TDS on Purchase of Goods (Section 194Q) Calculator for Indian Buyers
Section 194Q requires certain buyers to deduct a small TDS on purchases of goods from a resident seller once purchases from that seller cross Rs 50 lakh in a financial year. This calculator applies the threshold, the incremental base and the rate to each invoice so your accounts payable team deducts the right amount.
Your numbers
Total value of goods bought from the same resident seller from 1 April up to the previous invoice.
Taxable value of goods on the invoice.
Where GST is shown separately in the invoice, CBDT guidance excludes it from the TDS base.
Rs 50 lakh in the section as enacted. Change only if the law has changed.
Your results
Section 194Q has been amended several times and its applicability depends on the period and on the Income-tax Act in force. Confirm that 194Q applies to your transaction date and buyer turnover test with your tax advisor before deducting.
TDS vs current invoice value
Sweeps Current invoice value excluding GST from 0 to 20000000, holding your other inputs fixed.
Automate vendor-wise TDS threshold tracking
Optional: have an expert review how your ERP determines withholding tax by vendor and cumulative purchases.
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How to use the calculator
Enter the value of goods already purchased from the same vendor since 1 April, then the current invoice value excluding GST. The tool adds the two, checks how far the cumulative total sits above the threshold, and taxes only the incremental excess. Keep one run per vendor, because the threshold is tested vendor by vendor and not across all suppliers. Use the chart to see how TDS grows as a single invoice gets larger. Re-run after each invoice, carrying the cumulative figure forward.
- Use the vendor's PAN to pick the 0.1% rate
- Exclude GST if it is shown separately on the invoice
- Carry cumulative purchases forward invoice by invoice
The rule behind the numbers
The section applies to a buyer whose turnover in the previous financial year exceeded Rs 10 crore. TDS is at 0.1% of the amount by which purchases from the seller exceed Rs 50 lakh, deducted at the time of credit to the seller or payment, whichever is earlier. It does not apply where the seller has TCS collected under section 206C(1H) for the same transaction, and it does not apply to goods covered by other TDS sections. Because the base is incremental, an invoice that stays below the threshold carries no TDS.
Worked example
A plant has already bought Rs 42 lakh of castings from a vendor this year. The next invoice is Rs 18 lakh plus Rs 3.24 lakh GST. Cumulative purchases become Rs 60 lakh, which is Rs 10 lakh above the threshold. TDS at 0.1% is Rs 1,000 on that Rs 10 lakh. The net payable is Rs 21.24 lakh less Rs 1,000. The next invoice from the same vendor will be fully above the threshold, so TDS applies to its entire base.
Common mistakes and ERP notes
Teams often test the threshold on a single invoice instead of cumulatively, or include GST in the base. Another miss is forgetting that advances and credit notes also move the position. In SAP, Oracle, Infor or Tally, set up a withholding tax code for 194Q with a cumulative threshold by vendor so the system deducts automatically, and reconcile it quarterly against Form 26Q before filing.
Frequently Asked Questions
Is GST included in the 194Q TDS base?
Where GST is shown separately in the invoice, the CBDT clarified that TDS under 194Q is applied on the value excluding GST. If the invoice shows a single gross amount with no separate GST, the full amount forms the base. Keep the invoice format consistent so auditors can follow the logic.
Does the Rs 50 lakh threshold apply per invoice?
No. It applies to total purchases from one seller in the financial year. Once cumulative purchases cross Rs 50 lakh, TDS is calculated on the excess, and every later invoice from that seller is fully taxable at the rate.
What if the seller has already collected TCS?
If the seller collected TCS under section 206C(1H) on the same sale, the buyer is not required to deduct 194Q on that transaction. The two provisions are not meant to apply together, so record which one covered each invoice.
Which buyers must deduct 194Q?
Buyers whose total sales, gross receipts or turnover from business exceeded Rs 10 crore in the immediately preceding financial year. The test is on the buyer, not the seller. Confirm current applicability with your tax advisor each year.
If threshold tracking by vendor is still done in spreadsheets, we can help automate withholding tax determination inside your ERP and reconcile it to Form 26Q.
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