Motivated by the recently reported excess of electron recoil events by the XENON1T experiment, we propose low scale seesaw scenarios for light neutrino masses within $U(1)_X$ gauge extension of the standard model that also predicts stable as well as long lived dark sector particles. The new fields necessary for seesaw realisation as well as dark matter are charged under the $U(1)_X$ gauge symmetry in an anomaly free way. A singlet scalar field which effectively gives rise to lepton number violation and hence Majorana light neutrino masses either at tree or radiative level, also splits the dark matter field into two quasi-degenerate states. While sub-eV neutrino mass and non-zero dark matter mass splitting are related in this way, the phenomenology of sub-GeV scale inelastic dark matter can be very rich if the mass splitting is of keV scale. We show that for suitable parameter space, both the components with keV splitting can contribute to total dark matter density of the present universe, while opening up the possibility of the heavier dark matter candidate to undergo down-scattering with electrons. We check the parameter space of the model for both fermion and scalar inelastic dark matter candidates which can give rise to the XENON1T excess while being consistent with other phenomenological bounds. We also discuss the general scenario where mass splitting~$Delta m$ between the two dark matter components can be larger, effectively giving rise to a single component dark matter scenario.