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The 2-Minute Summary
Section 393(1) Sl. No. 8(ii) requires TDS deduction on purchases of goods exceeding Rs. 50 lakh from a single seller in a Tax Year. The rate is 0.1% on the amount exceeding Rs. 50 lakh.
Not every buyer must deduct this TDS. Section 393(12) Table Sl. No. 1 defines the eligible buyer as a person whose total sales, gross receipts, or turnover from business exceeded Rs. 10 crore during the Tax Year immediately preceding the current Tax Year.
If TDS or TCS already applies to the same transaction under any other provision of the Act, Sl. 8(ii) does not apply additionally.
Example: Wholesale Traders Ltd had a turnover of Rs. 18 crore in Tax Year 2025-26. In Tax Year 2026-27, it purchases Rs. 80 lakh of goods from Supplier A. TDS = 0.1% on Rs. 30 lakh (the amount above Rs. 50 lakh) = Rs. 3,000.
Under Income Tax Act 1961: Section 194Q of the Income Tax Act 1961. Now Section 393(1) Sl. No. 8(ii) of the Income Tax Act 2025.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 8(ii) of Income Tax Act 2025 |
| Old Act Reference | Section 194Q of Income Tax Act 1961 |
| Who Deducts | A buyer as defined in Section 393(12) Table Sl. No. 1 (turnover above Rs. 10 crore in preceding Tax Year) |
| Rate | 0.1% of sum exceeding Rs. 50 lakh |
| Threshold | Rs. 50 lakh from a single seller in the Tax Year (Note 1(b): TDS on the sum exceeding Rs. 50 lakh) |
| Override condition | Note 1(a): does not apply if TDS or TCS already applies to the same transaction under any other provision |
| TAN Required | Yes |
| Form | Form 26Q (quarterly TDS return) |
| TDS Certificate | Form 16A |
Who Qualifies as a Buyer: Section 393(12)
Section 393(12) Table Sl. No. 1 defines the buyer for Sl. 8(ii) as: a person whose total sales, gross receipts, or turnover from the business carried on by that person exceed ten crore rupees during the Tax Year immediately preceding the Tax Year in which the purchase of goods is carried out.
For Tax Year 2026-27, the preceding Tax Year is 2025-26. If your total sales or turnover in 2025-26 exceeded Rs. 10 crore, you must deduct TDS on goods purchases from each seller above Rs. 50 lakh in 2026-27.
If your turnover was below Rs. 10 crore, Sl. 8(ii) does not apply to you even if your individual purchases are large.
Note 1(b): TDS on Excess Only
Note 1(b) to Sl. 8(ii) states clearly: the tax shall be deducted on the sum exceeding fifty lakh rupees. This means TDS is not on the full purchase value. It is only on the amount by which the purchases from a single seller exceed Rs. 50 lakh in the Tax Year.
Example: A company buys Rs. 40 lakh from Supplier A in Q1 and Rs. 15 lakh in Q2. Total = Rs. 55 lakh. TDS applies only on Rs. 5 lakh (the amount above Rs. 50 lakh) at that point. From Q3 onwards, TDS of 0.1% applies on every rupee of purchase from Supplier A.
Note 1(a): No Double TDS/TCS
Note 1(a) to Sl. 8(ii) states: the deduction of tax under Sl. 8(ii) shall not apply to a transaction on which tax is deductible or collectible under any of the provisions of the Act.
This means: if the seller is already collecting TCS under Section 394 on the same goods sale, the buyer does not additionally deduct TDS under Sl. 8(ii). Similarly, if TDS applies under any other provision to the same transaction, Sl. 8(ii) does not apply.
Goods, Not Services
Sl. 8(ii) applies only to purchase of goods. It does not apply to services. Payments for services are covered under Sl. 6(i) (contract work), Sl. 6(iii) (professional/technical fees), or other applicable provisions.
If a single invoice covers both goods and services, Sl. 8(ii) applies to the goods portion. The services portion may separately attract TDS under the applicable provision.
Practical Compliance Checklist
- At the start of each Tax Year: check whether your previous year’s turnover exceeded Rs. 10 crore. If yes, maintain a seller-wise purchase tracker and apply TDS under Sl. 8(ii) when any seller’s total exceeds Rs. 50 lakh.
- Check whether the seller is already collecting TCS on the same goods. If yes, no TDS under Sl. 8(ii) is required.
- Apply TDS on the amount exceeding Rs. 50 lakh only, not on the full purchase value.
- File quarterly TDS returns in Form 26Q and issue Form 16A to sellers on whom TDS was deducted.
Sl. 8(ii) at 0.1% is primarily a reporting and tracking mechanism rather than a significant revenue tool. On Rs. 1 crore of purchases from a single vendor, the TDS is only Rs. 500 (on Rs. 50 lakh excess). The real purpose is to create a database of large business-to-business transactions for cross-verification with ITR disclosures.
