How to Claim 194-O TDS Refund: Steps for Marketplace Sellers

To claim a 194-O TDS refund, file your income tax return and claim the TDS shown in Form 26AS. There is no separate refund form, and the marketplace does not pay it back. If the tax paid in your name is more than your final tax, the balance is credited to your validated bank account after the return is processed.

When does the TDS turn into a refund?

Think of the TDS as an advance your marketplace paid to the government on your behalf. At the end of the year you work out your actual tax. Is the tax more than the advance? You pay the difference. Is it less? The department returns the difference. That return of money is the refund.

So you do not get back the TDS as such. You get back whatever is left after your own tax is covered. Many small sellers have little or no tax to pay, and for them the whole amount comes back.

Why does the rule exist at all? The deduction is tiny. Its real job is to tell the department, through Form 26AS, how much you sold on each marketplace. The basics are in TDS under section 194-O.

How do you claim it, step by step?

1. Log in to the income tax e-filing portal and download Form 26AS and the Annual Information Statement (AIS). Note the TDS against each marketplace.
2. Match it with the TDS lines in your marketplace payment reports, or with the TDS certificates the marketplace issues. If an entry is missing, ask the marketplace to correct its TDS statement before you file.
3. Check that the bank account you want the money in is validated on the portal, under your profile. Savings, current, cash credit and overdraft accounts can be validated. The portal says the status is updated within 10 to 12 working days.
4. Pick the right return form and report your business income. See which ITR form to file.
5. In the TDS schedule of the return, confirm the pre-filled section 194-O entries. Claim what Form 26AS shows, not more.
6. Submit the return and e-verify it within 30 days. Processing starts only after verification.
7. Track it under e-File, then Income Tax Returns, then View Filed Returns, then View Details.

A worked example

Farhan sells mobile accessories on two marketplaces. In financial year 2025-26 his gross sales were Rs 30,00,000, all received through his bank account.

• TDS under section 194-O at 0.1%: Rs 3,000. Form 26AS shows Rs 1,800 from one marketplace and Rs 1,200 from the other.
• He opts for the presumptive scheme and declares income at 6% of turnover: Rs 1,80,000.
• He has no other income. Rs 1,80,000 is below the level at which income tax starts, so his tax is nil.
• Tax paid in his name: Rs 3,000. Tax due: nil. Refund: Rs 3,000.

Now change one fact. Suppose his tax had worked out to Rs 20,000. The Rs 3,000 would not come back. It would reduce what he pays to Rs 17,000. Either way he gets the full benefit, but only if he files and claims it.

What do the refund statuses mean?

Why do refunds fail? The portal lists these reasons: PAN not linked with Aadhaar, bank account not pre-validated, name in the bank not matching the PAN, a wrong IFSC, and a closed account. Every one of them can be fixed before you file.

How long does it take? The portal says a refund usually takes four to five weeks to reach the account once the return is e-verified. Treat that as an indication, not a promise.

What if you have missed the due date?

For financial year 2025-26, a seller whose accounts did not need an audit had to file by 31 August 2026. You can still file a belated return up to 31 December 2026 and claim the refund in it. A late fee under section 234F can apply: Rs 1,000 where total income is up to Rs 5 lakh, and Rs 5,000 above that. The details are in belated return filing.

Does the department pay interest on the refund? Section 244A provides for simple interest in some cases, and less of it when the delay is yours. We could not open the official text today, so check the rate with your tax expert.

The mistake sellers usually make

The biggest one is not filing at all. "My income is below the limit, so why file?" Because without a return, the TDS simply stays with the government.

The second is a turnover figure that does not agree with the marketplace's records. If the gross sales in Form 26AS are higher than the turnover in your return, write down why. The usual reasons are in 26AS turnover vs GST turnover mismatch.

The third is mixing this up with the GST that the marketplace collects from the same payout. That one is TCS under GST, and it is claimed in the GST cash ledger, not in the income tax return. See how to claim TCS credit in GST.

Should you do this yourself or pay for it? If the refund is a few thousand rupees and you only need the money back, a fee can eat a large part of it. The return is worth more than the refund, though. It is your income proof for a loan, and it answers the sales that Form 26AS already shows against your PAN.

For sales from 1 April 2026, the deduction moves to section 393(1) of the Income-tax Act, 2025. We expect the claim to work the same way in the return you file in 2027, but the forms for that year should be checked when they are released.

Frequently asked questions

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