TDS on property purchase: the 1% rule under Section 194-IA

If you buy property worth ₹50 lakh or more from a resident seller, you must deduct 1% TDS. Here's how to do it correctly.

When you buy immovable property (other than agricultural land) from a resident seller for ₹50 lakh or more, you must deduct 1% TDS under Section 194-IA of the Income-tax Act.

Key points

• Who deducts: the buyer
• Rate: 1% (higher if the seller has no valid PAN)
• On what amount: the higher of the sale consideration and the stamp-duty value
• When: at the time of payment (each instalment)
• Return: file Form 26QB and deposit the TDS within 30 days from the end of the month of deduction
• Certificate: give the seller Form 16B

You don't need a TAN for this.

Example

On a ₹7 Cr purchase, you deduct ₹7 lakh and pay the seller ₹6.93 Cr. The ₹7 lakh is deposited with the tax department through Form 26QB.

Buying from an NRI

If the seller is a non-resident, Section 194-IA doesn't apply — Section 195 does, with higher rates on the capital gains. You'll need a TAN. Take a CA's help.

Not a cost

TDS is not an extra cost — it is part of the price, paid to the government on the seller's behalf.

Step-by-step: filing Form 26QB

1. Log in to the income-tax e-filing portal.
2. Select Form 26QB under e-pay tax.
3. Enter the PAN of buyer and seller, the property details, the total value and this instalment.
4. Pay the TDS online.
5. After processing, download Form 16B from TRACES and give it to the seller.

Multiple buyers or sellers

Each buyer files for their share against each seller's share. The ₹50 lakh threshold applies to the total consideration.

Common mistakes

• Wrong PAN for the seller
• Missing the 30-day deadline, which attracts interest and late fees
• Deducting only on the agreement value when the stamp-duty value is higher

Frequently asked questions

Does TDS apply to the token? Yes. TDS applies to each payment, including the token, if the total consideration is ₹50 lakh or more.

What if the seller hasn't linked PAN with Aadhaar? Higher TDS rates can apply. Check the seller's PAN status before paying.

General information only; confirm your case with a chartered accountant.