TDS U/S194Q

For FY 2026-27,section 194Q applies if purchases exceeds 50 lakhs  made in this FY 2026-27 only

I.e it applies separately for each Financial Year and for each seller.

Section 194Q is tested separately for each financial year; it does not continue automatically from one year to the next. For FY 2026-27, it applies if your business turnover/gross receipts exceeded ₹10 crore in FY 2025-26 and your purchases from a resident seller exceed ₹50 lakh during FY 2026-27. TDS is generally 0.1% on the amount exceeding ₹50 lakh, at the time of credit or payment, whichever is earlier.

So, purchases above ₹50 lakh from that supplier in FY 2025-26 do not by themselves trigger 194Q in FY 2026-27. However, the FY 2025-26 turnover test is relevant, and the FY 2026-27 purchase threshold must be monitored as purchases accrue. This annual check can be built into purchase and vendor-ledger review. Manual threshold tracking across suppliers and years is repetitive; automation can reduce that work while keeping tax judgments and review in your control. Our platform brings together 2,000+ AI agents and 650+ integrations for relevant purchase, TDS and compliance workflows. For a walkthrough tailored to your process, message us on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.

Two tests apply, and both reset every year.

Test 1: Is the buyer covered?

• The buyer must have turnover above Rs 10 crore in the immediately preceding year. For FY 2026-27, check FY 2025-26 turnover. If it was above Rs 10 crore, the buyer is covered for the whole of FY 2026-27, whatever the purchases were last year.

Test 2: Which purchases?

• TDS at 0.1% applies on purchases from a resident seller only on the amount exceeding Rs 50 lakh in the year, per seller. Purchases up to Rs 50 lakh are never subject to it.

• Last year's purchases from a seller do not carry over. The Rs 50 lakh counter restarts on 1 April.

Law reference

• Up to 31.03.2026: Sec 194Q of the 1961 Act.

• From 01.04.2026: Sec 393(1) of the Income-tax Act, 2025 (Table, Sl. No. 8(ii)), same rate and thresholds.

Practical points

• Deduct at the earlier of credit or payment, on value excluding GST if shown separately (CBDT Circular 13/2021).

• TCS under Sec 206C(1H) by the seller has been omitted from 1 April 2025, so the buyer's TDS is the only obligation now.

• If the seller has no PAN, the rate is 5%.