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For businessesRates reviewed September 2026

TDS under Section 194Q vs TCS 206C(1H) Calculator

This TDS 194Q calculator works out tax on the purchase of goods. The provision people know as section 194Q of the Income-tax Act, 1961 now sits in the section 393 payment table of the Income-tax Act, 2025 for transactions from 1 April 2026 onwards. The mechanics are unchanged: a buyer whose total sales, turnover or gross receipts exceeded ₹10 crore in the preceding financial year deducts 0.1% on the value of goods bought from a resident seller, but only on the part above ₹50,00,000 in the year.

The 194Q versus 206C(1H) question that dominated FY 2021-22 to FY 2024-25 has since been settled by removing one leg of it. Tax collection at source on the sale of goods under section 206C(1H) ceased to apply from 1 April 2025, so for FY 2025-26 and FY 2026-27 the seller has no TCS obligation on a plain sale of goods and only the buyer's deduction survives. The comparison still matters when you are reopening an earlier year, reconciling an old ledger or answering a notice, where the rule was that the buyer's deduction prevailed and the seller then did not collect.

Two details catch people out. The threshold is per seller per financial year, not per invoice, and deduction applies only to the excess over ₹50,00,000. And where the seller has not furnished a PAN, the higher rate for purchase of goods is 5%, not the usual 20%, under section 397(2) of the 2025 Act (earlier the proviso to section 206AA).

TDS 194Q Calculator

Sales, turnover or gross receipts from business. Deduction applies only above ₹10 crore.

₹

Aggregate for the whole year against one seller PAN, not one invoice.

₹
Seller has furnished a PAN

Without a PAN the rate for purchase of goods is 5%, not the general 20%.

₹

TDS to deduct

₹3,500

0.1% on ₹35,00,000 above the ₹50 lakh threshold

Buyer turnover in the preceding yearTest is more than ₹10 crore
₹18 crore
Section 393 (earlier 194Q) appliesTurnover is above the ₹10 crore limit
Yes
Purchases from this sellerPer seller PAN, for the financial year as a whole
₹85,00,000
Annual thresholdThe first ₹50 lakh is never deducted on
₹50,00,000
Amount above the threshold
₹35,00,000
Rate appliedSeller PAN furnished
0.1%
TDS payable for the year
₹3,500
TDS already deducted
₹0
Balance still to deduct
₹3,500
  • Tax collection at source on the sale of goods under section 206C(1H) ceased to apply from 1 April 2025, so no TCS arises alongside this deduction.
  • Deduct at credit to the seller's account or at payment, whichever is earlier. A credit to a suspense account counts as a credit to the seller.
  • Pay the challan by the 7th of the following month, and by 30 April for a March deduction. Report it on Form 140, which replaced Form 26Q from FY 2026-27.

The formula

TDS = (Purchases from one seller in the year − ₹50,00,000) × 0.1%

Purchases from one seller
Aggregate value of goods purchased from a single resident seller during the financial year, counted per seller PAN.
₹50,00,000
Annual threshold per seller. Only the amount above it attracts deduction, so the first ₹50 lakh is never deducted on.
0.1%
Rate where the seller has furnished a PAN. If no PAN is furnished the rate is 5%.
Buyer eligibility
Applies only if the buyer's turnover, sales or gross receipts exceeded ₹10 crore in the immediately preceding financial year.

The provision covers purchases from a resident seller only; payments to a non-resident seller fall under the non-resident deduction rules instead.

How to calculate it

  1. 1

    Test the buyer's turnover for the preceding year

    For FY 2026-27, check whether sales, turnover or gross receipts from business exceeded ₹10 crore in FY 2025-26. If not, there is no obligation to deduct at all, whatever the purchase value.

  2. 2

    Aggregate purchases seller by seller

    Group every purchase in the year by seller PAN. The threshold is a per-seller annual figure, so a buyer with fifty suppliers runs fifty separate tests rather than one on total procurement.

  3. 3

    Strip out the first ₹50 lakh

    Deduct on the excess over ₹50,00,000 only. Once a seller crosses the line mid-year, deduction begins from the invoice that crosses it and continues on every rupee after that.

  4. 4

    Apply the rate and check the PAN

    Use 0.1% where the seller has furnished a valid PAN. Where the PAN is not furnished, section 397(2) of the 2025 Act (earlier section 206AA) raises the rate to 5% for purchase of goods.

  5. 5

    Deduct at credit or payment, whichever is earlier

    The trigger is the credit of the sum to the seller's account or the payment, whichever comes first. A credit to a suspense account or any other account counts as a credit to the seller.

  6. 6

    Deposit and report

    Pay the challan by the 7th of the following month, and by 30 April for a March deduction. Report it in the quarterly non-salary statement, Form 140 for FY 2026-27 onwards, which replaced Form 26Q.

TDS on purchase of goods and TCS on sale of goods, position by year

TDS on purchase of goods and TCS on sale of goods, position by year
ItemBuyer deduction (194Q)Seller collection (206C(1H))Financial year
Applicability testBuyer turnover above ₹10 crore in the preceding yearSeller turnover above ₹10 crore in the preceding yearFY 2021-22 to FY 2024-25
Threshold₹50,00,000 per seller in the year₹50,00,000 per buyer in the yearFY 2021-22 to FY 2024-25
Rate0.1% on the excess0.1% on the excessFY 2021-22 to FY 2024-25
Which one prevails when both applyBuyer deduction prevailsSeller does not collect if the buyer has deductedFY 2021-22 to FY 2024-25
Position from 1 April 2025Continues, 0.1% on the excess over ₹50,00,000Ceased to apply on sale of goodsFY 2025-26 onwards
Section number from 1 April 2026Section 393 payment table, Income-tax Act 2025Not applicableFY 2026-27 onwards
Rate where the seller has no PAN5% under section 397(2) (earlier 206AA)Not applicableFY 2026-27 onwards

Worked example

Buyer turnover in FY 2025-26
₹18,00,00,000
Purchases from one resident seller in FY 2026-27
₹85,00,000
Seller PAN furnished
Yes
  • Turnover test: ₹18 crore is above ₹10 crore, so the buyer must deduct
  • Amount above threshold = ₹85,00,000 − ₹50,00,000 = ₹35,00,000
  • TDS = ₹35,00,000 × 0.1% = ₹3,500
  • No TCS arises, since collection on sale of goods ceased from 1 April 2025

TDS payable = ₹3,500

Frequently asked questions

No. Collection of tax at source on the sale of goods under section 206C(1H) ceased to apply from 1 April 2025, and the Income-tax Act, 2025 does not carry it forward. For FY 2025-26 and FY 2026-27 only the buyer's deduction on purchase of goods applies. The provision still matters for reconciling or reopening years up to FY 2024-25.
A buyer whose total sales, turnover or gross receipts from business exceeded ₹10 crore in the immediately preceding financial year. For deductions in FY 2026-27, the test year is FY 2025-26. Turnover from a profession is not counted for this test, and a buyer below the limit has no obligation regardless of how much it purchases.
It is per seller for the whole financial year, and the count starts afresh each year. Deduction applies only to the aggregate value above ₹50,00,000 from that seller, so the first ₹50 lakh is never deducted on. A buyer with several suppliers applies the test separately against each seller PAN.
The Income-tax Act, 2025 consolidates the entire 194 series into section 392 for salary and section 393 for other payments, effective 1 April 2026. Purchase of goods appears as an entry in the section 393 payment table with the same 0.1% rate and ₹50,00,000 threshold. Quarterly statements now reference the section 393 payment code rather than the old section number.
Where tax is deducted at the time of credit and the GST component is shown separately on the invoice, departmental guidance has been to deduct on the value of goods excluding that GST. Where deduction happens at the time of payment because payment precedes credit, it applies to the whole sum paid. Follow the CBDT guidelines in force for the year in question.
For purchase of goods the higher rate is 5%, not the general 20%. This sits in section 397(2) of the Income-tax Act, 2025, which merges the earlier sections 206AA and 206CC. The general rule remains the highest of the rate specified for the payment, the rates in force, or 20%, with purchase of goods carved out at 5%.
By the 7th of the month following the month of deduction for April to February, and by 30 April for tax deducted in March. Late deposit attracts interest at 1.5% for every month or part of a month under section 398 of the Income-tax Act, 2025 (earlier section 201(1A)).

Sources

Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it.

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