Purchase-of-Goods Withholding (Section 393(1) Sl. 8(ii) / Code 1031) Threshold Determiner

Section 393(1) Sl. 8(ii) of the Income-tax Act 2025 is the consolidated buyer-side TDS provision on purchase of goods, carrying forward the substance of legacy Section 194Q of the Income-tax Act 1961. 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 once the aggregate purchase value from that seller crosses ₹50 lakh in the financial year. The payment code is 1031, the deduction applies on every invoice from the threshold-crossing invoice onwards, and the deposit is due by the 7th of the following month.

Section 206C(1H) of the Income-tax Act 1961 (seller-side 0.1% TCS on sale of goods above ₹50 lakh) has been functionally inapplicable from 1 April 2025 under the Finance Act 2025 proviso. Under the Income-tax Act 2025 there is no successor TCS code for sale of goods in the new payment-code range 1001-1092 — Section 393(1) Sl. 8(ii) / code 1031 (buyer-side TDS) remains the operative provision for purchase-of-goods withholding. Sellers should stop collecting TCS under 206C(1H) and instead expect the buyer to deduct TDS under code 1031 where the buyer is above ₹10 crore turnover.

Section 194Q of the Income-tax Act 1961 was the legacy purchase TDS provision (0.1% buyer-side TDS on purchases above ₹50 lakh per supplier where buyer turnover exceeds ₹10 crore). The Income-tax Act 2025 replaces 194Q with Section 393(1) Sl. 8(ii), payment code 1031, and the mechanics carry over largely unchanged. Cross-era reconciliation matters because deductions made in 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 1031 against Section 393(1) Sl. 8(ii). Correction challans for FY 2025-26 raised after April 2026 still go under 194Q.

The 0.1% TDS under Section 393(1) Sl. 8(ii) is calculated on the purchase value in excess of ₹50 lakh in the financial year, but operationally is deducted on every invoice from the threshold-crossing invoice onwards. The standard practice is: invoices accumulated before crossing ₹50 lakh — no TDS; invoice that takes year-to-date over ₹50 lakh — TDS on the excess portion only on that invoice; every subsequent invoice in the same FY from the same supplier — TDS on the full invoice value at 0.1%. The buyer must therefore track aggregate purchase per supplier PAN year-to-date, not just per-invoice value.

From 1 April 2026, all new deductions on purchase of goods must carry payment code 1031 against Section 393(1) Sl. 8(ii). The legacy 194Q section number remains operative only for cross-era reconciliation of FY 2025-26 transactions and correction challans for those historical entries. Form 168 (buyer view) and Form 26AS / AIS (seller view) carry the new payment code from FY 2026-27 onwards. Section 206C(1H) collections, which were already inapplicable from 1 April 2025, have no successor code under the new regime — only the buyer-side code 1031 applies.