Section 194Q.
TDS on purchase of goods.
Purchase of goods exceeding ₹50 lakh from a single seller
When it applies
Section 194Q applies on payments to a resident seller for the purchase of goods when the buyer's turnover in the previous year was above ₹10 crore. TDS triggers only on the amount above ₹50 lakh from that seller in the current year — not on the first ₹50 lakh.
Who must deduct
Buyers whose turnover, gross receipts, or sales from business in the immediately preceding financial year exceeded ₹10 crore. Smaller buyers are outside the scope and need not deduct.
Common mistakes
- Forgetting that TDS is on the excess over ₹50 lakh, not the entire payment.
- Both 194Q (buyer's TDS) and 206C(1H) (seller's TCS) applying — when both could apply, only 194Q does.
- Not coordinating with the seller — the seller stops collecting TCS once the buyer confirms 194Q applicability.
- Missing turnover threshold check at the start of each FY — the ₹10 crore test is on the previous year, not the current.
Frequently asked
Does 194Q apply on imports?
No. Section 194Q applies on purchases from a resident seller. Imports from non-resident sellers are outside the scope (different rules under Section 195 apply).
What if the seller doesn't have a PAN?
Higher TDS under Section 206AA — 5% instead of 0.1%. Always collect PAN at vendor onboarding to avoid the higher rate.
Is GST included in the threshold calculation?
No. The CBDT has clarified that GST is excluded from the ₹50 lakh threshold and from the TDS base, provided the GST is shown separately on the invoice.