# Section 194Q - TDS on Purchase of Goods

## Key Rules

Rate: 0.1% on amount exceeding threshold (5% if no PAN)
Payer: HIJACR Assessee (specified buyer)
Payee: Resident seller

## Important Exceptions

1. Seller's income wholly exempt → Section 194Q NOT applicable

2. First year of business → Section 194Q NOT applicable (since last year turnover = zero)

## Who is HIJACR Assessee?

TDS u/s 194Q applies when buyer is:

1. Assessee other than Individual/HUF, OR

2. Individual/HUF whose last year turnover/gross receipts exceeded:

₹1 crore (in case of Business)
₹50 lakhs (in case of Profession)

## Interaction with TCS u/s 206C(1)

Even if seller gives declaration for non-collection of TCS (goods used for manufacturing/processing/power generation, not trading), the buyer must still deduct TDS u/s 194Q if conditions apply.

Worked example

### Example 1

Example: ABC Ltd starts business on 1st April 2025. During FY 2025-26, it purchases goods worth ₹2 crores from XYZ Ltd. Is Section 194Q applicable?

Answer: NO. Since FY 2025-26 is the first year of business for ABC Ltd, the previous year's turnover is zero. Therefore, ABC Ltd does not qualify as HIJACR Assessee and Section 194Q is not applicable.

⚠️ Common exam mistakes

Applying Section 194Q in the first year of business — turnover criteria require previous year data which is zero
Forgetting that if seller's income is wholly exempt, 194Q does not apply
Assuming TCS declaration by seller eliminates TDS obligation under 194Q — both can coexist

Reference: 194Q

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