TDS Section 194 Q as per Income-tax Act, 1961

TDS Section 194 Q as per Income-tax Act, 1961

As per the Finance Act, 2021, Section 194Q of the Income-tax Act, 1961, which are regarding Tax Deducted at Source (TDS) on the buying of goods and not to the supply of service.

Section 194 Q Applicability-

This section generally applies to those buyers who include in the following cases:

  • Those buyers whose sales or turnover  or gross receipt in the immediately prior financial year was exceeding Rs 10 crore.
  • A buyer is liable for making payment of an amount to the resident seller.
  • Such a sum is to be initiated for the buying of goods of the value/cumulated of the value more than Rs 50 lakh.

For example

For an F.Y. that ended on March 31, 2021, a buyer whose turnover was more than Rs 10 crore in that year requires to deduct TDS from their resident seller on the buying of goods more than Rs 50 lakh in the recent F.Y 2021-22.

TDS Rates

And TDS rate will be deducted at 0.1% on the sum of more than Rs 50 lakh in an F.Y from a seller from whom the purchaser has bought goods worth exceeding Rs 50 lakh rupees.

TDS Calculation

  • Purchase more than Rs 50 lakh in a financial year from a seller.
  • TDS will be deducted after deduction of Rs 50 lakh from the full value of purchases.
  • The lower limit is Rs 50 lakh, which means a seller-wise deduction in every F.Y.


Let us explain, A purchaser of goods worth Rs 20 lakh, 3 times each from a seller, describing he purchased total products of Rs 60 lakh. Now he has to deduct Rs 50 lakh from the total value of products bought. The TDS will be deducted only on Rs 10 lakh at a rate of 0.1%.

Section 194Q Applicability

TDS Section 194Q is applicable from July 1, 2021, as per Income Tax Provisions. Thus, the TDS has to be deducted only on buying after July 1, 2021. Though, the lower limit of purchase of Rs 50 lakh will be taken into account from April 1, 2021.


If a purchaser has bought goods worth Rs 80 lakh from a seller, then he will have to deduct the first Rs 50 lakh from it as a former deduction as per Section 194Q and then deduct the TDS on the rest of Rs 30 lakh at 0.1%. So, In this case, the TDS applicable would be Rs 3,000.

GST Role

  • Turnover Calculation: Excluding GST.
  • TDS Calculation at a rate of 0.1%: Including GST.

If deduct TDS

The TDS will be deducted at that time if such sum is either credited to the seller or paid to him, whichever is earlier.

In another word, when you have not paid any advance amount, then you will have to deduct this TDS at the time of buying goods.

Although, when you have made a payment in advance, then you have to deduct TDS immediately.

Non-furnishing of PAN

Where a vendor is unable to furnish a PAN to a purchaser, the TDS will be deducted at a rate of 5% rather than 0.1%.

It is also very needed to note that without any PAN details, the tax rate in other cases will be chargeable to 20%. And, In the case of Section 194Q, the TDS rate applicability will be 5%.

TDS Deposit Due Date

The TDS has to be deposited on or before the 7th day of the month following the month in which the TDS will be deducted. For example, if the month of the deduction is January, the payment of the due date is Feb 7.

Whereas , in the case of March, the TDS could be deposited up to April 30.

TDS Return: Form 26Q

For a quarter ending June 30, September 30, December 31, and March 31, the due date for TDS filing returns will be July 31, October 31, January 31, and May 31, respectively.


Section 194Q could not apply in cases where the TDS has to be deducted on the transaction of a buyer as per any other provision of the Income Tax Act. For example, there may be a case where a buying transaction comes as per Section 194O as well as Section 194Q, then TDS can apply under Section 194O, which regards TDS on transactions related to e-commerce.

Whereas, there is a deviation in the case of Section 206C(1H), which offers for the collection of tax (TCS) by a seller for the sum received as consideration for the disposal of goods if it is more than Rs 50 lakh in any prior year.

If any transaction on purchase of goods attracts TDS under Section 194Q as well as tax collected at source under Section 206C(1H), then only Section 194Q shall apply in such a case.


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