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Lower Tax Deduction Certificate for Amazon and Flipkart Sellers

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As an ecommerce seller, you know that taxes can be a significant expense. But did you know that you may be eligible for a Lower Tax Deduction Certificate (LTDC)? An LTDC can help you save money on your taxes by allowing you to claim a lower rate of tax on certain types of income.

What is a Lower Tax Deduction Certificate (LTDC)?

A Lower Tax Deduction Certificate (LTDC) is an official document issued by the tax authorities that allows eligible taxpayers to reduce the amount of tax deducted at the source from their income. This certificate is particularly beneficial for individuals with specific deductions, exemptions, or investments that entitle them to pay a lower amount of tax than what is being currently deducted.

Who should opt for a Lower TDS Deduction Certificate?

E-commerce sellers who are residents of India and have a taxable income of more than Rs. 2,50,000 can apply for an LDC. You must also meet certain other eligibility criteria, such as

  1. E-commerce Sellers that have Lower Profit Margins (Eg: Mobile Phones, Electronics Categories) - 1% to 10% Margin
  2. E-commerce Traders who have Low Margin and High Volume Sales
  3. E-commerce Brands that face Cash Flow Struggles due to Deductions

Benefits of LTDC for e-commerce sellers

There are several benefits to applying for an LTDC, including:

  • You can save money on your taxes.
  • You can improve your cash flow.
  • You can reduce your tax liability.

TDS Deduction under Section 194O of the Income Tax Act

Section 194O of the Income Tax Act, of 1961, is a critical provision that deals with the tax deducted at source (TDS) on payments made by an e-commerce operator to an e-commerce participant. Introduced in the Union Budget 2020, this section aims to widen and deepen the tax net by bringing e-commerce within its purview.

Under Section 194O, an e-commerce operator is required to deduct TDS for facilitating any sale of goods or providing services through an e-commerce participant. The rate of TDS is 1% (0.75% for FY 2020-21) of the gross amount of the sale of goods or provision of services or both. The TDS is to be deducted at the time of credit of the amount of sale or services or both to the account of the e-commerce participant or at the time of payment, whichever is earlier.

This provision applies even if the sale of goods or provision of services is facilitated by the e-commerce operator but the payment is made directly to the e-commerce participant. However, if the gross amount of sales or services or both of an e-commerce participant is less than INR 5 lakh during the previous year and the participant provides a valid Permanent Account Number (PAN) or Aadhaar, then no TDS is to be deducted.

Our Process

STEP 1: Consultation

We begin by understanding your financial situation and identifying potential deductions and exemptions that you may be eligible for.

STEP 2: Documentation

Our experts will assist you in gathering the required documents and information necessary for the LTDC application.

STEP 3: Application Preparation

We meticulously prepare your LTDC application, ensuring all details are accurate and in compliance with tax regulations.

STEP 4: Submission and Follow-up

We submit the application on your behalf and closely monitor its progress with the tax authorities.

STEP 5: Delivery of Certificate

Once approved, we will promptly deliver your Lower Tax Deduction Certificate to you, and our team will be available to address any further queries or assistance you may require.

Required Documents

  • PAN card: The PAN card is a 10-digit alphanumeric number that is issued by the Income Tax Department.
  • Aadhaar card: The Aadhaar card is a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI).
  • Bank account details: The bank account details of the seller, including the account number, IFSC code, and name of the bank.
  • Tax residency certificate: The tax residency certificate is a document that proves that the seller is a resident of India for tax purposes.
  • Form 16: Form 16 is a document that is issued by the employer to the employee to show the amount of TDS deducted from the employee's salary.
  • Invoices: The invoices for the goods or services sold by the seller.

Frequently Asked Questions

An LTDC stands for Lower Tax Deduction Certificate. It is a certificate issued by the tax authorities that allows a taxpayer to deduct a lower amount of tax from their payments to a supplier.

Any taxpayer who meets the eligibility criteria can apply for an LTDC. The eligibility criteria vary depending on the type of taxpayer and the tax authority.

The benefits of having an LTDC vary depending on the type of taxpayer and the tax authority. However, some of the general benefits of having an LTDC include:

  •  Reduced tax liability
  •  Increased cash flow
  •  Improved cash management
  • Reduced compliance burden

The processing time for an LTDC varies depending on the type of taxpayer and the tax authority. However, it typically takes a few weeks to a few months to receive an LTDC.

In some cases, you may be able to get an LTDC for multiple years. However, this is typically only available to taxpayers who meet certain criteria.

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