Contents
- Introduction: Amazon TDS Framework for Sellers
- Overview of Key Changes for FY 2025-25
- Understanding the TDS Framework for Amazon
- Complete Amazon Expense Categorization
- TRACES Verification and Compliance Procedures
- Practical Scenarios and Implementation
- Who is Affected by These Changes
- Timeline of Events and Background
- You may also like
- Frequently Asked Questions (FAQs)
- Conclusion
Introduction: Amazon TDS Framework for Sellers
Amazon sellers operating in India face complex TDS (Tax Deduction at Source) obligations that have undergone significant changes in FY 2025-25. Understanding when to deduct TDS and when not to deduct is crucial for compliance and cost optimization. The fundamental principle is straightforward: most marketplace fees are covered under Section 194-O, but advertisement services require separate TDS deduction.
Key Rule: Amazon sellers should NOT deduct TDS on marketplace fees but MUST deduct TDS on Advertisement services and Multi-Channel Fulfillment services.
This comprehensive guide covers Amazon's Lower TDS Certificate (LDC), Section 194-O framework, TRACES verification procedures, and practical implementation strategies for FY 2025-25. With the recent rate changes and CBDT clarifications, sellers can achieve significant cost savings while maintaining full compliance.
Click to reveal a quick tip!
Always verify Amazon's LDC threshold balance in TRACES before applying reduced rates to avoid short payment of TDS and potential interest charges.
Overview of Key Changes for FY 2025-25
The TDS landscape for Amazon sellers has been transformed by several key regulatory changes and Amazon's proactive approach to obtaining Lower TDS Certificates. These changes provide substantial relief while requiring careful compliance management.
Note: CBDT Circular No. 20 dated December 28, 2025, clarifies that marketplace fees connected to sales facilitation and included in Section 194-O gross amount calculation should not attract separate TDS by sellers.
Important: Section 194-O rate reduced from 1% to 0.1% effective October 1, 2025, providing significant relief to e-commerce transactions while Amazon's LDC offers additional savings on applicable services.
| Change Category | Previous Position | Current Position FY 2025-25 | Impact on Sellers |
|---|---|---|---|
| Section 194-O Rate | 1% on gross sales | 0.1% on gross sales | 90% reduction in platform TDS |
| Marketplace Fees TDS | Unclear guidance | No TDS required (CBDT Circular) | Eliminates double taxation |
| Advertisement TDS | Normal rates (1-2%) | LDC rate 0.25% available | 75-87.5% reduction with LDC |
| LDC Coverage | Limited sections | 7 sections with reduced rates | Broader applicability |
Understanding the TDS Framework for Amazon
The TDS framework for Amazon transactions operates on a dual-track system: Section 194-O covers marketplace-facilitated transactions, while specific sections like 194C and 194J apply to standalone services like advertising and professional services.
Section 194-O Basics and Coverage
Section 194-O, effective from October 1, 2020, revolutionized TDS for e-commerce transactions by placing the obligation on the platform operator rather than individual sellers.
- Scope: Applies to gross amount of sales/services facilitated through e-commerce platforms
- Rate: 0.1% (reduced from 1% effective October 1, 2025)
- Deductor: E-commerce operator (Amazon) deducts TDS
- Coverage: All fees connected to sales facilitation including referral, FBA, shipping, storage
Lower TDS Certificate Details
Amazon Seller Services Private Limited has obtained comprehensive Lower TDS Certificates covering multiple sections for FY 2025-25, providing significant rate reductions for applicable services.
| TDS Section | Service Type | Normal Rate | LDC Rate | Certificate Number |
|---|---|---|---|---|
| 194C | Contractor/Advertising Services | 1% (Individual) / 2% (Company) | 0.25% | 1AF0524ALO |
| 194J | Technical Services | 2% | 0.25% | 1AF0524ALS |
| 194J | Professional Services | 10% | 1% | 1AF0524ALT |
| 194H | Commission/Brokerage | 5% | 0.50% | 1AF0524ALP |
| 194A | Interest (other than securities) | 10% | 1% | 1AF0524ALN |
| 194I(a) | Rent - Plant/Machinery/Equipment | 2% | 0.25% | 1AF0524ALQ |
| 194I(b) | Rent - Land/Building/Furniture | 10% | 1% | 1AF0524ALR |
Complete Amazon Expense Categorization
Proper categorization of Amazon expenses is fundamental to TDS compliance. Each expense must be evaluated based on its connection to marketplace sales facilitation versus standalone service provision.
Category 1: No TDS Required (194-O Coverage)
These expenses are covered under Section 194-O framework where Amazon deducts TDS at 0.1% on gross sales amount. Separate TDS deduction by sellers would constitute double taxation.
| Amazon Expense | Description | TDS Status | Rationale |
|---|---|---|---|
| Referral/Commission Fee | Percentage fee on each sale | No TDS by Seller | Covered under 194-O gross amount |
| Fixed Closing Fee | Per order processing fee | No TDS by Seller | Part of marketplace facilitation |
| FBA Pick & Pack | Fulfillment charges | No TDS by Seller | Ancillary to facilitated sale |
| FBA Storage Fee | Warehouse storage costs | No TDS by Seller | Part of fulfillment ecosystem |
| Payment Collection | Payment gateway charges | No TDS by Seller | Connected to facilitated sale |
| Return Processing | Product return handling | No TDS by Seller | Marketplace operational service |
| Gift Wrap/Labeling | Order preparation services | No TDS by Seller | Ancillary order services |
Category 2: TDS Required by Sellers
These services are not covered by Section 194-O as they are standalone services or not connected to marketplace sales facilitation. Sellers must deduct TDS under applicable sections.
| Service Type | Applicable Section | Normal Rate | LDC Rate | Threshold Limit |
|---|---|---|---|---|
| Amazon Advertising (All types) | 194C | 1% (Individual) / 2% (Company) | 0.25% | ₹30,000 / ₹1,00,000 |
| Multi-Channel Fulfillment | 194C | 1% (Individual) / 2% (Company) | 0.25% | ₹30,000 / ₹1,00,000 |
| Professional Services | 194J | 10% | 1% | ₹30,000 |
| Technical Services | 194J | 2% | 0.25% | ₹30,000 |
| Commission Services | 194H | 5% | 0.50% | ₹15,000 |
Category 3: Special Cases and Cross-Border
These scenarios require careful analysis and may involve multiple tax implications including GST RCM and international tax considerations.
- Global Selling Fees: Amazon.com fees may attract Section 195 (non-resident TDS) with DTAA benefits
- Currency Conversion: Charges by non-resident entities may require Section 195 assessment
- Installation Services: Standalone services may attract 194C or 194J depending on nature
- Account Health Services: Classification depends on connection to marketplace sales
TRACES Verification and Compliance Procedures
TRACES (TDS Reconciliation Analysis and Correction Enabling System) verification is essential for LDC utilization and ongoing threshold monitoring to ensure compliant application of reduced rates.
Step-by-Step Verification Process
Follow this systematic approach to verify Amazon's LDC and monitor available thresholds throughout the financial year.
- TRACES Login: Access traces.gov.in using your registered deductor credentials and navigate to the main dashboard
- Certificate Validation: Select "Statements/Payments" → "Validate Lower Deduction Certificate u/s 197/195(3)/195(2)"
- Amazon Details Entry: Input Amazon's PAN (AAICA3918J) and select appropriate certificate number based on service type
- Balance Verification: Review unutilized threshold amount and note the last update date for accurate tracking
- Documentation: Screenshot the verification result and maintain records for audit purposes and internal tracking
Threshold Monitoring and Management
Effective threshold monitoring prevents inadvertent short payment of TDS and ensures optimal utilization of LDC benefits throughout the year.
Critical Point: TRACES updates threshold balances quarterly after processing TDS returns, creating a potential 1-3 month delay between actual deductions and system updates.
| Monitoring Activity | Frequency | Key Actions | Documentation Required |
|---|---|---|---|
| LDC Balance Check | Before major payments | Verify available threshold | TRACES screenshots |
| Cumulative Usage Tracking | Monthly | Update internal records | Usage calculation sheets |
| Threshold Exhaustion Planning | Quarterly | Plan for normal rates | Quarterly projections |
| System Update Monitoring | After return filing | Check TRACES updates | Before/after comparisons |
Monthly and Quarterly Compliance
Systematic compliance procedures ensure accurate TDS calculation, timely payment, and proper documentation for all Amazon-related transactions.
- Categorize all Amazon expenses into TDS-required vs. TDS-exempt categories
- Verify LDC threshold availability before applying reduced rates
- Calculate TDS using appropriate rates and maintain detailed worksheets
- Deposit TDS by 7th of following month and generate Form 16A
- Update internal tracking systems and prepare for quarterly return filing
Practical Scenarios and Implementation
Real-world application scenarios help illustrate proper TDS treatment across different Amazon expense types and payment situations.
Scenario 1 - Mixed Invoice with Marketplace and Advertising Fees:
- Total Invoice: ₹2,00,000 (₹1,50,000 marketplace fees + ₹50,000 advertising)
- Marketplace Fees: No TDS required (covered by 194-O)
- Advertising: TDS under 194C at 0.25% (with LDC) = ₹125
- Total TDS Obligation: ₹125 only
Scenario 2 - Threshold Exhaustion Mid-Quarter:
- Q2 advertising spend: ₹8,00,000 total
- LDC threshold available: ₹5,00,000
- First ₹5,00,000: 0.25% LDC rate = ₹1,250
- Remaining ₹3,00,000: 2% normal rate = ₹6,000
- Total TDS: ₹7,250
Scenario 3 - Cross-Border Global Selling:
- Amazon.com marketplace fees: Section 195 applicable
- DTAA with USA may provide rate relief
- GST RCM also applicable on import of services
- Requires specialist tax advice for proper compliance
Who is Affected by These Changes
The TDS framework changes and Amazon's LDC impact multiple stakeholder categories with varying degrees of complexity and compliance requirements.
Primary Beneficiaries
- Individual Amazon Sellers: Benefit from no TDS on marketplace fees and reduced rates on advertising with annual savings potential of ₹50,000-2,00,000
- Corporate Sellers: Achieve significant cost savings with LDC rates, particularly beneficial for high advertising spends during festive seasons
- Professional Service Providers: Consultants and agencies serving Amazon can leverage LDC for reduced TDS rates on their service fees
- Multi-Channel Sellers: Those using MCF services can apply LDC rates for substantial cost optimization
Professional Service Categories
- Chartered Accountants: Must update TDS procedures and advise clients on new categorization requirements
- Tax Consultants: Need comprehensive understanding of Section 194-O interplay with other TDS provisions
- Compliance Teams: Require system updates and process changes for accurate expense categorization
- Amazon Aggregators: Managing multiple seller accounts need scalable compliance procedures
Business Size Impact Analysis
| Business Category | Annual Amazon Spend | Estimated TDS Savings | Key Compliance Focus |
|---|---|---|---|
| Small Sellers | ₹5-25 lakhs | ₹10,000-50,000 | Basic categorization and LDC application |
| Medium Enterprises | ₹25-100 lakhs | ₹50,000-2,00,000 | Threshold monitoring and quarterly planning |
| Large Corporations | ₹100+ lakhs | ₹2,00,000+ | Advanced compliance systems and cross-border considerations |
Timeline of Events and Background
Understanding the chronological development of Amazon TDS regulations provides context for current compliance requirements and helps anticipate future changes.
Historical Development
- October 1, 2020: Section 194-O introduced with 1% TDS on e-commerce transactions, shifting obligation to platform operators
- December 28, 2025: CBDT Circular No. 20 clarifies no separate TDS on marketplace fees covered by 194-O
- May 15, 2025: Amazon's comprehensive LDC becomes effective with reduced rates across 7 TDS sections
- October 1, 2025: Section 194-O rate reduced from 1% to 0.1%, providing massive relief to e-commerce ecosystem
Critical Dates and Deadlines for FY 2025-25
Important Deadlines:
| Activity | Due Date | Applicable Period | Penalty for Default |
|---|---|---|---|
| Q1 TDS Return (24Q) | July 31, 2025 | April-June 2025 | ₹200 per day |
| Q2 TDS Return (24Q) | October 31, 2025 | July-September 2025 | ₹200 per day |
| Q3 TDS Return (24Q) | January 31, 2025 | October-December 2025 | ₹200 per day |
| Q4 TDS Return (24Q) | May 31, 2025 | January-March 2025 | ₹200 per day |
| LDC Expiry | March 31, 2025 | Certificate validity ends | Short payment interest |
Frequently Asked Questions (FAQs) on Amazon TDS Deduction & Lower Certificate
Do I need to deduct TDS on Amazon referral commission and marketplace fees?
No, you should not deduct TDS on Amazon referral commission and most marketplace fees. These are covered under Section 194-O framework where Amazon deducts TDS at 0.1% on gross sales amount. Separate TDS deduction by sellers would result in double taxation and is specifically discouraged by CBDT Circular No. 20/2025.
What's the current rate for Section 194-O and which Amazon fees are covered?
The current Section 194-O rate is 0.1% effective October 1, 2025 (reduced from 1%). This covers all marketplace fees connected to sales facilitation including referral fees, FBA charges, shipping fees, storage fees, return processing, payment collection fees, and other operational charges directly related to order fulfillment.
Which Amazon expenses definitely require TDS deduction by sellers?
TDS deduction is required for: (1) All types of Advertisement services (Amazon Ads, Sponsored Products, Display Ads, Video Ads) under Section 194C, (2) Multi-Channel Fulfillment (MCF) services under Section 194C, (3) Standalone professional/technical services under Section 194J, (4) Any service not connected to marketplace sales facilitation and billed separately.
Can I use Amazon's Lower TDS Certificate even if my TAN is not specifically mentioned?
Yes, Amazon's LDC for FY 2025-25 is issued on aggregate threshold basis without individual TAN restrictions. This means all eligible deductors can use the certificate as long as threshold balance is available in TRACES. You don't need prior approval or registration to use the certificate.
What are the LDC rates and certificate numbers for different Amazon services?
Key LDC rates: (1) Advertising Services (194C): 0.25% using certificate 1AF0524ALO, (2) Technical Services (194J): 0.25% using certificate 1AF0524ALS, (3) Professional Services (194J): 1% using certificate 1AF0524ALT, (4) Commission/Brokerage (194H): 0.50% using certificate 1AF0524ALP. All certificates are valid from May 15, 2025 to March 31, 2025.
What happens if I apply LDC rates before May 15, 2025 or after March 31, 2025?
LDC is valid only from May 15, 2025 to March 31, 2025. Any TDS deducted outside this period must use normal rates. Incorrect application requires filing revised returns, paying the difference plus applicable interest. Amazon will not reimburse interest charges on short payments due to incorrect rate application.
What should I do if the LDC threshold gets exhausted mid-quarter?
Once threshold is exhausted, apply normal rates for all subsequent payments. You cannot continue using LDC rates beyond available balance. If you do, it results in short payment of TDS requiring corrective action through revised returns and interest payment. Monitor threshold usage monthly to plan for this scenario.
How frequently does TRACES update LDC threshold balances?
TRACES updates aggregate threshold limits quarterly after processing TDS returns. This creates a 1-3 month delay between actual deductions and system updates. Maintain internal tracking to avoid exceeding limits and always check TRACES before applying LDC rates for large amounts or new quarters.
Can I carry forward unutilized LDC threshold to FY 2025-26?
No, LDC thresholds cannot be carried forward to next financial year. Each certificate is valid only for its specified period. Any unutilized threshold amount expires with the certificate on March 31, 2025. Plan your usage accordingly to optimize benefits within the validity period.
How do I handle Amazon invoices containing both marketplace fees and advertising charges?
Split the treatment: (1) Marketplace fees (referral, FBA, shipping): No TDS required as covered by 194-O, (2) Advertising charges: Apply TDS under Section 194C at applicable rates (normal or LDC), (3) Maintain clear documentation of the split with invoice line-item analysis, (4) Ensure separate accounting for different categories for audit purposes.
What documents are required for TDS compliance on Amazon expenses?
Essential documents: (1) Amazon tax invoices with clear service categorization, (2) TRACES LDC validation reports with screenshots, (3) TDS calculation worksheets showing rate application logic, (4) Form 16A copies with acknowledgment proof, (5) TDS deposit challans, (6) Internal expense categorization records with business justification for each classification decision.
Does Amazon's LDC apply to cross-border transactions with Amazon.com?
No, LDC typically applies only to resident entities like Amazon Seller Services Pvt Ltd (PAN: AAICA3918J). For non-resident Amazon entities (Amazon.com, Amazon Europe), Section 195 applies with different rules including DTAA provisions, PE considerations, and potential GST RCM. Always seek specialist advice for cross-border scenarios.
How do I claim reimbursement for TDS deducted on Amazon advertising?
Follow these steps: (1) Upload Form 16A to Amazon Seller Central portal in the designated TDS section, (2) Ensure PAN and invoice details match exactly between your records and Amazon's system, (3) Submit through the reimbursement workflow with all required details, (4) Track status through seller portal notifications, (5) Follow up through Amazon support if delays exceed normal processing time of 30-45 days.
What are the threshold limits for TDS deduction on Amazon advertising?
Section 194C thresholds for advertising services: (1) Individual/HUF payees: ₹30,000 annually, (2) Company and other payees: ₹1,00,000 annually, (3) No TDS required if annual payments don't cross these limits, (4) Calculate aggregate payments to same payee (Amazon) across the entire financial year including all types of advertising services.
Can I interchange LDC threshold balances between different TDS sections?
No, you cannot interchange threshold balances between sections. Each TDS section (194C, 194J, 194H, etc.) has its own separate certificate number and threshold limit. For example, unused balance under Section 194J (professional services) cannot be used for Section 194C (advertising) payments and vice versa. Plan usage section-wise.
How should I handle TDS on high seasonal advertising spends like festive campaigns?
Plan strategically: (1) Check TRACES LDC balance before major campaigns, (2) Distribute high spends across quarters if business allows, (3) Monitor threshold utilization monthly with projected vs. actual tracking, (4) Keep buffer amount for normal rates if threshold exhausts, (5) Consider timing of payments to optimize LDC usage throughout the year, especially during Q3 festive season.
What records should I maintain for TDS audit and compliance purposes?
Maintain comprehensive records: (1) Monthly expense categorization sheets with detailed reasoning, (2) TRACES validation reports for LDC usage with timestamps, (3) TDS calculation worksheets showing step-by-step computation, (4) Form 16A register with delivery acknowledgments, (5) All correspondence with Amazon on reimbursements, (6) Detailed justification notes for expense classification decisions, (7) Quarterly threshold monitoring reports and variance analysis.
How do I handle corrections if I discover TDS calculation errors later?
Take immediate corrective action: (1) File revised TDS return (Form 24Q) immediately without waiting for the next quarter, (2) Deposit shortfall amount with applicable interest calculated from original due date, (3) Issue revised Form 16A to Amazon with corrected details, (4) Update internal records and procedures to prevent recurrence, (5) Implement additional controls and review processes, (6) Note: Interest on short payments is typically non-reimbursable by Amazon.
What are the recent changes in TDS treatment for Amazon marketplace fees?
Key recent changes: (1) CBDT Circular No. 20/2025 clarified no separate TDS on marketplace fees covered by 194-O, (2) Section 194-O rate reduced from 1% to 0.1% effective October 1, 2025, (3) Amazon's comprehensive LDC for FY 2025-25 with significantly reduced rates across 7 sections, (4) Clear regulatory distinction between marketplace fees (no TDS by seller) and advertisement services (TDS required), (5) Simplified compliance with elimination of double taxation scenarios.
How do I verify Amazon's LDC details in TRACES portal step-by-step?
Step-by-step TRACES verification: (1) Login to traces.gov.in using your registered deductor credentials, (2) Navigate to "Statements/Payments" from the main menu, (3) Select "Validate Lower Deduction Certificate u/s 197/195(3)/195(2)", (4) Enter Amazon's PAN: AAICA3918J, (5) Select appropriate certificate number based on service type (e.g., 1AF0524ALO for advertising), (6) Choose Financial Year 2025-25, (7) Review available balance and validity dates, (8) Take screenshot and document the verification for your compliance records.
Conclusion: Maximizing Compliance While Optimizing Costs
The TDS framework for Amazon sellers in FY 2025-25 presents unprecedented opportunities for cost optimization through proper understanding and application of regulatory changes. The combination of reduced Section 194-O rates and Amazon's comprehensive Lower TDS Certificate can result in annual savings of ₹50,000 to ₹2,00,000+ for active sellers, depending on transaction volumes and advertising spend patterns.
Success in this framework requires systematic approach to expense categorization, proactive TRACES monitoring, and disciplined compliance procedures. The key is recognizing that most marketplace fees are covered by Section 194-O (no seller action required), while advertisement and standalone services need careful TDS management with LDC optimization.
As we progress through FY 2025-25, sellers should focus on building robust compliance systems, maintaining detailed documentation, and leveraging professional expertise for complex scenarios. The regulatory landscape continues to evolve, making ongoing education and systematic compliance monitoring essential for sustained business success in the Amazon ecosystem.