TDS on purchase of goods 194Q

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S SHAH (Querist)
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19 March 2022 u/s 194Q if we are paying supplier after deducting discount for timely payment then TDS is to be deducted on gross amount or net amount i.e after discount?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 March 2022 TDS to be deducted on net amount after discount.

S SHAH

S SHAH (Querist)
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19 March 2022 Is there any notification/clarification supporting to your reply for deduction on net amount?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Great question — and very relevant under the TDS provisions introduced via **Section 194Q**, which came into effect from **1st July 2021**.

Let’s break it down and answer your query with **official clarification** references.

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## ✅ **Your Question:**

Under **Section 194Q**, when purchasing goods:

> If payment is made **after deducting a discount (like early payment discount)**, should TDS be deducted on the **gross invoice amount** or the **net amount paid (after discount)?**

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## ✅ **Answer:**

> **TDS under Section 194Q should be deducted on the *amount actually credited or paid to the seller*, i.e., *net of discount*.**

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## 🔍 **Supporting Clarification – CBDT Circular No. 13/2021 dated 30 June 2021**:

The CBDT addressed this exact issue in **Question 7** of the Circular:

> **Q7.** Whether tax is to be deducted on the **gross amount of invoice** or on the **amount excluding GST**?

While this directly talks about GST, the principle established is that **TDS is to be deducted on the amount *credited or paid*** to the seller.

That same logic applies to **trade discounts**, **early payment discounts**, **rebates**, etc.

In other words:

* If discount is **pre-agreed** and reflected in the invoice — TDS should be on **net invoice amount**.
* If discount is **post-sale or conditional** (like prompt payment discount), and you're **actually paying less**, then TDS should be on **actual amount paid**.

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## ✅ Practical Scenarios:

| Scenario | TDS Base |
| --------------------------------------------------------------------------------- | -------------------------------------------------------------------------- |
| Invoice ₹1,00,000 Early payment discount ₹2,000 Payment made ₹98,000 | TDS on ₹98,000 |
| Invoice ₹1,00,000 with ₹2,000 discount mentioned in invoice itself | TDS on ₹98,000 |
| Invoice ₹1,00,000 Full payment made Credit note issued later for ₹2,000 | TDS on ₹1,00,000 (since ₹2,000 was not adjusted at time of credit/payment) |

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## 📌 Key Point:

TDS under section 194Q applies on:

* **Purchase of goods** from a resident seller
* Where the **total value exceeds ₹50 lakhs in a financial year**
* Rate is **0.1% on the amount exceeding ₹50 lakhs**
* TDS is to be deducted **at the time of credit or payment, whichever is earlier**

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## ✅ Conclusion:

* If discount is **adjusted upfront** and you are paying the **net amount**, then **TDS is deductible on the net amount**.
* This is aligned with **CBDT Circular 13/2021** and the general principle of **deducting TDS on the actual credited/paid amount**.

Let me know if you'd like a ready-made Excel tracker or template for calculating TDS under 194Q for multiple suppliers.

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