You’re about to approve a purchase order for ₹60 lakh. Everything looks good.
What is Section 194Q TDS?
What is Section 194Q TDS? The Plain English Version
Let's cut through the noise.
You are only liable if you meet both.
You are only liable if you meet both. The Buyer Turnover Test: Your total sales, gross receipts, or turnover from your business must have exceeded ₹10 crore during the financial year immediately preceding the current one.
206C(1H) (TCS) This is where most of the…
206C(1H) (TCS)
This is where most of the confusion happens. There's another section, 206C(1H), that requires sellers with a turnover above ₹10 crore to collect tax at source (TCS) on sales over ₹50 lakh.
If you're liable under 194Q, inform your major…
If you're liable under 194Q, inform your major suppliers at the beginning of the financial year. This prevents them from incorrectly charging you TCS and saves you both a massive reconciliation headache.
The TDS amount would be ₹2,500 (0.1% of…
The TDS amount would be ₹2,500 (0.1% of ₹25,00,000). Deduct at the Right Time: The law is clear: deduct TDS at the time of crediting the seller's account in your books or at the time of payment, whichever is earlier.
The Real Monster: 30% Disallowance of Expenditure This…
The Real Monster: 30% Disallowance of Expenditure
This is the penalty that can cripple a business. According to Section 40(a)(ia) of the Income Tax Act, if you fail to deduct TDS under 194Q, 30% of the purchase value on which TDS was applicable will be disallowed as a business expense.
Smart Exclusions: When Does 194Q Not Apply?
Smart Exclusions: When Does 194Q Not Apply? Demonstrating expertise means knowing the exceptions to the rule.
No.
No. The CBDT has clarified that for checking the ₹50 lakh purchase threshold, you should exclude the GST amount.
If your turnover in FY 2025-26 was below…
If your turnover in FY 2025-26 was below ₹10 crore, you are not liable for 194Q TDS during FY 2026-27, even if your current turnover is soaring. Your liability would begin in the next financial year, FY 2027-28.