TDS Section 194-Q vs 194-O: the buyer-side trap most Indian SMEs missed in Q4 FY26

Section 194-Q (buyer-side TDS on purchase of goods) and Section 194-O (e-commerce operator TDS) were both introduced in Finance Act 2021. The operational overlap between them has been a chronic source of compliance error. Q4 FY26 reconciliations across our SME client base show two patterns: buyers double-deducting and buyers omitting 194-Q on direct purchases.

Section 194-Q applies to buyers whose total turnover in the preceding financial year exceeded 10 crore. On purchase of goods from a resident seller where aggregate purchase value exceeds 50 lakh in the financial year, the buyer must deduct TDS at 0.1%.

Section 194-O applies to e-commerce operators on the gross amount of sales facilitated through the platform, at 1%. CBDT Circular 13 of 2021 clarifies that Section 194-O takes precedence over 194-Q where both apply.

KAMRIT Direct Tax desk runs a 194-Q vs 194-O reconciliation as part of the year-end TDS closing engagement.