Contents
- Introduction: Amazon's Lower TDS Certificate
- Overview of Key Changes for FY 2024-25
- Understanding the Lower TDS Certificate
- TRACES Verification Process
- Compliance Requirements and Best Practices
- Who is Affected by These Changes
- Timeline of Events and Background
- You may also like
- Frequently Asked Questions (FAQs)
- Conclusion
Introduction: Amazon's Lower TDS Certificate for FY 2024-25
Amazon Seller Services Private Limited has obtained a Lower Tax Deduction at Source (TDS) Certificate from the Income Tax Department for financial year 2024-25, providing significant relief to sellers who need to deduct TDS on payments made to Amazon. This certificate allows for substantially reduced TDS rates across multiple sections of the Income Tax Act.
The Lower TDS Certificate is valid from May 15, 2024, to March 31, 2025, and covers various payment categories with rates as low as 0.25% instead of the standard rates.
Understanding how to properly apply this certificate is crucial for sellers to ensure compliance while minimizing tax burdens. This comprehensive guide covers everything you need to know about Amazon's LDC, from verification procedures to practical application scenarios.
Click to reveal a quick tip!
Always verify the available balance in TRACES before applying the LDC rate to avoid short payment of TDS and potential interest charges.
Overview of Key Changes for FY 2024-25
The Lower TDS Certificate for FY 2024-25 brings several important changes and considerations for Amazon sellers. The certificate is issued on an aggregate basis, meaning there's no individual TAN-specific threshold, making it accessible to all eligible sellers.
Note: As per CBDT Circular No. 20 dated December 28, 2023, marketplace fees (excluding Advertisement and Multi-Channel Fulfilment fees) may not be subject to TDS if they're included in the gross amount for Section 194-O TDS calculation.
Important: The certificate does not cover the period before May 15, 2024. Any TDS deducted before this date should follow normal rates.
| TDS Section | Payment Type | Normal Rate | LDC Rate | Certificate Number |
|---|---|---|---|---|
| 194J | Fee for technical services | 2% | 0.25% | 1AF0524ALS |
| 194J | Fees for professional services | 10% | 1% | 1AF0524ALT |
| 194A | Interest other than on securities | 10% | 1% | 1AF0524ALN |
| 194C | Payments to contractors | 2% | 0.25% | 1AF0524ALO |
| 194H | Commission/Brokerage | 5% | 0.50% | 1AF0524ALP |
| 194I(a) | Rent - Plant/Machinery/Equipment | 2% | 0.25% | 1AF0524ALQ |
| 194I(b) | Rent - Land/Building/Furniture | 10% | 1% | 1AF0524ALR |
Understanding the Lower TDS Certificate
The Lower TDS Certificate is a formal authorization from the Income Tax Department that allows deductors to apply reduced TDS rates on specific types of payments. Amazon's certificate covers seven different TDS sections, each with its own certificate number and reduced rate.
Certificate Details and Validity
Amazon's LDC contains the following key details:
- Deductee Details: Amazon Seller Services Private Limited (PAN: AAICA3918J)
- Validity Period: May 15, 2024, to March 31, 2025
- Certificate Type: Aggregate threshold basis (no individual TAN restrictions)
- Coverage: Seven different TDS sections with varying rates
Applicable TDS Sections and Rates
The certificate covers payments under multiple sections of the Income Tax Act, each designed for specific types of business transactions:
Section 194J: This covers both technical services (0.25% rate) and professional services (1% rate). Technical services typically include IT support, software services, and technical consultancy, while professional services cover broader consultancy and advisory services.
Section 194C: Applicable to contractor payments at a reduced rate of 0.25%, this section covers various service contracts and work contracts between businesses.
Section 194H: Commission and brokerage payments are covered at 0.50%, significantly lower than the standard 5% rate.
TRACES Verification Process
Verification through the TRACES portal is essential to ensure you don't exceed the available threshold limits and to maintain compliance with TDS regulations.
Step-by-Step Verification Guide
Follow these detailed steps to verify Amazon's LDC and check available thresholds:
- Step 1: Access TRACES Portal: Sign in to the TRACES portal using your deductor's credentials at traces.gov.in
- Step 2: Navigate to Statements: Go to the "Statements/Payments" section from the main dropdown menu
- Step 3: Select Validation Option: Choose "Validate Lower Deduction Certificate u/s 197/195(3)/195(2)" from the available options
- Step 4: Enter Amazon's Details: Input Amazon's PAN (AAICA3918J) in the designated field
- Step 5: Certificate Verification: Enter the specific certificate number based on the TDS section you're dealing with
- Step 6: Check Available Balance: Review the unutilized threshold amount displayed for that specific section
Balance Monitoring and Updates
Understanding how TRACES updates threshold balances is crucial for ongoing compliance:
Update Frequency: The aggregate threshold limits are updated quarterly after TRACES processes the quarterly TDS returns. This means there can be a delay between when you deduct TDS and when it reflects in the system.
Real-time Monitoring: Since updates are quarterly, you need to maintain your own records to track cumulative deductions against the available threshold.
Handling Threshold Exhaustion
When threshold limits are exhausted during a quarter, specific procedures must be followed:
Warning: If you continue applying LDC rates after threshold exhaustion, it results in short payment of TDS, requiring corrective action.
Corrective measures include filing a revised TDS return, depositing the TDS shortfall, and paying applicable interest. While Amazon will reimburse the short TDS on fees, interest on short payments is not reimbursable.
Compliance Requirements and Best Practices
Proper compliance with LDC requirements involves several key considerations that sellers must understand and implement.
TDS Return Reporting
When filing quarterly TDS returns with LDC rates applied, specific reporting requirements must be met:
- LDC Details Column: TDS returns have designated columns for LDC details that must be completed
- Certificate Information: Include the relevant certificate number and applicable rate
- Section-wise Reporting: Each TDS section must be reported separately with its corresponding LDC details
- Period Verification: Ensure all payments fall within the certificate validity period
Practical Application Scenarios
Understanding how the LDC applies in different scenarios helps ensure proper implementation:
| Scenario | LDC Applicable Amount | Normal Rate Amount | Explanation |
|---|---|---|---|
| Payment within threshold and period | Full payment amount | Nil | LDC rate applies to entire payment |
| Payment exceeds available threshold | Up to threshold limit | Excess amount | LDC rate for threshold portion, normal rate for excess |
| Payment before certificate period | Nil | Full payment amount | LDC not applicable for pre-period payments |
| Mixed period payments | Certificate period portion | Pre-certificate portion | Different rates for different periods |
Who is Affected by These Changes
The Amazon Lower TDS Certificate impacts several categories of business entities and individuals:
Primary Beneficiaries
- Amazon Sellers: All registered sellers on Amazon's platform who make payments subject to TDS deduction
- Service Providers: Companies providing technical, professional, or consultancy services to Amazon
- Contractors: Entities engaged in work contracts or service contracts with Amazon
- Commission Agents: Businesses earning commission or brokerage from Amazon transactions
Tax Professionals and Compliance Teams
- Chartered Accountants: Professionals managing TDS compliance for Amazon sellers
- Tax Consultants: Advisors helping businesses navigate TDS obligations
- Compliance Officers: Internal teams responsible for TDS processing and filing
Business Categories by Size
- Large Enterprises: Companies with significant Amazon transactions benefiting from substantial TDS savings
- SMEs: Small and medium enterprises with regular Amazon payments
- Individual Professionals: Freelancers and consultants providing services to Amazon
Timeline of Events and Background
Understanding the background and timeline of events helps provide context for Amazon's Lower TDS Certificate:
Historical Context
December 28, 2023: CBDT issued Circular No. 20, clarifying that marketplace fees connected to goods sales and included in Section 194-O gross amounts should not be subject to additional TDS.
Early 2024: Amazon applied for Lower TDS Certificates across multiple sections to reduce the TDS burden on business transactions.
Key Dates for FY 2024-25
- May 15, 2024: LDC validity period begins - reduced rates applicable from this date
- Quarterly Updates: June 30, September 30, December 31, 2024, and March 31, 2025 - TRACES threshold updates
- March 31, 2025: LDC validity period ends - normal rates apply after this date
Cut-off Dates and Deadlines
Critical Deadlines:
- TDS Return Filing: Quarterly by July 31, October 31, January 31, and May 31
- TDS Payment: By 7th of the following month for monthly deductions
- Certificate Expiry: March 31, 2025 - no extensions available
- Threshold Monitoring: Continuous tracking required as quarterly updates may have delays
Frequently Asked Questions (FAQs) on Amazon's Lower TDS Certificate
Can I apply the LDC rate even if my TAN is not specifically mentioned in the certificate?
Yes, you can apply the LDC rate. Amazon's certificate for FY 2024-25 is issued on an aggregate threshold basis without specifying individual TANs, making it applicable to all eligible deductors.
What happens if I deduct TDS at the LDC rate before May 15, 2024?
The LDC is not valid for periods before May 15, 2024. Any TDS deducted before this date should follow normal rates. If you've already applied LDC rates incorrectly, you'll need to file revised returns and pay the difference.
How frequently is the threshold balance updated in TRACES?
The aggregate threshold limit is updated quarterly after TRACES processes the quarterly TDS returns. This means there can be a 1-3 month delay between actual deductions and system updates.
Can I use unutilized threshold amounts in the next financial year?
No, unutilized threshold amounts from FY 2024-25 cannot be carried forward to FY 2025-26 or any subsequent year. Each certificate is valid only for its specified period.
Does the LDC apply to Section 194-O TDS on e-commerce transactions?
No, this LDC specifically does not apply to TDS under Section 194-O. The certificate only covers the seven mentioned sections (194J, 194A, 194C, 194H, 194I).
What should I do if the TRACES threshold gets exhausted mid-quarter?
If the threshold is exhausted, you must apply normal TDS rates for subsequent payments. If you continue with LDC rates, you'll need to file revised returns, pay the shortfall, and bear interest charges (which Amazon won't reimburse).
Can I apply different LDC rates for payments under different sections?
No, you cannot interchange threshold balances between sections. Each section has its own certificate number and threshold limit. For example, unused balance under Section 194J cannot be used for Section 194C payments.
How do I report LDC details in my quarterly TDS return?
TDS returns have designated columns for LDC details. You must provide the certificate number, applicable rate, and other relevant details for each section where LDC rates were applied.
Will I receive automatic notifications about Amazon's LDC from the Income Tax Department?
No, since the LDC is issued on an aggregate basis, individual deductors don't receive automatic notifications. You need to proactively check TRACES using Amazon's PAN and the certificate numbers.
What is the difference between technical services and professional services under Section 194J?
Technical services (0.25% LDC rate) typically include IT support, software services, and technical consultancy. Professional services (1% LDC rate) cover broader consultancy, advisory services, and other professional expertise not categorized as technical services.
Conclusion: Maximizing Benefits While Ensuring Compliance
Amazon's Lower TDS Certificate for FY 2024-25 presents a significant opportunity for cost savings while maintaining full compliance with tax regulations. The key to successful implementation lies in understanding the verification process, monitoring threshold limits, and maintaining accurate records.
Remember that proper planning and regular TRACES verification are essential to avoid compliance issues. Consider consulting with your tax advisor to ensure optimal utilization of the certificate benefits while meeting all regulatory requirements. With careful implementation, the LDC can result in substantial TDS savings throughout the certificate period.