Section 194Q: Relief for Sellers from 1st April 2025

Section 194Q is a provision in the Income-tax Act, 1961 related to Tax Deducted at Source applied specifically to purchases of goods.

Applicability

This section applies to buyers meeting specific criteria:

• Buyers with turnover exceeding Rs 10 crores in the previous financial year.
• Buyers responsible for making payments to resident sellers.
• Purchases of goods exceeding Rs 50 lakh in a financial year attract TDS under this section.

Major Relief for Sellers from FY 2025-26

Rate of TDS

The buyer is liable to deduct TDS at the rate of 0.1% on the amount exceeding Rs 50 lakh from a seller.

For Example

If a buyer purchases goods worth Rs 60 lakh, then TDS is applicable only on Rs 10 lakh at 0.1%.

Time of Deduction

TDS is to be deducted –

• at the time of crediting to the seller’s account or
• at the time of making payments thereof any any mode, whichever is earlier.

Due Date To Deposit TDS

TDS must be deposited by the 7th of the following month. For March deductions, the due date is April 30.

Key Points

• Deduct TDS on payment or credit.
• This section doesn’t apply to non-resident sellers.
• Failure to comply may lead to a disallowance of expenditure, up to 30%. Further demand can be also raised u/s 201(1) of the Income Tax Act for non deposit of TDS and penalty can also be levied on the same u/s 221 of the Act.
• Applies to purchases of both revenue and capital goods.

Non-furnishing of PAN

If a seller doesn’t provide a PAN, TDS is deducted at 5%, higher than the standard rate of 0.1%.

Impact on GST

TDS is computed on amounts excluding GST.

TDS u/s 194Q Vs TCS u/s 206(1H)

Particulars	Section 194Q	Section 206(1H)
Who is Responsible?	Buyer	Seller
Applicable	Turnover of the buyer must exceed Rs. 10 cr during the previous year (excluding GST) Aggregate purchase of goods exceeding Rs. 50 Lakh in previous year (including GST)	Turnover of the seller must exceed 10cr during the previous year (excluding GST) Sale consideration received exceeds Rs. 50 Lakh in previous year (including GST)
Effective From	1st July 2021	1st October 2020 (w.e.f 1 April 2025, TCS u/s 206C(1H) will be removed).
When	At the time of payment or credit	At the time of receipt
Quarterly Statement	Form 26Q	Form 27EQ

Conclusion

Section 194Q simplifies TDS deductions on purchases exceeding Rs 50 lakh. Buyers deduct 0.1% TDS on qualifying purchases from resident sellers when PAN details are available.

FAQs