New Delhi, June 16 -- Every month, Ranjani Purohit, a women's apparel manufacturer and seller in Jaipur, has to set aside an extra Rs.50,000 just to fulfill her tax deducted at source (TDS) obligations. Purohit is liable to deposit 2% TDS on the advertisements she runs on Facebook, Google and other online marketplaces, but is forced to pay this tax out of pocket, given the nature of these transactions.

Big marketplaces such as Facebook and Google demand full payment upfront for running ads, without any deductions. This is contrary to the very definition of TDS, said Lokendra Singh Tomar, a chartered accountant (CA) in Jaipur. "TDS provisions require the payer to withhold tax at the source, deposit it with the government on the behalf of ...