TDS Filing by Goods Traders AY 2026-27: Section 194Q

A goods trader may need to deduct tax at source (TDS) when purchasing goods from a resident seller. For FY 2025-26 and AY 2026-27, Section 194Q generally applies when the buyer’s turnover exceeds ₹10 crores in the immediately preceding financial year and purchases from a particular resident seller exceed ₹50 lakhs during the year.

The buyer must deduct TDS at 0.1% on the amount exceeding ₹50 lakhs, deposit it within the prescribed time, file quarterly Form 26Q, and issue Form 16A to the seller. This guide explains the complete TDS filing by goods trader for AY 2026-27, including TAN registration, payment deadlines, return filing, compliance checks and corrections.

Section 194Q TDS on Purchase of Goods FY 2025-26

Section 194Q applies to a buyer purchasing goods from a resident seller. The provision is relevant to wholesalers, distributors, retailers, manufacturers, importers and other businesses that buy goods for business purposes.

When does Section 194Q apply?

A goods trader must comply with Section 194Q if all these conditions are satisfied:

1. The buyer’s total sales, gross receipts or turnover exceeded ₹10 crores in FY 2024-25.
2. The buyer purchases goods from a resident seller.
3. The aggregate value of goods purchased from that seller exceeds ₹50 lakhs during FY 2025-26.
4. The transaction is not covered by a different TDS provision, such as TDS under Section 194O for e-commerce transactions.
5. The buyer credits the purchase amount to the seller’s account or makes payment, whichever occurs earlier.

The ₹10 crore test applies to the buyer’s turnover in the immediately preceding financial year. Therefore, for transactions during FY 2025-26, the buyer must check its turnover for FY 2024-25.

The Income Tax Department provides the statutory text and related provisions through its official Section 194Q reference.

Who is treated as a buyer?

For Section 194Q, a buyer generally means a person whose business turnover crossed ₹10 crores in the preceding financial year. This can include:

• A company
• A partnership firm or limited liability partnership
• A Hindu Undivided Family
• A trust carrying on business
• An individual proprietor
• Any other person carrying on business or profession

A buyer should not assume that Section 194Q applies only to companies. An individual or HUF carrying on business may also come within its scope if the turnover condition is satisfied.

TDS Rate Under Section 194Q for FY 2025-26

The normal TDS rate under Section 194Q for FY 2025-26 is 0.1% on the purchase value exceeding ₹50 lakhs from a seller during the financial year.

Rate where the seller does not furnish PAN

If the seller does not provide a valid PAN, the buyer may need to deduct TDS at 5% under Section 206AA, subject to the applicable law and facts of the transaction.

The buyer should collect and validate the seller’s PAN before making purchases. A wrongly quoted, invalid or inoperative PAN can create a higher TDS liability and reconciliation problems.

Is surcharge or cess added to Section 194Q TDS?

No separate surcharge or health and education cess is generally added to TDS under Section 194Q. The normal rate is applied to the relevant purchase amount.

What happened to Section 206C(1H)?

For FY 2025-26, the earlier TCS provision on the sale of goods under Section 206C(1H) was omitted with effect from 1 April 2025. As a result, the earlier overlap between Section 194Q TDS and Section 206C(1H) does not generally arise for transactions from FY 2025-26 onwards.

Businesses should still review the nature of each transaction because other TCS provisions may apply to specified goods or transactions.

₹50 Lakh Threshold for TDS on Purchase of Goods

The ₹50 lakh threshold applies seller-wise, not invoice-wise. A buyer must track the cumulative purchase value from each resident seller during FY 2025-26.

TDS applies only to the amount above ₹50 lakhs.

Example of Section 194Q calculation

A wholesaler purchased goods from one resident supplier as follows:

• Purchase value during FY 2025-26: ₹80,00,000
• Threshold: ₹50,00,000
• Amount exceeding threshold: ₹30,00,000
• TDS rate: 0.1%

TDS payable = ₹30,00,000 × 0.1% = ₹3,000

The buyer should deduct ₹3,000 from the amount payable to the seller and deposit it with the Central Government.

Does the threshold apply separately to every seller?

Yes. Consider the following purchases:

Seller	Annual purchases	Section 194Q result
Seller A	₹45,00,000	No TDS under Section 194Q
Seller B	₹75,00,000	TDS on ₹25,00,000
Seller C	₹1,20,00,000	TDS on ₹70,00,000

The buyer must maintain a seller-wise ledger or automated report to identify when purchases cross ₹50 lakhs.

When Must a Goods Trader Deduct TDS?

The buyer must deduct TDS at the earlier of:

• Credit of the purchase amount to the seller’s account; or
• Payment of the purchase amount by any mode

The provision can apply even when the purchase invoice is credited to a suspense account or another account instead of directly to the seller’s ledger.

TDS where GST is shown separately

Where the seller separately indicates GST in the invoice and the amount is first credited to the seller’s account, TDS is generally calculated on the value excluding GST. However, if the buyer makes an advance payment before crediting the invoice, the TDS calculation may apply to the amount paid, including the GST component.

Goods traders should configure their accounting software according to the timing of credit and payment. The CBDT guidance on Section 194Q discusses practical issues concerning GST and the timing of deduction.

TAN Registration and TDS Compliance for Goods Traders

A person responsible for deducting TDS must obtain a Tax Deduction and Collection Account Number (TAN), unless a specific exception applies.

How to obtain TAN

A goods trader can apply for TAN through:

• The online income tax portal; or
• Form 49B through an authorised service provider

The trader should quote the TAN on:

• TDS challans
• Form 26Q
• TDS certificates
• Correspondence with the Income Tax Department

A buyer should obtain TAN before the first TDS payment or return filing. Using a permanent account number (PAN) instead of TAN for regular TDS compliance can result in filing and payment errors.

Basic compliance records to maintain

The buyer should maintain:

• Seller PAN and residency details
• Seller-wise purchase totals
• Invoice date and invoice number
• Date of credit and payment
• GST value shown separately
• TDS amount deducted
• Challan identification number
• Form 26Q acknowledgement
• Form 16A records
• Details of cancelled or returned purchases

TDS Payment and Challan Requirements for Goods Traders

The buyer must deposit TDS using Challan ITNS 281. Payment can generally be made through the authorised online tax payment facility.

The challan should contain the correct:

• TAN
• Assessment year
• Major head and minor head
• Nature of payment
• Amount of TDS
• Date of deduction
• Bank reference details

The Income Tax Department’s e-Pay Tax service provides the current payment process and available payment modes.

Due date for depositing TDS

For most deductors, TDS deducted during a month must be deposited by the 7th day of the following month.

For TDS deducted in March, the due date is generally 30 April.

Month of deduction	Deposit due date
April to February	7th of the following month
March	30 April

A government office may follow a different payment deadline. Private goods traders should follow the normal monthly deadlines.

TDS Return Due Dates for Goods Traders AY 2026-27

A goods trader must report Section 194Q deductions in Form 26Q. Form 26Q is the quarterly statement used for TDS deducted from payments other than salary, where the deductee is a resident.

Form 26Q filing calendar for FY 2025-26

Quarter	Period covered	Form 26Q due date
Quarter 1	April to June 2025	31 July 2025
Quarter 2	July to September 2025	31 October 2025
Quarter 3	October to December 2025	31 January 2026
Quarter 4	January to March 2026	31 May 2026

These are the relevant TDS return due dates for goods traders AY 2026-27. A trader should file the statement even if there are no reportable deductions only where a statement is required under the applicable filing rules. It is safer to review the TAN account and filing obligation for every quarter rather than automatically skipping a return.

What details are reported in Form 26Q?

Form 26Q generally requires:

• Deductor’s TAN and PAN
• Deductee’s PAN
• Seller name and address
• Amount paid or credited
• Date of payment or credit
• TDS amount
• TDS deduction date
• Challan details
• Section code, such as Section 194Q
• Details of lower or nil deduction certificates, where applicable

The statement must be prepared and validated using the prescribed TDS return utility and filed through the authorised system.

Form 16A Issuance for Section 194Q TDS

After the quarterly TDS statement is processed, the buyer must download Form 16A from the TRACES system and issue it to the seller.

Form 16A is the quarterly TDS certificate that shows the TDS deducted and deposited against the seller’s PAN.

Form 16A due dates for FY 2025-26

The usual schedule is:

Quarter	Form 16A issue date
April to June 2025	15 August 2025
July to September 2025	15 November 2025
October to December 2025	15 February 2026
January to March 2026	15 June 2026

The buyer should download Form 16A only after the return has been processed. The certificate should match the seller’s Form 26AS and accounting records.

Common Issues in Form 26Q Filing for TDS on Goods Purchases

Errors in Form 26Q can prevent the seller from receiving TDS credit. Common mistakes include:

• Reporting the wrong seller PAN
• Using an incorrect Section 194Q code
• Reporting the invoice amount instead of the amount subject to TDS
• Entering an incorrect deduction date
• Quoting the wrong challan serial number
• Reporting a challan under the wrong assessment year
• Failing to report a transaction after the ₹50 lakh threshold was crossed
• Deducting TDS from a non-resident seller under Section 194Q instead of examining Section 195
• Treating every purchase invoice independently instead of tracking the seller-wise annual total

The buyer should reconcile the TDS ledger with the purchase register, bank payments, challans and the seller’s Form 26AS wherever possible.

TDS Return Correction for Section 194Q AY 2026-27

If the buyer identifies an error after filing Form 26Q, it can submit a correction statement through the prescribed TDS return process.

Situations requiring correction

A correction may be necessary for:

• Invalid or incorrect PAN
• Incorrect amount paid or credited
• Wrong TDS amount
• Wrong deduction date
• Incorrect challan details
• Missing deductee records
• Incorrect assessment year
• Wrong or missing Section 194Q reporting

Practical correction process

1. Download the relevant consolidated file or correction details from the TDS reporting system.
2. Identify the statement period and record needing correction.
3. Correct the PAN, amount, date, challan or section information.
4. Validate the revised file using the prescribed utility.
5. Submit the correction statement.
6. Track the revised processing status.
7. Download the updated Form 16A after processing.

If the original TDS payment was short, the buyer should deposit the balance tax, applicable interest and any other amount payable before submitting or completing the correction.

Consequences of Late TDS Compliance

Late or incorrect compliance can create additional costs for the goods trader.

Interest

Interest may apply for:

• Failure to deduct TDS
• Deducting TDS late
• Depositing deducted TDS late

The applicable interest depends on whether the default relates to deduction or payment.

Late filing fee

Under Section 234E, a late filing fee of ₹200 per day may apply for delay in filing the TDS statement, subject to the amount of TDS deductible or collectible for that statement.

Other consequences

The trader may also face:

• Penalty proceedings
• TDS mismatch notices
• Seller complaints due to missing tax credit
• Disallowance-related issues under the Income Tax Act
• Additional interest and correction costs
• Difficulty obtaining a clean tax compliance record

The Income Tax Department’s TDS information should be checked for the applicable filing and certificate procedures.

A Practical Compliance Checklist for FY 2025-26

Goods traders can follow this monthly and quarterly checklist:

Monthly checklist

• Confirm that FY 2024-25 turnover exceeded ₹10 crores.
• Identify all resident sellers.
• Track seller-wise purchases from 1 April 2025.
• Check when the ₹50 lakh threshold is crossed.
• Deduct TDS at 0.1% on the excess amount.
• Deposit TDS by the 7th of the following month.
• Deposit March TDS by 30 April 2026.
• Reconcile TDS deducted with the purchase and payment ledger.

Quarterly checklist

• Reconcile deductions with challans.
• Verify seller PANs.
• Prepare and validate Form 26Q.
• File Form 26Q by the applicable due date.
• Download Form 16A from TRACES.
• Issue Form 16A to the seller.
• Resolve defaults or mismatches promptly.

Frequently Asked Questions

Is TDS under Section 194Q applicable to purchases below ₹50 lakhs?

No. If the aggregate purchases from a particular resident seller do not exceed ₹50 lakhs during FY 2025-26, Section 194Q generally does not apply to that seller.

Is the ₹50 lakh limit calculated seller-wise?

Yes. The buyer must calculate the threshold separately for each resident seller.

Does Section 194Q apply to purchase returns?

The buyer should adjust its records for genuine purchase returns and ensure that the final purchase and TDS figures are correctly reported. Accounting and tax records should clearly document the original purchase, return and adjustment.

Is Form 27Q required for Section 194Q?

No. For payments to resident sellers covered by Section 194Q, the buyer generally files Form 26Q. Form 27Q applies to specified payments made to non-residents, subject to the relevant provisions.

Does a goods trader need TAN for Section 194Q?

Yes, a person required to deduct TDS generally needs TAN and must quote it in challans, Form 26Q and TDS certificates.

What is the TDS rate if the seller does not provide PAN?

TDS may apply at 5% under Section 206AA where the seller does not furnish a valid PAN, subject to the specific facts and applicable provisions.

Summary

For filing of TDS by a goods trader in AY 2026-27, first verify whether the buyer’s FY 2024-25 turnover exceeded ₹10 crores. Then track purchases from each resident seller, apply the ₹50 lakh threshold for TDS on purchase of goods, deduct TDS at 0.1% on the excess, deposit it through Challan ITNS 281, file quarterly Form 26Q and issue Form 16A.

Maintaining seller-wise purchase tracking and completing TDS filing by goods trader for AY 2026-27 on time will help prevent interest, late fees, mismatches and correction demands under Section 194Q.