TDS on Purchase of Goods Above Rs 50 Lakh: Rules Under Income Tax Act 2025

The Income-tax Act, 2025 introduces detailed provisions governing Tax Deducted at Source (TDS) on the purchase of goods, with specific conditions for buyers crossing the prescribed turnover and purchase thresholds.

Under Section 393(1), Table S. No. 8(ii), a buyer purchasing goods from a resident seller is required to deduct TDS when the aggregate value of goods purchased from that seller exceeds Rs 50 lakh during a tax year. The applicable TDS rate is 0.1% on the amount exceeding Rs 50 lakh.

The provisions are particularly relevant for businesses making high-value purchases and require careful attention to the buyer's turnover, purchase value, timing of deduction and compliance requirements.

Who Is Required to Deduct TDS on Purchase of Goods?

Not every buyer is covered by this provision. The buyer must satisfy certain conditions.

A buyer is required to deduct TDS when:

• The buyer is carrying on a business.
• The payment is being made to a resident seller for the purchase of goods.
• The buyer's total sales, gross receipts or turnover from business exceeded Rs 10 crore in the immediately preceding tax year.
• The value or aggregate value of goods purchased from the seller exceeds Rs 50 lakh in the tax year.

Certain entities are excluded from the definition of buyer, including specified transactions involving Air India Limited and Government departments that do not carry out business or commercial activities.

What Is the TDS Rate and Threshold?

TDS becomes applicable once purchases from a seller cross the Rs 50 lakh threshold in a tax year.

The tax is deducted at:

• TDS Rate: 0.1%
• Threshold: Rs 50 lakh

Importantly, TDS is calculated on the amount exceeding Rs 50 lakh and the applicable rate is not increased by surcharge or Health & Education Cess.

If the seller does not provide PAN, TDS is required to be deducted at 5% under Section 397(2).

When Is TDS Required to Be Deducted?

The timing of deduction is also important.

TDS must be deducted at the earlier of:

• The time when the amount is credited to the seller's account; or
• The time when payment is made by any mode.

This means the provision can also apply to advance payments made by the buyer to the seller.

TDS on Purchases Through E-Commerce Platforms

The Income-tax Act, 2025 also addresses transactions where goods or services are sold through an e-commerce platform.

An e-commerce operator responsible for making payment to a resident person selling goods or services through its platform is required to deduct TDS under Section 393(1), Table S. No. 8(v).

Where a transaction falls under both provisions, the e-commerce operator has the primary obligation to deduct TDS under Table S. No. 8(v). The buyer is not required to deduct TDS under Table S. No. 8(ii) if the e-commerce operator has already fulfilled the obligation.

However, if the e-commerce operator defaults, the responsibility to deduct TDS can shift to the buyer.

How Does TDS Apply to Purchase Returns?

The rules also provide clarity on purchase returns.

Where the seller refunds the amount against a purchase return, the TDS already deducted can be adjusted against the next purchase from the same seller.

However, where the purchase return is replaced by goods, no adjustment is required.

Is GST Included for TDS Calculation?

TDS is generally deducted on the amount credited excluding GST and other non-GST levies, provided certain conditions are satisfied.

The GST and other applicable levies must be separately indicated in the agreement or contract, and TDS must be deducted at the time of credit.

However, where deduction is made at the time of payment because payment occurs before credit, TDS is deducted on the whole payment amount, as the GST component may not yet be separately identifiable.

TDS Deposit and Return Filing Requirements

Businesses must also comply with the prescribed reporting and payment requirements.

TDS deducted under these provisions is required to be deposited with the Central Government through Challan ITNS 281(N) within seven days from the end of the month in which the deduction was made.

For TDS deducted during March, the deposit deadline is 30 April of the following tax year.

The deductor is required to file the quarterly TDS statement in Form 140.

A TDS certificate in Form 131 must also be issued to the assessee within 15 days from the due date for furnishing the TDS statement.

What Happens If TDS Is Not Deducted or Deposited?

Failure to comply can result in interest and other consequences.

If TDS is not deducted, interest is applicable at 1% per month or part of a month, calculated from the date on which TDS was required to be deducted until the date it is actually deducted.

If TDS has been deducted but is not deposited with the government, interest applies at 1.5% per month or part thereof, from the date of deduction until the date of deposit.

A person treated as an assessee-in-default may also face penalties and, in applicable cases, prosecution.

Penalty for Delay in Filing TDS Statement

Failure to furnish the TDS statement can attract a fee of Rs 200 per day for the period of default, subject to the fee not exceeding the amount of TDS.

Additional penalties may also apply under the specified provisions of the Act.

Similarly, failure to issue the TDS certificate can attract a penalty of Rs 500 for every day during which the default continues.

Key Takeaways for Businesses

For businesses making substantial purchases, the key numbers to remember are:

The Income-tax Department's document containing these provisions is stated to incorporate amendments made by the Finance Act, 2026. Taxpayers and businesses should verify the applicable provisions against the relevant Government Acts, Rules and notifications before taking compliance decisions.

Conclusion

The TDS provisions on the purchase of goods place a clear compliance responsibility on eligible businesses crossing the prescribed turnover and purchase thresholds. From identifying covered transactions to deducting TDS at the correct time, depositing it within the prescribed timeline and filing Form 140, businesses need to ensure that each step is handled correctly.

For businesses dealing with high-value purchases, maintaining accurate seller-wise purchase records can help identify when the Rs 50 lakh threshold is crossed and avoid interest, penalties and other consequences arising from non-compliance.