TDS on Property Purchase

The rule that surprises property buyers

Here is what catches thousands of homebuyers off guard: when you buy immovable property (other than agricultural land) for ₹50 lakh or more, you the buyer are legally responsible for deducting 1% TDS from the payment to the seller and depositing it with the government under Section 194-IA. It is not the seller's job, and not the registrar's, it is yours.

Miss it and the liability, interest, and penalty fall on you, not the seller. This is one of the most commonly missed compliances in Indian real estate, precisely because buyers assume TDS is something only businesses deal with.

How the 1% TDS works

• The threshold is ₹50 lakh. At or above it, TDS applies on the entire consideration, not just the amount above ₹50 lakh.
• The rate is 1% of the sale consideration (or stamp-duty value, if higher).
• You deduct it at the time of payment, including on each instalment if you pay the seller in stages.
• If the seller does not provide a PAN, TDS is deducted at the much higher rate of 20%.
• For multiple buyers or sellers, each buyer-seller combination files separately.

Filing Form 26QB and issuing Form 16B

The TDS is deposited using Form 26QB, a combined challan-cum-statement, filed online:

1. Within 30 days from the end of the month in which you deducted (i.e., made the payment), file Form 26QB on the income tax e-filing portal or Protean (NSDL) TIN, entering both parties' PAN, property details, and the amount.
2. Pay the 1% TDS through the same form.
3. Download Form 16B (the TDS certificate) from TRACES and give it to the seller as proof you deposited their TDS.

Note that for 26QB, no TAN is required, you use your PAN, which keeps it accessible for individual buyers. But the deadlines are strict and per-instalment.

A worked example

Arjun buys a flat for ₹80,00,000, paying the builder in three instalments. On each instalment he deducts 1% and pays the builder the remaining 99%: on a ₹30,00,000 instalment he deducts ₹30,000, pays ₹29,70,000, and files a Form 26QB for that payment within 30 days of month-end. Across the three payments he files three 26QBs, deducting ₹80,000 in total, and issues Form 16B for each.

Had Arjun paid the full ₹80 lakh without deducting, he would owe the ₹80,000 himself, plus interest for late deduction and a late-filing fee, a costly oversight on an already large purchase.

Penalties, and getting it right

The consequences of missing 26QB compliance:

• Interest at 1% per month for late deduction, or 1.5% per month for deducting but depositing late.
• Late-filing fee under Section 234E of ₹200 per day until the 26QB is filed, capped at the TDS amount.
• Penalty under Section 271H for non-filing, over and above the fee.

For NRIs selling property, note that a completely different and higher TDS regime applies under Section 195, not 194-IA, so read our guide on TDS when an NRI sells property if your seller is a non-resident. For resident purchases, our TDS compliance service files 26QB correctly and on time. book a free consultation before you make a large property payment.

A property-buyer's TDS checklist

Before and during a property purchase of ₹50 lakh or more, work through this:

• Confirm the seller's residency. Resident → 1% under 194-IA and Form 26QB; NRI → Section 195 and a very different process.
• Collect the seller's PAN, without it, TDS jumps to 20%.
• Deduct 1% on each payment, including every instalment.
• File Form 26QB on the income tax e-filing portal within 30 days of the month-end of each payment.
• Download Form 16B from TRACES and hand it to the seller.

Because the buyer carries the liability, a missed deduction on a large purchase becomes the buyer's problem, with interest and fees on top. Building the TDS step into your payment schedule, deduct, deposit, file, certify, keeps a routine compliance from turning into an expensive oversight.