Section 194Q applies to purchase of goods by a buyer from a resident seller, where the aggregate purchase value exceeds ₹50 lakhs in a financial year.
## Who is the 'Buyer'?
A buyer means a person whose total sales, gross receipts or turnover from business exceeds ₹10 crores during the F.Y. immediately preceding the F.Y. in which the purchase is carried out.
> Note: Turnover from profession is NOT counted; only business turnover matters here.
## Rate of TDS
0.1% on the sum exceeding ₹50 lakhs (i.e., only on the amount above the threshold, not the entire purchase value).
If the seller does not furnish PAN (Section 206AA), the rate becomes 5% (NOT 20%).
## Timing of Deduction
Tax must be deducted at the earlier of:
1. Time of credit of such sum to the seller's account, OR
2. Time of payment.
## Key Points to Remember
Threshold of ₹50 lakhs is applied per seller per F.Y.
The buyer's turnover threshold (₹10 crores) is checked in the immediately preceding F.Y.
If both TDS u/s 194Q and TCS u/s 206C(1H) apply to the same transaction, TDS u/s 194Q gets priority.
Worked example
### Example 1
Example: Mr. A (turnover in PY 2024-25 = ₹15 crores) purchases goods worth ₹80 lakhs from Mr. B (resident) during FY 2025-26.
Example: Mr. X (business turnover in PY 2024-25 = ₹8 crores) buys goods worth ₹60 lakhs from Mr. Y.
Buyer's turnover < ₹10 crores → Section 194Q NOT applicable.
No TDS required.
⚠️ Common exam mistakes
Calculating TDS on the entire purchase value instead of only on the amount exceeding ₹50 lakhs.
Treating 20% as the higher rate under section 206AA for section 194Q — the correct higher rate is 5% (specifically lower for 194Q).
Including profession turnover when checking buyer's eligibility — only business turnover counts.
Applying the ₹10 crore buyer turnover threshold to the current F.Y. instead of the preceding F.Y.
Bare-Act text Section 194Q · Income-tax Act, 1961 · click to expand
Section 194Q: Any person, being a buyer who is responsible for paying any sum to any resident (seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as income-tax. 'Buyer' means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out.