Sec 194Q - TDS on Purchase of goods

194Q TDS on Purchase of Goods

A Buyer needs to deduct TDS under sec 194Q when he purchase goods from resident seller.

• This section applies only when Buyers previous financial year gross turnover or sales or receipts above 10 crores.
• If the gross turnover does not meet 10 crores no TDS apply under 194Q
• This section not applicable in the year on incorporation of companies because it does not meet the 10 crores gross turnover limit in previous year.
• Threshold limit is 50 lakhs and TDS rate is 0.1% of excess of 50 lakhs
• 50 lakhs need to be calculated on particular seller, don’t combine all sellers to calculate 50 lakhs limit.

Calculation of TDS
- ⁠If invoice is with GST and mentioned separately - TDS on Taxable Value
- ⁠If invoice having only amount and no mention of tax - TDS on full invoice value
- ⁠If in case of purchase returns - TDS can adjust against next purchase from the same seller
- ⁠If in case Replacement of goods - no adjustment required

​194Q Not applicable on
- Recognized Stock Market Transactions and Power Exchanges 
- ⁠on State / Central Government 
- ⁠any bodies exempt from sec 10 of income tax act (not partly exempt bodies).
​
If any department of government carrying a commercial business - 194Q applies 
If not carrying business - not applicable

You need to deduct TDS either:
1. When you record the amount in the seller’s account, or
2. When you make the payment to the seller (in any way, like cash, cheque, bank transfer),
Whichever happens first.

If you pay an advance to a seller for goods, you need to deduct TDS on the advance amount at the time of payment, as per the rule:
TDS is deducted at the earlier of
- When the amount is credited to the seller’s account, or
- When the payment is made.
TDS is deducted at the earlier of
- When the amount is credited to the seller’s account, or
- When the payment is made.

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