CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194Q — Tax Deduction on Payment for Purchase of Goods
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Inserted by the Finance Act, 2021 (w.e.f. 1 July 2021); recent.
Finance Act, 2026: No amendment.
Mechanism: A buyer with turnover over ₹10 crore deducts 0.1% on purchases of goods from a resident seller exceeding ₹50,00,000 a year; section 194Q overrides section 206C(1H) but yields to section 194-O.
Litigation profile: Limited merits law; overlaps resolved by CBDT guidelines — the candour rule applies.
A. SECTION COMMENTARY
Section 194Q, inserted by the Finance Act, 2021 with effect from 1 July 2021, requires a buyer whose total sales, gross receipts or turnover exceeded ₹10 crore in the immediately preceding financial year to deduct tax at 0.1 per cent on the purchase of goods from a resident seller to the extent the value exceeds ₹50,00,000 in a financial year. It mirrors, on the buyer's side, the seller-side tax-collection provision in section 206C(1H), and together they create a comprehensive trail of high-value goods transactions.
The defining feature of section 194Q is its place in a three-way priority. Where a transaction attracts both section 194Q (buyer's TDS) and section 206C(1H) (seller's TCS), section 194Q prevails and the seller need not collect under section 206C(1H). Where a transaction attracts both section 194-O (e-commerce) and section 194Q, section 194-O prevails. The order of priority is therefore section 194-O first, then section 194Q, then section 206C(1H). The CBDT has resolved the computational and overlap questions in Circulars No. 13/2021 and 20/2021 (and Circular 17/2020 for section 194-O).
Scope questions and chargeable sums
Section 194Q applies to 'goods' (the term is not defined in the section and takes its ordinary commercial meaning), and the deduction is on the purchase value above the threshold. Questions such as the treatment of GST, purchase returns, and transactions in electricity or securities have been addressed by the CBDT guidelines. The general principle that withholding attaches only to chargeable sums, and the no-double-recovery rule on default, apply as elsewhere.
Why merits authority is limited — candour
The provision is recent and its practical difficulties have been resolved chiefly by CBDT guidance rather than by contested adjudication; there is no settled body of section 194Q merits authority. In candour, it is applied from its terms read with the CBDT circulars and the section 206C(1H)/194-O priority rules.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194Q. (1) Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as income-tax.
Explanation.—For the purposes of this sub-section, "buyer" means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
(2) Where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
(5) The provisions of this section shall not apply to a transaction on which—
(a) tax is deductible under any of the provisions of this Act; and
(b) tax is collectible under the provisions of section 206C ***.
C. AUTHORITIES
The position is governed chiefly by the statute and the CBDT guidelines fixing the section 194-O / 194Q / 206C(1H) priority and computation. The candour rule is observed on merits authority.
Statutory scheme and CBDT guidance
Priority order — sections 194-O, 194Q and 206C(1H) (CBDT Circulars 13/2021, 20/2021)
Use: The decisive rule for any high-value goods transaction touching more than one provision.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194Q.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194Q — Tax Deduction on Payment for Purchase of Goods
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Inserted by the Finance Act, 2021 (w.e.f. 1 July 2021); recent.
Finance Act, 2026: No amendment.
Mechanism: A buyer with turnover over ₹10 crore deducts 0.1% on purchases of goods from a resident seller exceeding ₹50,00,000 a year; section 194Q overrides section 206C(1H) but yields to section 194-O.
Litigation profile: Limited merits law; overlaps resolved by CBDT guidelines — the candour rule applies.
A. SECTION COMMENTARY
Section 194Q, inserted by the Finance Act, 2021 with effect from 1 July 2021, requires a buyer whose total sales, gross receipts or turnover exceeded ₹10 crore in the immediately preceding financial year to deduct tax at 0.1 per cent on the purchase of goods from a resident seller to the extent the value exceeds ₹50,00,000 in a financial year. It mirrors, on the buyer's side, the seller-side tax-collection provision in section 206C(1H), and together they create a comprehensive trail of high-value goods transactions.
The interplay — section 194Q, section 206C(1H) and section 194-O
The defining feature of section 194Q is its place in a three-way priority. Where a transaction attracts both section 194Q (buyer's TDS) and section 206C(1H) (seller's TCS), section 194Q prevails and the seller need not collect under section 206C(1H). Where a transaction attracts both section 194-O (e-commerce) and section 194Q, section 194-O prevails. The order of priority is therefore section 194-O first, then section 194Q, then section 206C(1H). The CBDT has resolved the computational and overlap questions in Circulars No. 13/2021 and 20/2021 (and Circular 17/2020 for section 194-O).
Scope questions and chargeable sums
Section 194Q applies to 'goods' (the term is not defined in the section and takes its ordinary commercial meaning), and the deduction is on the purchase value above the threshold. Questions such as the treatment of GST, purchase returns, and transactions in electricity or securities have been addressed by the CBDT guidelines. The general principle that withholding attaches only to chargeable sums, and the no-double-recovery rule on default, apply as elsewhere.
Why merits authority is limited — candour
The provision is recent and its practical difficulties have been resolved chiefly by CBDT guidance rather than by contested adjudication; there is no settled body of section 194Q merits authority. In candour, it is applied from its terms read with the CBDT circulars and the section 206C(1H)/194-O priority rules.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194Q. (1) Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as income-tax.
Explanation.—For the purposes of this sub-section, "buyer" means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out, not being a person, as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
(2) Where any sum referred to in sub-section (1) is credited to any account, whether called "suspense account" or by any other name, in the books of account of the person liable to pay such income, such credit of income shall be deemed to be the credit of such income to the account of the payee and the provisions of this section shall apply accordingly.
(3) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(4) Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and the person liable to deduct tax.
(5) The provisions of this section shall not apply to a transaction on which—
(a) tax is deductible under any of the provisions of this Act; and
(b) tax is collectible under the provisions of section 206C ***.
C. AUTHORITIES
The position is governed chiefly by the statute and the CBDT guidelines fixing the section 194-O / 194Q / 206C(1H) priority and computation. The candour rule is observed on merits authority.
Statutory scheme and CBDT guidance
Priority order — sections 194-O, 194Q and 206C(1H) (CBDT Circulars 13/2021, 20/2021)
Principle: Section 194Q overrides section 206C(1H): where both apply, the buyer deducts under section 194Q and the seller does not collect under section 206C(1H). But where section 194-O also applies (e-commerce), section 194-O prevails over section 194Q. The order is thus section 194-O, then section 194Q, then section 206C(1H).
Use: The decisive rule for any high-value goods transaction touching more than one provision.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor where the payee has paid the tax; section 201(1A) interest runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194Q.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.