TDS on purchase of goods (section 194Q): who deducts and how much
Large buyers deduct a small tax on what they pay their suppliers for goods. The rate is only 0.1%, but missing it disallows part of the purchase cost and brings interest and a notice, so it is worth setting up once in the accounting system.
Reviewed by Vijay Dhawan, Managing Partner, LexVerge LLP, on · Published
Quick answer
A buyer whose sales or turnover exceeded ₹10 crore in the previous financial year must deduct TDS of 0.1% on purchases of goods from a resident seller to the extent they exceed ₹50 lakh in the year. Deduct at credit or payment, whichever is earlier, on the value excluding GST shown separately. Without the seller’s PAN the rate is 5%. From 1 April 2026 the provision sits in section 393 of the Income-tax Act, 2025 (formerly 194Q); TCS on sale of goods under the old section 206C(1H) was withdrawn from 1 April 2025, so the buyer’s TDS is now the only levy.
Who has to deduct
| Condition | Rule |
|---|---|
| Buyer | Sales, gross receipts or turnover from business above ₹10 crore in the preceding financial year |
| Seller | A resident; purchases from non-residents are outside this provision |
| Threshold | Purchases from that seller above ₹50 lakh in the financial year; TDS only on the excess |
| Rate | 0.1%; 5% where the seller has not given a PAN |
| When | At the time of credit to the seller’s account or payment, whichever is earlier |
The provision does not apply where tax is deductible on the same payment under another TDS section.
Worked example
A distributor with ₹40 crore turnover last year buys ₹80 lakh of goods, excluding GST, from one supplier during FY 2026-27. The first ₹50 lakh is free of TDS; on the remaining ₹30 lakh it deducts 0.1%, which is ₹3,000, from the invoices that take the year past ₹50 lakh. Had the supplier not given a PAN, the deduction would be ₹1,50,000 at 5%.
GST, deposit and returns
- GST: where GST is shown separately on the invoice, TDS is calculated on the value without GST (CBDT Circular 13/2021).
- Deposit: by the 7th of the next month, and by 30 April for March.
- Return: report it in the quarterly TDS statement, Form 140 (formerly 26Q), and give the seller Form 131 (formerly 16A).
- Missed it: the expense can be partly disallowed and interest runs from the date the tax should have been deducted.
All rates and thresholds are in our TDS rate chart; check a single payment with the TDS calculator.
Frequently asked questions
Who has to deduct TDS under 194Q?
A buyer whose sales, gross receipts or turnover from business exceeded ₹10 crore in the preceding financial year, on purchases of goods from a resident seller.
What is the TDS rate on purchase of goods?
0.1% of the purchase value above ₹50 lakh from a seller in the financial year, or 5% if the seller has not furnished a PAN.
Is TDS under 194Q calculated on the value including GST?
No, where GST is indicated separately on the invoice. CBDT Circular 13/2021 says TDS is then calculated on the amount excluding GST.
Is TCS under 206C(1H) still applicable?
No. TCS on sale of goods under section 206C(1H) was withdrawn from 1 April 2025, so only the buyer’s TDS applies.
Which return reports TDS under 194Q?
The quarterly TDS statement in Form 140, formerly Form 26Q, with Form 131 (formerly 16A) issued to the seller.
Keep this on your desk.
Form 141 checklist (PDF)
What to collect before you pay TDS on property, rent, contractor fees or crypto, which schedule to pick, and the dates that follow.
New income-tax form numbers 2026 (PDF)
Old-to-new list of every renumbered form and section under the Income-tax Act, 2025, for your desk.
TDS Return Filing from ₹799 a quarter, by a CA.
Quarterly TDS returns filed by a chartered accountant, challans mapped, certificates issued on time.
Professional fee shown; government charges at actuals, quoted in writing before you pay. GST at 18% extra.
See what is included and the full priceTurnover above ₹10 crore?
We set up 194Q tracking by supplier and file your quarterly TDS returns, from ₹799 a quarter.
Keep reading.
TDS and TCS rate chart for FY 2026-27, with the new section numbers
Every TDS and TCS rate and threshold for FY 2026-27, with the old section numbers and where each now sits in the Income-tax Act, 2025.
Read guide→GuideTDS Return Due Dates for FY 2026-27: Deposits, Quarterly Statements, Certificates and Late Fees
Deposit by the 7th, quarterly statements by 31 July, 31 October, 31 January and 31 May, certificates 15 days later, and the ₹200-a-day fee no officer can waive.
Read guide→Official references
The statutory sources behind this page. We keep our guidance aligned to them: verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
Facts on this page are checked against these sources; the date of the last check is shown at the top of the page. It is general guidance, not advice on your specific facts. How we write and check our guides.