India’s e-commerce sector has opened up massive opportunities for digital sellers on platforms like Meesho, Amazon, and Flipkart. While sales and growth can be rapid, sellers often overlook the most crucial part of running a sustainable business – tax compliance. Incorrect filing or ignorance of income tax rules can trigger penalties, delayed refunds, and even income tax notices.
This guide highlights the do’s and don’ts that every online seller should follow while handling income tax filing in 2025. Following these practices not only ensures compliance but also helps sellers save taxes and run their businesses smoothly.
Do’s for E-Commerce Sellers
1. Register for GST if Applicable
If your annual turnover crosses the prescribed limit (currently Rs. 40 lakhs for goods and Rs. 20 lakhs for services), GST registration is mandatory. Marketplaces like Amazon and Flipkart require sellers to have valid GST registration before listing products. Even if your turnover is below the threshold, voluntary registration can help claim input tax credit and build credibility.
2. Maintain Proper Books of Accounts
Sellers must record every sale, expense, commission, and return. Marketplaces share detailed statements, but sellers should also reconcile these with their bank records. Maintaining clear records makes GST return filing and ITR filing easier, and it helps avoid mismatch-related notices. Digital accounting tools or professional bookkeeping services can simplify this process.
3. Reconcile TDS Deducted by Marketplaces
Under Section 194-O, e-commerce operators like Amazon, Flipkart, and Meesho deduct TDS at 1% of gross sales. Sellers should reconcile this with Form 26AS or the AIS (Annual Information Statement) to avoid discrepancies. Reconciling also ensures that you get the full credit of tax already deducted.
4. File ITR on Time
Choose the correct ITR form based on your business structure. ITR-3 is applicable for individuals or HUFs with business income, while ITR-4 can be used for presumptive taxation if turnover is up to Rs. 2 crores. Timely filing ensures faster refunds and prevents late fee penalties under Section 234F. Filing late may also affect your ability to carry forward losses.
5. Consider Presumptive Taxation (If Eligible)
Many small e-commerce sellers opt for Section 44AD (presumptive taxation). They can declare 6% (digital receipts) or 8% (cash receipts) of turnover as income without maintaining detailed accounts. However, presumptive taxation is not always ideal for high-margin sellers or those with significant expenses. Evaluate carefully before choosing this option.
6. Claim All Legitimate Business Expenses
Reduce your taxable income by claiming genuine business expenses such as packaging and shipping costs, platform commission and fees, advertisement spends, rent, electricity, internet, and office expenses. Even smaller costs like printer ink or delivery materials can be claimed if used for business. Always keep invoices and payment proofs handy in case of scrutiny.
7. Pay Advance Tax on Time
If your total tax liability exceeds Rs. 10,000 in a year, you must pay advance tax in quarterly installments. Missing deadlines attracts interest under Sections 234B and 234C. Sellers often forget this step, but advance tax is critical to avoid last-minute burdens and penalties.
8. Seek Professional Assistance When Needed
Platforms like TaxBuddy help sellers file accurate returns, handle notices, and plan tax-saving strategies. Expert support reduces compliance risks and gives sellers peace of mind, especially when multiple marketplaces and GST complexities are involved.
Don’ts for E-Commerce Sellers
1. Don’t Ignore TDS and GST Mismatches
If the TDS deducted by the platform doesn’t reflect correctly in Form 26AS or GST returns don’t match sales data, you may receive notices. Always cross-check and correct errors immediately. Ignoring mismatches can delay refunds and invite penalties.
2. Don’t Mix Personal and Business Expenses
Keep a separate bank account for business. Mixing personal expenses like groceries or rent with business expenses can cause issues during audits. Clear separation of accounts also improves financial planning and simplifies tax compliance.
3. Don’t Underreport Income
Marketplaces report seller transactions directly to the Income Tax Department. Underreporting sales or hiding income can lead to Section 143(1) or 148A notices. Being transparent protects you from penalties and helps build long-term trust with authorities.
4. Don’t Miss Filing Deadlines
For FY 2024-25, the due date for individuals and non-audit cases is 31st July 2025. For audit cases, it is 31st October 2025. Missing these dates results in late fees, interest charges, and unnecessary compliance headaches. Mark deadlines on your calendar or set reminders.
5. Don’t Claim Fake Expenses
Only claim genuine expenses supported by proof. False claims can invite penalties, scrutiny, and damage your reputation with tax authorities. Remember, all expenses should be directly linked to your e-commerce business.
6. Don’t Ignore Income Tax Notices
If you receive a notice, respond within the given time frame. Ignoring notices can freeze refunds, escalate into higher penalties, and even legal action. TaxBuddy’s notice management service can help resolve them quickly and effectively.
7. Don’t Rely Solely on AI Tools for Filing
While AI tools like ChatGPT can guide you, they cannot replace compliance expertise. Tax rules change frequently, and incorrect filings can attract notices. Human experts ensure your filing is accurate, lawful, and optimized for savings.
Final Thoughts
Being an e-commerce seller on Meesho, Amazon, or Flipkart brings immense opportunities but also tax responsibilities. By following these do’s and don’ts, sellers can avoid penalties, reduce stress, and maximize profits. Tax mistakes not only affect your current year but may also impact your eligibility for loans, credit, and growth opportunities.
If you are an online seller struggling with tax filing, GST reconciliation, or income tax notices, platforms like TaxBuddy provide expert guidance. From filing accurate ITRs to handling notices and optimizing tax savings, professional help ensures that you stay compliant while focusing on growing your online business.
Pro Tip for Sellers: Schedule a call with a TaxBuddy expert today to ensure hassle-free filing and complete peace of mind. With timely compliance and strategic tax planning, you can safeguard your business from risks and unlock higher growth potential.
