What Is Section 194Q and How to Comply India, 0.1% TDS on purchase above INR 50 lakh.

• Who deducts: buyer of goods with turnover / gross receipts / sales > INR 10 crore in immediately preceding FY.
• What triggers: purchase of goods from any seller exceeding INR 50 lakh in aggregate during FY.
• Rate: 0.1% on consideration exceeding INR 50 lakh (not on the entire amount - only on excess).
• Section 206AA override: if seller lacks Indian PAN, higher of 0.1% / 5% applies - typically 5%.
• Deduction timing: credit of amount in books OR payment, whichever earlier.
• Interaction with Section 206C(1H) seller TCS: if both 194Q (buyer) + 206C(1H) (seller) apply, buyer's 194Q TDS prevails (no 206C(1H) TCS on same transaction).

• Buyer's turnover > INR 10 crore in preceding FY: mandatory applicability.
• Specific aggregation across buyer group: 194Q applies entity-wise, not group-wise (each legal entity assessed separately).
• Buyer type: company / LLP / partnership / HUF / individual / specific entity.
• Specific sector carve-outs: specific exempt purchases + specific government purchases.
• Trading goods vs capital goods: 194Q applies to purchases - specific analysis for leased / specific scenarios.
• Import of goods: 194Q applies to purchases from Indian sellers; imports have specific TCS under 206C(1H) seller-side + specific customs duty.

1. FY-start: identify sellers from whom cumulative purchases likely to exceed INR 50 lakh. Historical data + budget / forecast.
2. Monitor cumulative purchases: track per seller + per FY running total.
3. Trigger: when cumulative purchase crosses INR 50 lakh in FY: deduct 0.1% on amount in excess of INR 50 lakh (or 5% if seller lacks PAN).
4. Pay TDS: by 7th of following month (June: 30th).
5. Quarterly return: Form 26Q filed within 30 days of quarter-end (July 31 / October 31 / January 31 / May 31 for Q4).
6. Form 16A to seller: TDS certificate within 15 days of quarterly return filing.
7. Section 206AA / 206AB: if seller inactive filer or lacks PAN: higher rate applicability check.
8. Reconciliation: Form 26AS / AIS reconciliation + specific credit flow to seller.

• Section 206C(1H) effective 1 October 2020: seller collects 0.1% TCS on sale of goods above INR 50 lakh in FY from single buyer. Seller turnover > INR 10 crore in preceding FY.
• Section 194Q effective 1 July 2021: parallel buyer-side TDS.
• Overlap: both buyer (194Q) + seller (206C(1H)) qualify + transaction crosses INR 50 lakh.
• Resolution: proviso to Section 206C(1H) - if buyer deducts 194Q TDS, seller is NOT required to collect 206C(1H) TCS on same transaction. 194Q TDS prevails.
• Documentation: buyer confirms 194Q TDS deduction to seller + specific declaration.
• Specific administrative framework + CBDT Circulars for operationalisation.

• Not identifying 194Q applicability + missing TDS deduction.
• Wrong rate: deducting on entire amount vs only excess of INR 50 lakh.
• Not applying Section 206AA 5% for sellers lacking PAN.
• Not applying Section 206AB higher rate for seller as 'specified person' (non-filer).
• Missing Form 26Q quarterly filing.
• Mismatched Form 16A causing seller's Form 26AS reconciliation issues.
• Double TDS + TCS on same transaction (should not happen if 194Q + 206C(1H) interaction correctly managed).
• Section 201 default: TDS not deducted / short deducted - buyer treated as 'assessee in default' + interest + penalty.

• 194Q applicability assessment for buyer.
• Seller-wise cumulative purchase monitoring system + specific tracking.
• Specific per-transaction TDS deduction calculation.
• Form 26Q quarterly filing + specific reconciliation.
• Form 16A issuance to sellers.
• Specific Section 206AA (no PAN) + Section 206AB (specified person) higher-rate analysis.
• Specific Section 206C(1H) interaction management + specific declarations.
• Form 26AS / AIS reconciliation for both buyer + seller sides.
• Specific Section 201 default defence if assessed.
• CA + GST + specific accounting system integration for 194Q compliance.

Last updated: 2026-10-25.