 October 2024. Therefore, for the standard Section 194-O case, the rate is 0.1%. The separate 5% rate applies only where the seller does not furnish PAN, so it is not the normal rate asked in the question.
Why the other options are wrong
- (B) 5% is not the standard Section 194-O rate; it applies only when the seller does not furnish PAN.
- (C) 1% was the earlier rate under Section 194-O, but the Finance Bill, 2024 reduced it to 0.1% from 1 October 2024.
- (D) 2% is higher than both the earlier 1% rate and the amended 0.1% rate for Section 194-O transactions.
Concept
This tests tax deduction at source provisions for digital commerce, a recurring Indian Economy area because RAS often asks recent Budget-linked rate changes. It also checks whether candidates distinguish the normal TDS rate from special PAN-default rates.