Section 393(1)(k) vs Section 394 Threshold Determiner — Who Deducts on Purchase Above ₹50 Lakh?
Under the Income Tax Act 2025, Section 393(1)(k) (replacing 194Q) requires the buyer to deduct 0.1% TDS on purchases above ₹50 lakh per supplier per FY. Section 394 (replacing 206C(1H)) requires the seller to collect 0.1% TCS. When both thresholds cross simultaneously, Section 393(1)(k) takes precedence.
Transaction profile
Buyer's aggregate turnover, gross receipts or sales in the immediately preceding financial year.
Seller's aggregate turnover in the immediately preceding financial year.
Aggregate purchase from this single seller PAN year-to-date in the current financial year.
Net-of-GST invoice value of the transaction being assessed.
Move the sliders to see which section applies.
For deductions before 1 April 2026: use legacy Section 194Q / 206C(1H) codes. From 1 April 2026 onwards: use Section 393(1)(k) / Section 394 with payment codes 1012 / 1073.
Methodology and assumptions
Section 393(1)(k) threshold (buyer-side)
Two-leg test: buyer turnover in immediately preceding FY above ₹10 crore, AND aggregate purchase from a single resident seller PAN above ₹50 lakh in the current FY. Both must be satisfied for the 0.1% TDS to apply, on every invoice from the threshold-crossing invoice onwards.
Section 394 threshold (seller-side)
Mirror two-leg test: seller turnover in immediately preceding FY above ₹10 crore, AND aggregate sale to a single buyer above ₹50 lakh in the current FY. Both must be satisfied for the 0.1% TCS to apply.
Precedence rule
When both Section 393(1)(k) and Section 394 would otherwise apply, the buyer-side TDS prevails. Section 393(1)(k) applies; Section 394 does not. Operationalised through a mutual declaration exchange at the start of the financial year.
Cross-era handling
FY 2025-26 transactions retain legacy 194Q / 206C(1H) tags. FY 2026-27 onwards uses payment codes 1012 / 1073 against Sections 393(1)(k) / 394. Correction challans for legacy years stay under the legacy section number.
This determiner is an estimator. For the regulatory framework, refer to the Income Tax Department portal for Section 393 payment-code notifications, Form 168 (buyer view), and TRACES correction challan paths.
Related guides
TDS Reconciliation Software
26AS, AIS, Form 168 reconciliation against TDS receivable and TDS deducted.
Payment Code 1012 — Section 393(1)(k)
Operating the buyer-side purchase TDS regime under the Income Tax Act 2025.
393(1)(k) for Manufacturing
Section 394 overlap, precedence rule, cross-era reconciliation against legacy 194Q.
Frequently Asked Questions
What is Section 393(1)(k) of the Income Tax Act 2025? +
Section 393(1)(k) of the Income Tax Act 2025 is the consolidated provision for TDS on purchase of goods. It requires a buyer whose aggregate turnover, gross receipts or sales in the immediately preceding financial year exceed ₹10 crore to deduct 0.1% TDS on purchases from any resident seller where the aggregate purchase value in the financial year crosses ₹50 lakh. The payment code is 1012, the deduction applies on every invoice from the threshold-crossing invoice onwards, and the deposit is due by the 7th of the following month.
What was Section 194Q and how does it relate? +
Section 194Q of the Income Tax Act 1961 was the legacy purchase TDS provision, identical in substance to Section 393(1)(k). The Income Tax Act 2025 replaces 194Q from 1 April 2026; the mechanics carry over largely unchanged. Cross-era reconciliation matters because deductions made under FY 2025-26 continue to carry the legacy 194Q section tag on the TDS challan and TDS return, while deductions from 1 April 2026 must use payment code 1012 against Section 393(1)(k). Correction challans for FY 2025-26 raised after April 2026 still go under 194Q.
When does Section 394 apply instead? +
Section 394 of the Income Tax Act 2025 is the seller-side TCS on sale of goods (payment code 1073), replacing legacy Section 206C(1H). It requires a seller whose prior-year turnover exceeds ₹10 crore to collect 0.1% TCS on sale-of-goods receipts from a buyer where aggregate sale value to that buyer crosses ₹50 lakh in the financial year. Where the buyer is below ₹10 crore turnover (so Section 393(1)(k) does not apply) but the seller is above ₹10 crore, Section 394 applies and the seller collects TCS.
What is the precedence rule when both apply? +
When the buyer is required to deduct under Section 393(1)(k) and the seller would also be required to collect under Section 394 on the same transaction, the law gives precedence to the buyer-side TDS. Section 393(1)(k) applies; Section 394 does not. The buyer deducts 0.1% TDS under payment code 1012; the seller does not collect TCS under payment code 1073. The operational instrument is a mutual declaration exchange at the start of each financial year — buyer confirms to seller that 393(1)(k) applies, and the seller documents the precedence in their records and stops the 394 collection on that counterparty.
What changed from April 1, 2026? +
From 1 April 2026, all new deductions on purchase of goods must carry payment code 1012 against Section 393(1)(k), and all new collections on sale of goods must carry payment code 1073 against Section 394. The legacy 194Q and 206C(1H) section numbers remain operative only for cross-era reconciliation of FY 2025-26 transactions and correction challans for those historical entries. Form 168 (buyer view), Form 26AS and AIS (seller view) carry the new payment codes from FY 2026-27 onwards. Section 17(5) GST blocked credits, Rule 43 capital goods amortisation, and Section 9(5) GST law are unchanged.
Operate Section 393(1)(k) and Section 394 at vendor-PAN scale
TransactIG runs the YTD purchase tracker per vendor PAN, flags threshold crossings invoice-by-invoice, reconciles against Form 168 monthly, and handles the cross-era 194Q overlap. Implementation 2–4 weeks, ISO 27001:2022, AWS Mumbai.