Section 194Q: TDS on Purchase of Goods Above Rs 50 Lakh

Section 194Q places a TDS obligation on the buyer's side of a goods purchase, once the buyer's own turnover and the purchase value from a given seller cross specified thresholds. It was introduced to bring large buyers into the TDS net for goods transactions, mirroring the TCS obligation that used to sit on the seller's side under Section 206C(1H). That mirrored provision has since been withdrawn, which simplifies compliance considerably, as explained below.

Who Must Deduct TDS Under Section 194Q

A buyer must deduct TDS under Section 194Q if their total sales, turnover, or gross receipts exceeded Rs 10 crore in the immediately preceding financial year, and their aggregate purchase of goods from a particular resident seller exceeds Rs 50 lakh in the current financial year. Both conditions must be met: the turnover test looks at the buyer's own prior-year scale, and the Rs 50 lakh threshold is tested seller-by-seller, not across all purchases combined.

A buyer with Rs 12 crore turnover last year, purchasing Rs 80 lakh of goods from Seller A and Rs 30 lakh from Seller B in the current year, deducts TDS only on the Rs 30 lakh excess from Seller A (Rs 80 lakh minus the Rs 50 lakh threshold); Seller B stays below the threshold and attracts no TDS.

TDS Rate and How It Is Calculated

The rate is 0.1%, applied only to the portion of the purchase value from a seller that exceeds Rs 50 lakh in the financial year, not the entire purchase amount. If the seller has not furnished PAN, the rate increases to 5% under Section 206AA. TDS is deducted at the time of credit to the seller's account or payment, whichever is earlier, including on advance payments.

This "only on the excess" mechanic is a useful contrast with Section 194J, where crossing the Rs 50,000 threshold pulls the entire year's payments into TDS. Section 194Q, like Section 194C's Rs 1 lakh aggregate rule, applies TDS prospectively from the point the threshold is crossed rather than retroactively to the first rupee.

Section 194Q vs Section 206C(1H): The Overlap Has Been Resolved

Before April 1, 2025, Section 194Q (buyer-side TDS on goods purchases) and Section 206C(1H) (seller-side TCS on sale of goods) could technically both apply to the same transaction, since the two provisions targeted mirror-image sides of large goods transactions above similar thresholds. The law's own precedence rule addressed this by giving Section 194Q priority: where the buyer was liable to deduct TDS under Section 194Q, the seller was not required to also collect TCS under Section 206C(1H) on that same transaction.

Section 206C(1H) has since been omitted from the statute with effect from April 1, 2025. This means the precedence question is now moot for any transaction going forward: Section 194Q alone governs buyer-side compliance on qualifying goods purchases, and there is no parallel seller-side TCS obligation to reconcile against it. Businesses that built dual-tracking processes to manage the old overlap (checking whether the seller had already collected TCS before deciding whether to still deduct TDS) can retire that reconciliation step for current-year transactions.

Note that this is a different mechanism entirely from GST's e-commerce TCS under Section 52 of the CGST Act, covered in our GST for e-commerce sellers guide; that is a GST-law TCS on marketplace transactions, unrelated to the income-tax TCS under Section 206C(1H) discussed here, despite the similar-sounding name.

Section 393 of the Income Tax Act 2025: An Unconfirmed Sub-Item

Under the Income Tax Act 2025, TDS on purchase of goods has been consolidated in substance with other TDS provisions under Section 393, the same large consolidated section that also covers what used to be Sections 194J and 194C. Unlike those two, however, we have not been able to confirm a specific table item or sub-clause number for the goods-purchase provision consistently across available sources at the time of writing. Rather than cite a number that might be wrong, we recommend treating this as "consolidated under Section 393" for now and confirming the precise sub-item with your tax advisor at the time of filing, once official notifications settle the point beyond doubt. The rate, threshold, and buyer-turnover condition described in this guide are unaffected by this numbering detail.

Compliance Steps for Buyers

• Check your own turnover for the immediately preceding financial year against the Rs 10 crore threshold at the start of each year.
• Track cumulative purchases seller-by-seller, not in aggregate, since the Rs 50 lakh threshold applies per seller.
• Deduct TDS at 0.1% on the excess over Rs 50 lakh from each qualifying seller, deposit it by the 7th of the following month, and file the quarterly TDS return.
• Verify seller PAN before the first qualifying payment to avoid the 5% no-PAN rate applying retroactively across the transaction.

Failure to deduct exposes the buyer to being treated as an assessee in default, interest on the shortfall, disallowance of the purchase expense, and penalty exposure under Section 271C. If your business crosses the Rs 10 crore turnover mark for the first time, build a seller-wise purchase tracker into your accounting system before the Rs 50 lakh threshold is reached mid-year, rather than reconciling it retrospectively at year-end.

Need help setting up Section 194Q tracking across your vendor base, or reviewing whether past purchases were correctly captured? Our tax compliance services cover TDS system setup and periodic health checks.