Section 194Q is a rule in the Indian Income Tax Act that says:
If a buyer buys goods worth more than ₹50 lakh from a seller in a year, the buyer must deduct TDS (Tax Deducted at Source) at 0.1%.
In simple words:
If you’re a business buying large amounts, you must cut a small tax (0.1%) before paying your seller and deposit that tax to the government.
Applicability of Section 194Q
✅ This section applies when:
- The buyer’s turnover in the previous financial year is more than ₹10 crore
- The total value of goods bought from one seller in the current year is more than ₹50 lakh
- The purchase is not from outside India (applies to Indian transactions only)
When to Deduct TDS under Section 194Q
- TDS must be deducted at the time of payment or credit, whichever is earlier
- TDS rate: 0.1% of the amount above ₹50 lakh
Simple Example
- A company has turnover of ₹12 crore last year
- Buys goods worth ₹70 lakh from a seller this year
- ₹50 lakh is exempt
- TDS = 0.1% of ₹20 lakh = ₹2,000
The company must deduct ₹2,000 from the seller’s payment and deposit it as TDS.
Who is Eligible Under Section 194Q?
- Only buyers with turnover over ₹10 crore
- Applies to purchase of goods only, not services
- Individuals and HUFs are covered only if they run a business with turnover above ₹10 crore
Exceptions to Section 194Q
TDS under 194Q is not required if:
- Seller is a non-resident
- TDS is already deducted under other sections like 194C, 194J
- TCS (Tax Collected at Source) under Section 206C(1H) applies and is already collected
(But if both apply, TDS under 194Q overrides TCS)
Important Points to Remember
- PAN is required. If the seller doesn’t provide PAN, TDS is deducted at 5% instead of 0.1%
- Deductor must file TDS return (Form 26Q) quarterly
