Section 194Q TDS under the Income Tax Act: Applicability, Rates, and Due Dates

Introduction

The Central Board of Direct Taxes (CBDT) has introduced Section 194Q of the Income Tax Act, which mandates Tax Deduction at Source (TDS) on the purchase of goods. Under this provision, a buyer must deduct TDS at the rate of 0.1% on the value of goods purchased from a resident seller if the annual purchase amount exceeds ₹50 lakh, provided the seller has furnished a valid PAN. This measure aims to broaden the tax base, strengthen compliance, and promote greater transparency in financial transactions.
In this article, you will find a comprehensive overview of Section 194Q, including its applicability, TDS rate, and key compliance requirements. Auriga Accounting pvt. ltd. simplifies TDS filing under Section 194Q with expert support!

What is Section 194Q TDS?

Section 194Q of the Income Tax Act, introduced in 2021, mandates Tax Deducted at Source (TDS) on certain high-value purchases of goods. It applies to buyers who cross a specified turnover limit, requiring them to deduct a portion of the payment made to resident sellers. The provision aims to improve tax compliance, widen the tax base, and enhance transparency in commercial transactions. Non-compliance with Section 194Q may result in penalties and disallowance of expenditure.

Applicability of TDS Under Section 194Q

Section 194Q is applicable when all the following conditions are met:

Buyer: The obligation to deduct TDS lies with the buyer purchasing goods from a resident seller. The provision does not apply to the import of goods.
Purchase Value: TDS is required if aggregate purchases from a single seller exceed ₹50 lakh in a financial year.
Buyer’s Turnover: The buyer’s total sales, gross receipts, or turnover must exceed ₹10 crore in the preceding financial year.

Who Must Deduct TDS Under Section 194Q?

The buyer is responsible for deducting TDS on purchases of goods. Once TDS is deducted, it must be deposited with the government on or before the 7th day of the following month.

When Should TDS Be Deducted Under Section 194Q?

TDS must be deducted at the earlier of:

Crediting the amount to the seller’s account: When the buyer records the payable amount (even if the seller has not yet received payment).
Actual payment: When the buyer makes payment through cash, cheque, draft, or any other mode.

Section 194Q TDS Rate

The TDS rate is 0.1% on the value of purchases exceeding ₹50 lakh in a financial year.

What Happens If the Seller Does Not Provide a PAN?

If the seller does not furnish a PAN, the TDS rate increases to 5% under Section 194Q (instead of the standard 20% applicable under other sections).

How Is TDS Calculated Under Section 194Q?

Determine the total value of goods purchased from a seller during the financial year.
Subtract the threshold amount of ₹50 lakh.
Apply the relevant TDS rate:
- 0.1% when PAN is provided
- 5% when PAN is not provided

Note: TDS is calculated on the entire invoice value, including GST.

Due Date for TDS Deposit

TDS deducted must be deposited on or before the 7th of the following month.
For TDS deducted in March, the deposit deadline is April 30, due to year-end closing.

Form 26Q – TDS Return Filing Due Dates

Quarter Ending	Due Date for Filing Form 26Q
June 30	July 15
September 30	October 15
December 31	January 15
March 31	May 15

Exemptions from TDS Under Section 194Q

TDS under Section 194Q is not applicable in the following cases:

Purchase Below ₹50 Lakh: If annual purchases from a seller do not exceed the ₹50 lakh threshold.
Buyer’s Turnover Below ₹10 Crore: Buyers with less than ₹10 crore turnover in the previous financial year are exempt.
Other TDS Provisions Apply: If the transaction is covered under another TDS section (e.g., Section 194O for e-commerce operators), that section prevails.
TCS Under Section 206C: When the seller must collect tax under Section 206C (except 206C(1H)), the buyer is not required to deduct TDS under Section 194Q.

About the Author

Ravi is a seasoned legal writer who simplifies complex laws into practical, actionable guidance. He helps entrepreneurs navigate their legal obligations, enabling them to build compliant and sustainable businesses with confidence.

May 14, 2026