Section 194Q · TDS on purchase of goods
Big buyer? You now deduct TDS on goods you purchase.
- Who deducts
- Buyers with turnover > ₹10 crore
- Rate
- 0.1% (5% if no PAN)
- Threshold
- Purchases > ₹50 lakh / seller / year
- Interplay
- 194Q overrides 206C(1H)
In plain English
If your business turnover crossed ₹10 crore last year, you must deduct 0.1% TDS on the value of goods you buy from any single seller — but only on the amount above ₹50 lakh in a year. It dovetails with the seller's TCS u/s 206C(1H), and only one of the two applies on a transaction.
| Meaning | Number |
|---|---|
| Who deducts | Buyers with turnover > ₹10 crore |
| Rate | 0.1% (5% if no PAN) |
| Threshold | Purchases > ₹50 lakh / seller / year |
How 194Q works in practice
- Trigger — buyer turnover > ₹10 crore — In the immediately preceding FY
- Trigger — purchases > ₹50 lakh — From the same seller in the FY
- Deduction — 0.1% on the amount exceeding ₹50 lakh
- No-PAN case — Rate jumps to 5% u/s 206AA
- Vs 206C(1H) — If both apply, 194Q (buyer's TDS) prevails
What this section covers
Section 194Q (inserted by Finance Act, 2021) makes the buyer of goods a tax deductor where (a) the buyer's total sales / turnover in the immediately preceding FY exceeded ₹10 crore, and (b) the value of purchases from a particular seller in the current FY exceeds ₹50 lakh. TDS is 0.1% on the amount in excess of ₹50 lakh. If the seller has not furnished PAN, the rate becomes 5% under Section 206AA. The provision overlaps with Section 206C(1H) (TCS on sale of goods by large sellers) — where both could apply, only 194Q applies and the seller is relieved from TCS. The buyer is also liable for higher TDS (twice the rate or 5%, whichever is higher) under Section 206AB where the seller is a 'specified person'.
The legal text
“Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof… deduct an amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as income-tax.”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 194Q | 393 |
| Topic | TDS on purchase of goods | |
| Verdict | Consolidated under unified TDS section | |
| Notes | Restated within Section 393 under the Income-tax Act, 2025. The ₹10 crore turnover trigger, ₹50 lakh threshold and 0.1% rate are retained. | |
Common confusion
194Q and 206C(1H) look similar but are mirror images — 194Q is TDS by the buyer, 206C(1H) is TCS by the seller. If both can apply, 194Q wins and the seller does NOT collect TCS.
Who should know this
Related sections
Based on the official Income-tax Act, 1961 and the published Income-tax Act, 2025 as available on the Income Tax Department website. Always verify against the published Act and consult a qualified professional.