TDS on Purchase of Goods Above Rs 50 Lakh: Key Compliance Requirements Under the Income-tax Act, 2025

What Is TDS on Purchase of Goods?

Under the Income-tax Act, 2025, a Tax Deducted at Source (TDS) regime applies to high-value purchases of goods. The law requires certain business buyers to deduct tax upfront from payments made to resident sellers, shifting part of the compliance burden from the seller to the buyer.

This provision targets business-to-business (B2B) transactions where aggregate purchases from a single resident seller exceed Rs 50 lakh in a financial year. It aims to improve reporting and curb tax evasion in large goods transactions.

Who Is Required to Deduct TDS?

TDS on purchase of goods is not universal. The following conditions must be met:

• Buyer Qualification: The buying entity (business, firm, company, etc.) must have turnover, sales, or gross receipts exceeding Rs 10 crore in the preceding financial year.
• Transaction Threshold: The TDS obligation arises only if the aggregate value of goods purchased from a single resident seller during the financial year crosses Rs 50 lakh.

If both conditions apply, the buyer must deduct TDS on any amount exceeding the Rs 50 lakh threshold per seller.

Table: Summary of When TDS Applies

TDS Deduction Rates and PAN Requirement

• Normal rate: 0.1% of the purchase amount exceeding Rs 50 lakh.
• If seller has no PAN: 5% TDS applies.

Example:

- If a business with Rs 20 crore turnover in FY2024-25 buys Rs 70 lakh worth of goods from a resident seller between April and October 2025, it must deduct 0.1% TDS on Rs 20 lakh (i.e., Rs 70 lakh - Rs 50 lakh = Rs 20 lakh, so Rs 2,000 TDS).

- If the seller does not furnish a PAN, deduction must be at 5% on the excess amount.

Timing of Deduction: Credit or Payment

TDS must be deducted at the earlier of:

• The date of credit to the seller's account, or
• The date of payment (including advance payments)

This means even advance payments before invoice or delivery are covered.

GST Component: Inclusion or Exclusion?

TDS should be computed on the purchase value excluding GST, provided GST is separately indicated on the invoice and TDS is deducted at the time of credit. If deducted at payment (where GST component is not known), TDS is on the gross amount paid.

E-commerce Transactions: Who Must Deduct TDS?

If an e-commerce platform is used for purchase and makes the payment to the seller, the primary liability to deduct TDS lies with the e-commerce operator (e.g., Amazon, Flipkart). The buyer need not deduct TDS if the operator has done so—unless there is a default.

Adjustments for Purchase Returns

Where goods are returned by the buyer and the seller refunds the amount, TDS deducted on the returned portion can be adjusted against future purchases from the same seller. This avoids excess TDS outflow and matches tax collected with actual trade.

Compliance Requirements and Deadlines

• Deposit of TDS: Paid to the government via Challan ITNS 281(N).

- Within 7 days from the end of the month in which TDS is deducted.

- For deductions in March: by 30th April of the following year.

• Quarterly TDS Statement: File Form 140 every quarter.
• TDS Certificate: Issue Form 131 to the seller within 15 days of the TDS statement due date.

Table: Timelines and Forms

Penalties and Interest for Non-Compliance

• Failure to deduct TDS: 1% interest per month or part thereof.
• Failure to deposit TDS: 1.5% interest per month or part thereof.
• Late filing TDS statement (Form 140): Rs 200 per day (max to TDS amount).
• Delay in issuing TDS certificate (Form 131): Rs 500 per day.
• Other possible statutory penalties and prosecution for willful default.

Key Practical Scenarios

• Multiple sellers: Rs 50 lakh threshold applies per seller per year.
• Multiple payments: TDS tracks aggregate purchases per seller—deduct once the threshold is crossed.
• Advance payments: TDS is mandatory even if the purchase has not materialised yet.
• Purchase returns: Adjustment for refunded goods permitted against subsequent bills.

Who Should Take Note?

• Businesses and corporates with turnover over Rs 10 crore (previous fiscal year).
• Accountants and finance departments responsible for vendor payments.
• Resident sellers dealing in B2B transactions.

This compliance regime requires tight tracking of cumulative purchases per seller, proper PAN collection, and timely documentation to avoid steep interest and penalty costs.

---