Section 393: TDS on purchase of goods explained (old 194Q)

What changed on 1 April 2026

The Income-tax Act 1961 has been replaced by the Income-tax Act 2025 from 1 April 2026. Instead of one section per type of TDS (194C, 194J, 194Q…), most TDS now sits in one section, section 393, with a table. TDS on purchase of goods is section 393(1), Table serial 8(ii).[1]

For a trader, three things change in practice:

• The label. Your purchase ledger, TDS ledger and the certificate you give the supplier should say "sec 393(1) Sl. 8(ii)" for FY 2026-27, and "194Q" for earlier years.
• The challan code. Secondary sources list payment code 1031 for this item on the e-pay tax page.[3] तपासा
• The quarterly return. Reports say Form 140 replaces Form 26Q under the new Act.[5] तपासा Ask your CA which form their software files for Q1 and Q2 of FY 2026-27.

What did not change, as far as the sources show: the ₹10 crore buyer test, the ₹50 lakh per-seller limit and the 0.1% rate.[2]

Who has to deduct

You are the one who deducts (the buyer) if both are true:

1. Your total sales, gross receipts or turnover from business was more than ₹10 crore in the previous financial year. For FY 2026-27 you look at FY 2025-26.
2. You buy goods from one resident seller worth more than ₹50 lakh in the financial year.

The ₹10 crore test is on your turnover, not the supplier's. A ₹12 Cr distributor buying ₹80 lakh a year from a small manufacturer still deducts.

Section 393 says Sl. 8(ii) does not apply to a transaction on which tax is deductible or collectible under another provision (Note 1(a)), for example scrap, on which the seller collects TCS under section 394.[1] Under 194Q, buyers in their first year of business were also left out; whether that carries over is not clear from the Act text. तपासा

How the ₹50 lakh limit works

The limit is counted per seller, per financial year (April to March), and it starts again at zero every 1 April. Only the part above ₹50 lakh is taxed; the first ₹50 lakh never is.

TDS is deducted when you credit the bill to the seller's account or when you pay, whichever is earlier (section 393(1)(c)).[1] For most traders that is the day the purchase bill is entered.

Is GST included in the value?

Under 194Q, the Income Tax Department's guidance (following CBDT Circular 13/2021) said: when TDS is deducted at the time of credit and GST is shown separately, deduct on the value without GST. When it is deducted on an advance payment, deduct on the full amount paid, because you can't split the GST out yet.[2] Moharbill uses the taxable value by default. Whether CBDT has repeated this for section 393 is not confirmed. तपासा

Worked example, in rupees

Mehta Electricals & Traders, Nagpur (sample firm), had a turnover of ₹12.6 Cr in FY 2025-26, so it deducts in FY 2026-27. It buys cable from one supplier, Shree Ganesh Cables (example).

The 8 Oct bill. Before it, the year's purchases were ₹46,80,000. The bill takes the total to ₹52,80,000, so ₹2,80,000 is above the limit. TDS = 0.1% × ₹2,80,000 = ₹280. The bill is ₹6,00,000 + 18% GST ₹1,08,000 = ₹7,08,000, so the buyer pays the supplier ₹7,07,720 and keeps back ₹280.

The 22 Oct bill. The whole ₹4,00,000 is above the limit. TDS = ₹400. Payment = ₹4,72,000 − ₹400 = ₹4,71,600.

Deposit. The ₹680 kept back in October is paid by 7 Nov 2026 on the e-pay tax page, under payment code 1031. Verify code

If the supplier's PAN is missing or inoperative, the rate under 194Q was 5%: on the 8 Oct bill that would be 5% × ₹2,80,000 = ₹14,000 instead of ₹280.[2] Confirm the rate under the new Act with your CA तपासा, and check every big supplier's PAN status before October.

Deposit, return and certificate

1. Deposit the TDS by the 7th of the next month on the income-tax e-pay tax page (challan ITNS 281). Keep the challan number (CIN). Under the old Act, March TDS could be paid by 30 April. तपासा
2. File the quarterly TDS return with each supplier's PAN and amount. Your CA files this; under the new Act the form is reported to be Form 140.[5] तपासा
3. Give the supplier a TDS certificate so they can claim the credit against their own tax.

Late deposit attracts interest, and the expense can be disallowed in part for income-tax. The amounts are small, but the paperwork is not, so it is worth getting right every month.

Section 393 vs 206C(1H)

Until March 2025 a big seller could have to collect TCS under 206C(1H) on the same sale where the buyer deducted TDS under 194Q. The rule was that if the buyer deducted, the seller didn't collect. That question is gone: 206C(1H) does not apply from 1 April 2025.[4] See section 393 vs 206C(1H) for the year-by-year picture. For FY 2026-27 only the buyer's TDS remains.

If you are the seller to a large buyer, expect them to keep back 0.1% once you cross ₹50 lakh with them, and check the credit shows in your Form 26AS / AIS before you mark the bill as short-paid.

How Moharbill handles it

• Tracks purchases per supplier against ₹50 lakh for the year, with a warning when a supplier passes ₹40 lakh.
• Keeps back 0.1% on the purchase bill the day the limit is crossed, or 5% when the supplier's PAN is inoperative.
• Shows the month's challan amount, and a quarterly summary your CA can file from.
• Uses sec 393 labels from FY 2026-27 and 194Q for earlier years, so old and new records both read correctly.

Frequently asked questions

Sources

Official sources read on 17 Oct 2026; sources 3 and 5 are secondary.

1. Income-tax Act 2025, section 393 (Table Sl. 8(ii), Note 1; time of deduction), Income Tax Department. incometaxindia.gov.in
2. Income Tax Department, "TDS on Purchase of Goods" (194Q: ₹10 crore buyer test, GST exclusion per Circular 13/2021, 5% under 206AA, deposit by the 7th, Form 26Q). incometaxindia.gov.in
3. Terra Insight, “TDS payment code 1031, section 393 Sl. 8(ii), purchase of goods”. Secondary source. terra-insight.com
4. Income Tax Department, "TCS Rates" (206C(1H) not applicable w.e.f. 01-04-2025). incometaxindia.gov.in
5. TaxHeal, “TDS on purchase of goods, new section 393” (Form 140). Secondary source. taxheal.com

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