TDS on Purchase of Goods Under Section 393 of Income Tax

Introduction

The Government has introduced a significant restructuring of the TDS framework through the Income Tax Act, 2025. One of the major updates under the new law is that the provisions relating to TDS on purchase of goods, which were earlier covered under Section 194Q of the Income Tax Act, 1961, are now consolidated and restructured under Section 393(1) Table Serial No. 8(ii) of the Income Tax Act 2025.

The objective behind this consolidation is to simplify TDS compliance, reduce confusion caused by multiple TDS sections, and create a more systematic framework for tax deduction at source. Earlier, taxpayers and businesses had to refer to different sections for different transactions. Under the new law, several non-salary TDS provisions relating to residents and specified transactions are now grouped under Section 393 of Income Tax Act 2025.

For businesses involved in high-value purchase transactions, understanding the transition from Section 194Q to Section 393 is important to ensure proper TDS on purchase of goods compliance and avoid deduction errors.

What is Section 393 of Income Tax Act 2025?

Section 393 of Income Tax Act 2025 is a consolidated provision introduced to cover multiple non-salary TDS transactions under one structured framework. Instead of maintaining separate provisions for every category of TDS deduction, the government has grouped several TDS provisions into a table-based structure.

The section broadly covers:

• Payments to residents
• Specified payments to non-residents
• TDS rates and threshold limits
• Lower deduction provisions
• Compliance timelines
• Deduction requirements for specified transactions
• The new framework becomes applicable from 1 April 2026.

One of the important changes under this framework is that TDS on purchase of goods, previously governed under Section 194Q of the Income Tax Act, 1961, is now covered under Section 393(1) Table Serial No. 8(ii).

Background of Section 194Q

Before understanding the new framework, it is important to understand the earlier provision relating to TDS on purchase of goods.

Section 194Q was introduced in the Income Tax Act, 1961 with effect from 1 July 2021 to bring high-value purchase transactions within the TDS mechanism. The provision was introduced mainly to strengthen transaction tracking and widen the tax reporting system.

Businesses dealing with multiple vendor payments, including payments covered under provisions relating to TDS on payment to a non-resident, were required to maintain proper deduction and reporting systems for accurate compliance management. Many businesses also started adopting automated accounting and TDS software for accountants to manage deduction tracking, reconciliation, and return filing efficiently.

Under Section 194Q:

• Buyers having turnover exceeding Rs. 10 Crore in the previous financial year were required to deduct TDS.
• TDS on purchase of goods was applicable where purchases from a seller exceeded Rs. 50 Lakh in a financial year.
• The TDS rate was fixed at 0.1% on the amount exceeding the threshold limit.
• TDS had to be deducted at the earlier of payment or credit.

The core applicability, threshold limit, and deduction mechanism continue to remain substantially similar under the new framework introduced through Section 393 of Income Tax Act 2025.

How Section 194Q is Consolidated Under Section 393 of Income Tax Act 2025

The Income Tax Act 2025 introduces a structured and consolidated format for TDS provisions. Instead of keeping separate sections for every transaction category, the law now groups multiple TDS provisions under one central framework.

Under the new structure:

• Section 194Q is no longer a standalone provision under the new Act.
• TDS on purchase of goods is covered under Section 393(1) Table Serial No. 8(ii).
• The threshold limit and deduction mechanism remain substantially similar to the earlier framework.
• The buyer turnover condition also continues in the same manner.

This restructuring has been introduced to simplify interpretation, improve compliance management, and make future amendments easier.

Instead of referring to multiple TDS sections separately, businesses can now refer to Section 393 of Income Tax Act 2025 for several specified non-salary TDS transactions.

Applicability of TDS on Purchase of Goods Under Section 393

Under Section 393 of Income Tax Act 2025, TDS on purchase of goods continues to apply to specified buyers purchasing goods from resident sellers.

Companies already managing annual compliance and Private Limited Company Tax Filing should also ensure proper monitoring of high-value purchase transactions for smooth TDS compliance under the new framework.

Who is required to deduct TDS?

A buyer is liable to deduct TDS if:

• The total turnover or gross receipts from business exceeded Rs. 10 Crore during the immediately preceding financial year.
• Purchases from a resident seller exceed Rs. 50 Lakh during the financial year.

TDS Rate Under Section 393

The applicable TDS rate remains:

• 0.1% on the amount exceeding Rs. 50 Lakh.

Time of Deduction

TDS must be deducted at:

• The time of payment, or
• The time of credit to the seller’s account, whichever is earlier.

Non-applicability of TDS Under Section 393

The provisions relating to TDS on purchase of goods under Section 393(1) Table Serial No. 8(ii) shall not apply where tax is deductible or collectible under any other provision of the Income Tax Act. This provision helps avoid duplication of TDS or TCS on the same transaction.

Businesses should therefore stay updated with the latest TDS and TCS new changes and revised compliance requirements under the Income Tax Act 2025 to ensure correct tax deduction and reporting. Businesses should also understand the applicability of the new TDS and TCS forms under the Income Tax Act for proper return filing and compliance management.

Example of TDS on Purchase of Goods Under Section 393

Suppose ABC Pvt. Ltd. had turnover of Rs. 15 Crore during FY 2025-26.

During FY 2026-27, the company purchases goods worth Rs. 80 Lakh from XYZ Traders.

In this case:

Threshold limit = Rs. 50 Lakh
Amount exceeding threshold = Rs. 30 Lakh
Applicable TDS rate = 0.1%
TDS amount = Rs. 3,000

Therefore, ABC Pvt. Ltd. will deduct TDS of Rs. 3,000 under Section 393 of Income Tax Act 2025.

Difference Between Section 194Q and Section 393

Important Compliance Requirements Under Section 393

Businesses should regularly monitor vendor transactions to identify when the prescribed threshold limit is crossed and ensure timely TDS deduction. Maintaining proper compliance records also helps avoid reporting errors and notices later.

Incorrect or inactive PAN details may lead to higher TDS deduction and mismatches during compliance reporting. Businesses should ensure proper vendor verification and updated documentation through timely verification of PAN Application and correction processes.

After deduction, TDS should be deposited within the prescribed due dates to avoid interest and penalties. Businesses already handling regular compliances like Income Tax Return Filing should maintain a proper compliance calendar for smooth tax management.

Accurate TDS Return Filing is equally important to avoid defaults, correction notices, and reconciliation issues. Regular matching of books of accounts with TDS records helps businesses maintain accurate financial and tax reporting.

Businesses facing challenges in deduction tracking, vendor verification, or return filing can also seek professional Tax Consultancy support. Ebizfiling helps businesses manage end-to-end TDS compliance, return filing, and tax-related documentation efficiently.

Challenges Businesses May Face During the Transition

The new TDS structure may simplify compliance overall, but businesses can still face a few challenges while adjusting to the changes in the beginning.

Getting Familiar with the New Structure

Most businesses are already comfortable with Section 194Q and the current TDS framework. With the introduction of the new consolidated provisions, finance teams may need some time to understand the new section references and compliance process properly.

Updates in ERP and Accounting Systems

Many companies use automated ERP or accounting software for TDS calculations and return filing. These systems may need updates to reflect the new section mapping. Until the changes are fully implemented, there can be chances of deduction or reporting mistakes.

Communicating Changes to Vendors

During the transition period, vendors and suppliers may still refer to the old section names in invoices or discussions. Businesses may therefore have to clearly communicate the shift from Section 194Q to Section 393 to avoid confusion at the time of reconciliation.

Changes in Internal Compliance Process

Companies may also need to update their internal compliance procedures, checklists, and approval systems according to the revised law. In some cases, teams handling taxation and accounts may require basic training to avoid errors in day-to-day compliance.

Separate Review of Goods Transactions

Businesses should also carefully review transactions relating to purchase of goods and services separately. This becomes important because Section 393(1) Table Serial No. 8(ii) specifically applies to goods transactions under the new framework.

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Conclusion

The introduction of Section 393 of Income Tax Act 2025 marks a major transformation in India’s TDS framework. The government has introduced consolidated TDS provisions to simplify interpretation and improve compliance management.

Earlier, TDS on purchase of goods was governed under Section 194Q of the Income Tax Act, 1961. Under the new framework, the same provision is now consolidated and restructured under Section 393(1) Table Serial No. 8(ii).

While the applicability, threshold limit, and TDS rate remain substantially similar, the new framework introduces a more organized compliance structure for businesses and tax professionals. Understanding the transition from Section 194Q to Section 393 will help businesses ensure smooth TDS compliance and avoid future compliance issues under the Income Tax Act 2025.

Suggested Reads:

Section 393(3) of Income Tax Act

Section 194N of Income Tax Act

Frequently Asked Questions