Section 194Q TDS on Purchase of Goods
Rules, Threshold & Example
Quick Answer
Section 194Q requires buyers to deduct TDS at 0.1% on purchase of goods exceeding ₹50 lakh in a financial year, provided the buyer’s turnover exceeds ₹10 crore in the previous year. TDS is deducted at the time of credit or payment, whichever is earlier.
Summary
Section 194Q was introduced to widen the tax base and track high-value transactions. It applies to large buyers purchasing goods beyond a threshold. This guide explains applicability, thresholds, rates, examples, compliance steps, mistakes, and practical business scenarios.
For complete TDS and TCS understanding including rates, returns, payment, and certificates, refer to the Complete Guide to TDS & TCS in India.
What is Section 194Q?
Section 194Q mandates TDS deduction by a buyer on purchase of goods exceeding a specified threshold. It ensures reporting of large-value transactions and improves tax compliance.
Applicability of Section 194Q
- Buyer turnover exceeds ₹10 crore ✔️
- Purchase exceeds ₹50 lakh ✔️
- Transaction involves goods ✔️
Threshold Limit under Section 194Q
| Criteria | Limit |
|---|---|
| Buyer Turnover | ₹10 crore |
| Purchase Value | ₹50 lakh |
TDS Rate under Section 194Q
| Condition | TDS Rate |
|---|---|
| Normal case | 0.1% |
| No PAN | 5% |
When to Deduct TDS under Section 194Q?
- At time of credit ✔️
- At time of payment ✔️
- Whichever is earlier ✔️
Section 194Q Example
Total purchase from supplier = ₹70 lakh
Threshold = ₹50 lakh
Applicable amount = ₹20 lakh
TDS @0.1% = ₹2,000
Section 194Q vs Section 206C(1H)
| Aspect | Section 194Q | Section 206C(1H) |
|---|---|---|
| Applicability | Buyer | Seller |
| Nature | TDS | TCS |
| Threshold | ₹50 lakh | ₹50 lakh |
Who is Responsible to Deduct TDS?
- Buyer ✔️
- Large business entities ✔️
Transactions Covered under Section 194Q
- Purchase of goods ✔️
- Domestic transactions ✔️
Transactions Not Covered
- Import of goods ❌
- Transactions below threshold ❌
- Services ❌
TDS Payment Process
After deduction, TDS must be deposited using Challan 281.
Guide: TDS Payment Online.
TDS Return Filing
TDS deducted under Section 194Q must be reported in Form 26Q.
Learn more: Form 26Q.
Checklist for Section 194Q Compliance
- Check turnover limit ✔️
- Track purchase value ✔️
- Deduct TDS correctly ✔️
- Deposit tax on time ✔️
- File return ✔️
Common Mistakes to Avoid
- Ignoring threshold ❌
- Wrong TDS rate ❌
- Late deduction ❌
- Non-payment ❌
Consequences of Non-Compliance
- Interest penalty ❌
- Disallowance of expense ❌
- Late fees ❌
Process Flow – Section 194Q
- Check eligibility
- Track purchases
- Deduct TDS
- Deposit tax
- File return
Suggested Posts
Important External Resources
Conclusion
Section 194Q plays a critical role in tracking high-value purchase transactions. Businesses must ensure proper compliance by monitoring thresholds, deducting correct TDS, and filing returns on time.
For complete TDS and TCS compliance guidance, visit the Complete Guide to TDS & TCS in India.
Frequently Asked Questions (FAQs)
What is Section 194Q?
TDS on purchase.
Threshold limit?
₹50 lakh.
TDS rate?
0.1%.
Who deducts TDS?
Buyer.
Is PAN required?
Yes.
Return form?
Form 26Q.
Payment method?
Challan 281.
Is import covered?
No.
Penalty for non-compliance?
Interest applies.
Is scheme mandatory?
Yes, if applicable.