Section 194Q: TDS on Purchase of Goods (FY 2025–26 Practical Guide)

Section 194Q introduced a buyer-based TDS obligation on purchase of goods, creating confusion due to overlap with Section 206C(1H) (TCS).

This WonderTax guide simplifies:

• When 194Q applies

• Who deducts TDS

• Priority between TDS & TCS

• Examples and compliance rules

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What Is Section 194Q?

Section 194Q requires buyer to deduct TDS on purchase of goods from a resident seller.

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Applicability Conditions (ALL Must Be Met)

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TDS Rate Under Section 194Q

• 0.1% on amount exceeding ₹50 lakh

• 5% if PAN not provided

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When Is TDS Deducted?

• At time of credit or payment, whichever is earlier

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Example: Section 194Q Calculation

• Purchases from seller: ₹80,00,000

👉 TDS applicable on ₹30,00,000
👉 TDS @0.1% = ₹3,000

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Overlap with Section 206C(1H) – Priority Rule

👉 TDS always overrides TCS

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GST Impact on Section 194Q

• If GST shown separately → TDS on base value only

• If not separated → TDS on total amount

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Compliance Requirements

• Deposit TDS by 7th of next month

• Report in Form 26Q

• Issue Form 16A

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Common Mistakes Under Section 194Q

• Applying TCS instead of TDS

• Missing turnover condition

• Deducting TDS on full ₹80 lakh

• PAN not collected

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Internal Links (WonderTax)

• Section 206C(1H) vs 194Q Comparison
  https://wondertax.in/tds-vs-tcs

• TDS Compliance Services
  https://wondertax.in/tds-return-filing

• GST & Purchase Compliance
  https://wondertax.in/gst-return-filing

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CTA – WonderTax

👉 Confused between TDS vs TCS on goods purchases?

WonderTax helps with:

• Section applicability analysis

• Monthly TDS compliance

• Return filing & notices

🔗 https://wondertax.in