Section 194Q, buyer-side TDS on goods purchase.

Section 194Q applies when:

• Buyer — any person (individual, HUF, firm, LLP, company, trust) whose aggregate turnover / receipts / sales in the immediately preceding FY exceeded INR 10 crore.
• Seller — resident Indian seller of goods.
• Purchase threshold — aggregate purchases from that seller in the current FY exceed INR 50 lakh.
• TDS deducted at 0.1% of the amount in excess of INR 50 lakh.

Timing of deduction: at the time of credit of the amount to the seller's account OR at payment, whichever is earlier.

PAN non-availability: if seller does not provide PAN, Section 206AA kicks in — rate becomes 5% (or applicable rate, whichever higher).

Exempt transactions: purchase from government entity (Central Govt, State Govt, local authority), import of goods from outside India (buyer-side TDS on import not applicable; separate customs regime), transaction already subject to seller-side TCS under Section 206C(1H).

Finance Act 2021 added Section 194Q (buyer TDS) alongside existing Section 206C(1H) (seller TCS). Both apply to the same transaction — sale of goods. Rule: Section 194Q takes precedence where both would apply.

Overlap rules:

• Buyer turnover > INR 10 crore AND Seller turnover > INR 10 crore AND purchases from seller > INR 50 lakh: Section 194Q applies (buyer deducts); Section 206C(1H) is not deducted by seller.
• Buyer turnover > INR 10 crore but Seller turnover < INR 10 crore: Section 194Q applies; buyer deducts.
• Buyer turnover < INR 10 crore but Seller turnover > INR 10 crore AND sales to this buyer > INR 50 lakh: Section 206C(1H) applies; seller deducts (collects as TCS).
• Both buyer and seller turnover < INR 10 crore: neither 194Q nor 206C(1H) applies.

Practical consequence: buyers should proactively tell sellers 'we deduct 194Q, do not collect 206C(1H) TCS'. Written declaration helps prevent duplicate deduction / collection.

1. Confirm buyer eligibility: turnover for immediately preceding FY exceeds INR 10 crore? If yes, you are 194Q liable.
2. Identify sellers with > INR 50 lakh purchases in current FY: review purchase register. Track cumulative purchases per seller.
3. Request PAN from sellers: without PAN, rate jumps to 5% under Section 206AA.
4. Confirm no Section 206C(1H) TCS applied by seller on your purchases. If seller has already applied TCS, you cannot also deduct 194Q TDS — coordinate.
5. Deduct 0.1% at the first invoice that crosses INR 50 lakh cumulative, and continue on all subsequent purchases in that FY.
6. Deposit TDS by 7th of the following month (last month: 30 April).
7. File Form 26Q quarterly (Q1 by 31 July, Q2 by 31 October, Q3 by 31 January, Q4 by 31 May).
8. Issue Form 16A to seller within quarterly timeline.

• Missing seller PAN: 0.1% becomes 5% under Section 206AA. On INR 1 crore invoice, that's INR 5 lakh vs INR 1,000. Chase PAN before invoice crosses threshold.
• Double deduction / collection: seller collecting 206C(1H) TCS while buyer also deducting 194Q TDS. Overlap resolution: 194Q takes precedence; seller should not collect 206C(1H) when buyer deducts 194Q. Written communication prevents this.
• Missing the INR 50 lakh threshold tracking: 194Q applies on amount above INR 50 lakh per seller per FY. Cumulative tracking essential; missing the threshold boundary means under-deduction + Section 201 interest.
• Not filing Form 26Q quarterly: late filing fee under Section 234E at INR 200 per day. Section 271H penalty for non-filing or incorrect filing.
• Not issuing Form 16A to seller: seller cannot claim TDS credit on their ITR without it. Vendor relationships suffer.
• 194Q on exempt transactions: deducting on import purchases (customs regime applies, not 194Q), government supplier (exempt), or where seller is government. Over-deduction wastes TDS pool and creates reconciliation headaches.

Last updated: 2026-10-12.