When is TDS deducted on purchase of goods?
When a buyer deducts 0.1 per cent on purchases of goods above ₹50 lakh, why the ₹10 crore prior-year turnover test decides who is a buyer, how it interacts with TCS, and why section 194Q now reads as section 393(1) table sl. no. 8(ii) under the Income-tax Act, 2025.
In this guide
A buyer whose business turnover exceeded ₹10 crore in the immediately preceding financial year deducts 0.1 per cent on the value of goods bought from a single seller above ₹50 lakh in the year, on the amount exceeding ₹50 lakh. Section 194Q of the 1961 Act, from 1 April 2026, sits in section 393(1) table sl. no. 8(ii) of the Income-tax Act, 2025. If another TDS or TCS provision already applies to the transaction, this one does not apply again.
What purchase does section 194Q tax?
Section 194Q is the buyer-side deduction on the purchase of goods. A buyer above a turnover line deducts 0.1 per cent on what it pays a single seller for goods once the year's purchases from that seller pass ₹50 lakh. The deduction runs on the amount above ₹50 lakh, not on the whole figure.
Section 194Q of the Income-tax Act, 1961 is the 1961-Act label. From 1 April 2026 the same rule reads as section 393(1) table sl. no. 8(ii) of the Income-tax Act, 2025. The rate, the threshold, and the buyer test are the same; the section number changed.
Who counts as a 194Q buyer?
Not every purchaser deducts under section 194Q. A buyer here is a person whose total sales, gross receipts, or turnover from business exceeded ₹10 crore in the financial year immediately preceding the year of the purchase. Below that line, the provision does not reach the buyer at all.
Is the ₹10 crore test this year or last year?
Last year. The test looks backward, at last year's business turnover, and it is business turnover, not the size of the current order. A buyer just over ₹10 crore last year deducts this year even on its first large purchase; a buyer under ₹10 crore does not, however large the purchase.
How does the 194Q threshold work?
The ₹50 lakh is measured per seller, across the year. Add up what the buyer pays a single seller for goods in the year. Up to ₹50 lakh, nothing is deducted. Once the running total crosses ₹50 lakh, 0.1 per cent applies to the amount above ₹50 lakh from that point on.
| Element | Position |
|---|---|
| Who deducts | Buyer with prior-year business turnover over ₹10 crore. |
| Threshold | Purchases from one seller above ₹50 lakh in the year. |
| Rate | 0.1 per cent on the amount exceeding ₹50 lakh. |
| If another provision applies | This deduction does not apply again to that transaction. |
Do I add all sellers together for the ₹50 lakh?
No. Each seller is a separate running total. Pooling ten suppliers into one ₹50 lakh bucket is not how section 194Q works.
Does 194Q apply when TCS already applies?
No. The buyer-side deduction and the seller-side collection were built not to double up. If tax is already collectible or deductible on the same transaction under another provision of the Act, this purchase-of-goods deduction does not apply again. That ordering matters where both a buyer and a seller are large enough to be caught.
The seller-side collection on sale of goods has its own history under the 1961 Act and the Finance Act changes; do not assume both the buyer and the seller act on the same sale. Read the specific provision for the year in question before deciding which side deducts or collects. See TCS on sale of goods for the seller-side path.
Where does 194Q sit after April 2026?
The Income-tax Act, 2025 renumbers the deduction provisions into a single section with a table. The purchase-of-goods TDS that professionals knew as section 194Q now sits at section 393(1) table sl. no. 8(ii). The buyer definition, including the ₹10 crore prior-year turnover test, sits in the same section's definitions.
For anything before 1 April 2026, the reference is section 194Q of the 1961 Act. From that date, cite section 393(1) sl. no. 8(ii). The substance is the same; the change is where you point.
How do I confirm a 194Q deduction?
- Read section 393 for the purchase-of-goods entry at sl. no. 8(ii) and the buyer definition.
- Confirm the buyer's prior-year business turnover against the ₹10 crore line before deducting.
- Track purchases per seller across the year and apply 0.1 per cent only on the amount above ₹50 lakh.
- Check whether another TDS or TCS provision already applies to the transaction before deducting here.
- Watch CBDT / Income Tax updates if the rate, threshold, or table changes.
Why do 194Q purchase deductions go wrong?
- Deducting on the whole purchase value instead of only the amount above ₹50 lakh.
- Testing the ₹10 crore turnover on the current year rather than the immediately preceding one.
- Deducting under this provision when TCS or another TDS section already applies to the same transaction.
- Measuring the ₹50 lakh across all sellers together instead of per seller.
- Citing section 194Q for a transaction on or after 1 April 2026 instead of section 393(1) sl. no. 8(ii).
Where do 194Q rate changes get notified?
The 0.1 per cent rate, the ₹50 lakh per-seller excess, and the ₹10 crore prior-year buyer test all trace back to CBDT and the Finance Acts. Complied AI keeps CBDT / Income Tax updates in one feed so you can open the source behind a change instead of relying on an older 194Q circular. When you need the purchase-of-goods row itself, open sl. no. 8(ii) of section 393 next to that update, and check the TCS overlap before both sides act.
Practical checks
Common questions
Who has to deduct TDS on purchase of goods?
A buyer whose total sales, gross receipts, or turnover from business exceeded ₹10 crore in the financial year immediately before the current one. A buyer below that turnover line does not deduct under section 194Q. The test is prior-year business turnover, not the value of the current purchase. From 1 April 2026 that buyer definition sits with table sl. no. 8(ii).
What is the 194Q rate and the ₹50 lakh threshold?
0.1 per cent, applied to the value of goods bought from a single seller above ₹50 lakh in the year, on the amount that exceeds ₹50 lakh. Purchases up to ₹50 lakh from that seller carry no deduction; the 0.1 per cent bites only on the excess. Measuring the ₹50 lakh across all sellers together is the usual error.
Does 194Q apply if TCS on sale of goods already applies?
No. If tax is already collectible or deductible on the same transaction under another provision of the Act, the purchase-of-goods deduction under section 194Q does not apply again to it. The rule avoids the same sale being taxed twice at source. Read the year-specific TCS provision before both sides act on one invoice.
Which table serial covers purchase-of-goods TDS from April 2026?
Section 393(1) table sl. no. 8(ii) of the Income-tax Act, 2025. That is the buyer-side TDS on purchase of goods that was section 194Q of the 1961 Act. The 0.1 per cent rate, the ₹50 lakh per-seller excess, and the ₹10 crore prior-year buyer test carry over. Quote sl. no. 8(ii), not 194Q, on a transaction on or after 1 April 2026.
Our turnover crossed ₹10 crore this year. Do we deduct 194Q now?
No. The buyer test looks backward, at last year's business turnover. A buyer just over ₹10 crore last year deducts this year even on its first large purchase. A buyer under ₹10 crore last year does not, however large this year's purchase. Testing the ₹10 crore line on the current year is how 194Q is applied a year too early.
Do I deduct 0.1 per cent on the whole invoice or only the excess?
Only the excess. Once the running total of purchases from that seller crosses ₹50 lakh, 0.1 per cent applies to the amount above ₹50 lakh from that point on. Deducting on the whole purchase value, including the first ₹50 lakh, over-deducts and is the first 194Q correction most buyers file.
We buy from ten sellers. Is the ₹50 lakh across all of them?
No. The ₹50 lakh is measured per seller, across the year. Add up what the buyer pays a single seller for goods. Up to ₹50 lakh from that seller, nothing is deducted. A second seller is a separate running total. Pooling all suppliers into one ₹50 lakh bucket is not how section 194Q works.
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How this guide was prepared
This guide is published by the Complied AI research desk. Its source list and stated position were checked against the official records shown below on 26 August 2026.
Automation, including AI, may assist research, drafting and structure. It does not replace the official record or amount to an independent professional review. Read our editorial standards and corrections policy.
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