TDS Under Section 194Q — Tax Deduction on Purchase of Goods Above ₹50 Lakh

Section 194Q, introduced from 1 July 2021, places a TDS obligation on buyers who purchase goods worth more than ₹50 lakh from a single seller in a financial year. This is the "buyer's TDS" — mirroring the earlier TCS provision for sellers. Here is the complete guide for businesses making large goods purchases.

Who Must Deduct TDS Under Section 194Q?

• Buyer's turnover threshold: Only buyers whose gross turnover/sales/receipts exceeded ₹10 crore in the immediately preceding financial year must deduct TDS under 194Q
• Purchase threshold: TDS is deducted once purchases from a single seller cross ₹50 lakh in the financial year
• Type of goods: Any goods (not services — services have separate TDS sections)

Rate of TDS Under 194Q

• TDS rate: 0.1% of the purchase consideration exceeding ₹50 lakh
• If the seller has not furnished PAN: 5% TDS (Section 206AA)
• TDS is deducted at the time of credit or payment, whichever is earlier

Interaction with TCS Section 206C(1H)

Section 206C(1H) requires sellers with turnover above ₹10 crore to collect TCS at 0.1% on receipts from buyers exceeding ₹50 lakh. If the buyer is deducting TDS under Section 194Q, the seller is NOT required to collect TCS under 206C(1H) for the same transaction. Section 194Q takes precedence — but only if the buyer is actually deducting TDS. If the buyer does not deduct 194Q TDS, the seller must collect 206C(1H) TCS.

Practical Impact

• Buyer with turnover above ₹10 crore must track cumulative purchases from each seller during the year
• Once a seller's cumulative billing crosses ₹50 lakh, TDS at 0.1% applies on all subsequent payments/invoices
• TDS must be deposited by the 7th of the following month
• Form 26Q quarterly return must include 194Q deductions (Section code 94Q)

Exemptions from Section 194Q

• Purchases for personal consumption (not business)
• Purchases from the government
• Purchases where TDS is already deductible under another section
• Purchases from non-residents (DTAA provisions apply instead)

Conclusion

Section 194Q adds a new compliance layer for large buyers — tracking vendor-wise purchases and deducting TDS above ₹50 lakh. SPOTON handles 194Q TDS computation, deduction and Form 26Q filing for businesses across Kerala. Contact us for comprehensive TDS compliance management.