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Section 194Q — TDS on Purchase of Goods (0.1%)

Updated: 3 June 2026  |  Effective 1 July 2021  |  Income-tax Act 2025

Section 194Q requires buyers to deduct 0.1% TDS on goods purchases exceeding ₹50 lakh/year from a single seller. Applies only if buyer's turnover exceeds ₹10 crore in the preceding year. If 194Q applies, seller need not collect TCS under Section 206C(1H) on the same transaction.
0.1%
TDS rate under Sec 194Q = 0.1% on purchase amount exceeding ₹50 lakh from single seller.
Rate becomes 5% if seller has not provided PAN; 20% if seller hasn't filed ITR (Section 206AB).

Section 194Q — Applicability Conditions

ConditionRequirement
Who must deductBuyer with turnover > ₹10 crore in preceding financial year
When to deductPurchase from single seller exceeds ₹50 lakh in current FY
What rate0.1% on amount exceeding ₹50 lakh
Timing of deductionAt time of credit or payment — whichever is earlier
Applies toAll goods (capital goods, raw materials, trading stock, consumables)
Does NOT apply toServices, imports, stock exchange transactions
If seller PAN not given5% TDS rate
If seller is non-filer (Sec 206AB)Higher of: 5% or prescribed rate (up to 20%)

Section 194Q vs Section 206C(1H) — Key Differences

FeatureSection 194Q (TDS)Section 206C(1H) (TCS)
Who actsBuyer deducts TDSSeller collects TCS
Turnover conditionBuyer turnover > ₹10CrSeller turnover > ₹10Cr
Rate0.1%0.1%
ThresholdPurchase > ₹50L from single sellerSale receipts > ₹50L from single buyer
When both applicable194Q takes priority; seller not required to collect 206C(1H)
Return formForm 26QForm 27EQ

Frequently Asked Questions

What is Section 194Q and who needs to deduct TDS?
Section 194Q requires a buyer to deduct TDS at 0.1% on purchase of goods. Applicability: Buyer must have turnover > ₹10 crore in the PRECEDING financial year. TDS applies when purchase from a single seller exceeds ₹50 lakh in the current financial year. Rate: 0.1% of amount exceeding ₹50 lakh. Higher rate: 5% if seller has not furnished PAN. Effective date: applicable from 1 July 2021. Section 194Q covers goods only — services are covered under other sections (194J, 194C etc.). Imported goods: 194Q does NOT apply to imports.
What is the difference between Section 194Q and Section 206C(1H)?
Section 194Q (buyer deducts TDS) and Section 206C(1H) (seller collects TCS) are similar — both at 0.1% on transactions > ₹50L. Key difference: If 194Q applies, 206C(1H) does NOT apply on the same transaction — the seller need not collect TCS if buyer has deducted TDS under 194Q. Priority: 194Q takes precedence over 206C(1H). When 206C(1H) applies: if buyer's turnover ≤ ₹10Cr (194Q not applicable) but seller's turnover > ₹10Cr, then seller collects TCS under 206C(1H). The buyer can claim 194Q/206C credit in their ITR.
What is the TDS rate under Section 194Q and when does 20% apply?
Normal rate: 0.1% of purchase value exceeding ₹50 lakh (buyer turnover > ₹10Cr). 5% rate: if seller has NOT furnished their PAN to the buyer. 20% rate: if seller has not filed ITR for the past 2 years AND TDS/TCS > ₹50,000 — Section 206AB applies (higher TDS for non-filers). Threshold: TDS applies only on amount exceeding ₹50 lakh from same seller in a year — not on the first ₹50L. For tax-exempt entities (Sec 197 certificate holders): buyer can deduct at lower/nil rate with certificate.
Does Section 194Q apply to all goods including capital goods?
Section 194Q applies to all goods — including capital goods, raw materials, trading stock, consumables. No exemption for specific types of goods unlike some other TDS sections. Exclusions: (1) Imports of goods — 194Q does not apply to overseas purchases; (2) Transactions on recognized stock exchanges (equity, commodity); (3) Transactions subject to other TDS provisions (e.g., if immovable property is covered under 194IA). Online marketplaces: if buyer purchases through Amazon Business/IndiaMART from a supplier, and buyer's turnover > ₹10Cr and purchase exceeds ₹50L from single supplier — 194Q applies.
How to deposit TDS under 194Q and file TDS return?
TDS deduction: deduct 0.1% from payment to seller (or at time of credit — whichever is earlier). Deposit: Challan ITNS 281 via TIN-NSDL; due date 7th of following month (March: 30 April). TDS Return: Form 26Q (quarterly); due dates: Q1: July 31, Q2: Oct 31, Q3: Jan 31, Q4: May 31. Issue certificate: Form 16A to seller within 15 days of quarterly return due date. Seller claims credit in their ITR / Form 26AS. Penalty for non-deduction: interest 1% per month; disallowance of 30% of purchase expense under Sec 40(a)(ia).

Related Pages

TDS Return Filing Section 206C TCS TDS Payment Online TAN Registration Section 194C Section 194J
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