TDS
TDS on Purchase of Goods — Section 194Q
Section 194Q requires a buyer with turnover above ₹10 crore in the prior year to deduct 0.1% TDS — but only on the amount exceeding ₹50 lakh purchased from that seller in the current year, not the full amount.
Section 194Q makes large buyers responsible for deducting TDS on goods purchases — it only applies if your business's turnover exceeded ₹10 crore in the preceding financial year, and only on purchases from a seller that cross ₹50 lakh in the current year.
This is one of the few TDS sections where the tax is deducted on the excess over the threshold, not the whole payment — buy ₹80 lakh of goods from one seller in a year, and 0.1% TDS applies only to the ₹30 lakh above the ₹50 lakh mark, not the full ₹80 lakh.
The no-PAN override is also different here: if the seller hasn't furnished a PAN, the rate rises to 5% — not the standard 20% under Section 206AA that applies to most other TDS sections.
From FY 2026-27, this is Section 393(1), Table 1, Sl. 8(ii) under the Income-tax Act, 2025, filed against payment code 1031.
Worked example
On a ₹80,00,000.00 payment, 0.1% TDS applies only to the ₹30,00,000.00 above the ₹50,00,000.00 threshold — ₹3,000.00, leaving a net payment of ₹79,97,000.00. ₹80 lakh in goods purchased from one seller in a year, by a buyer with turnover above ₹10 crore: 0.1% TDS applies only to the ₹30 lakh above the ₹50 lakh threshold — ₹3,000, not ₹8,000.
Frequently asked questions
Does this apply to every business, or only large ones?
Only buyers whose turnover exceeded ₹10 crore in the preceding financial year. Smaller buyers aren't required to deduct under this section, regardless of purchase value.
Is TDS deducted on the full purchase amount once ₹50 lakh is crossed?
No — only on the amount exceeding ₹50 lakh from that specific seller in the year. The first ₹50 lakh of purchases from them isn't taxed under this section.
What if this section and TCS under Section 206C(1H) both seem to apply?
Where both a buyer's TDS obligation under 194Q and a seller's TCS obligation under 206C(1H) could apply to the same transaction, 194Q takes priority — the buyer deducts TDS, and the seller doesn't also collect TCS on that transaction.