TDS on Property Purchase Under Section 194-IA: A Buyer's Complete Guide
Buying property worth ₹50 lakh or more? You must deduct 1% TDS, file Form 26QB within 30 days of month-end and issue Form 16B. Here is the full process, the traps and the penalties.
TDS on Property Purchase Under Section 194-IA
If you buy immovable property (other than agricultural land) from a resident seller for ₹50 lakh or more, you, the buyer, must deduct 1% TDS from the payment and deposit it with the government using Form 26QB. You do not need a TAN. The deposit is due within 30 days from the end of the month in which you paid, and you must give the seller Form 16B afterwards. Missing any step creates interest, a late fee and, in some cases, a penalty that falls on the buyer, not the seller.
Who has to deduct TDS under Section 194-IA?
Every buyer of land (non-agricultural) or a building, or part of a building, from a resident seller, where the consideration is ₹50 lakh or more.
- It applies to individuals, HUFs and companies alike. Salaried buyers are not exempt.
- It covers flats bought from builders, resale homes and plots.
- If the seller is an NRI, Section 194-IA does not apply. TDS is instead deducted under Section 195 at much higher rates, and the buyer needs a TAN. This is the most common mistake we fix.
How is the ₹50 lakh threshold calculated?
The test is on the total consideration for the property, not each buyer's share. The Finance (No. 2) Act, 2024 clarified this from 1 October 2024: if two spouses buy a ₹70 lakh flat jointly, each paying ₹35 lakh, TDS still applies because the property value crosses ₹50 lakh.
From 1 April 2022, TDS is calculated on the higher of the agreement value or the stamp duty value. If the sub-registrar's guidance value is ₹82 lakh and your agreement says ₹78 lakh, TDS is 1% of ₹82 lakh.
"Consideration" includes car parking, club membership, maintenance deposits and other charges that are part of the sale price.
What rate applies?
| Situation | TDS rate | Form |
|---|---|---|
| Resident seller with valid, operative PAN | 1% | 26QB |
| Resident seller without PAN, or PAN inoperative (not linked to Aadhaar) | 20% (Sec. 206AA) | 26QB |
| NRI seller | Rates under Sec. 195 plus surcharge and cess | 27Q, TAN required |
Always check that the seller's PAN is linked to Aadhaar before you pay. An inoperative PAN turns a ₹82,000 deduction into ₹16.4 lakh.
Step-by-step: how to pay TDS on property
- Collect details: PAN of every seller and buyer, property address, agreement date, total value, and the date and amount of each payment.
- File Form 26QB on the income tax e-filing portal (e-Pay Tax, then "26QB"). One form per buyer-seller pair. Two buyers and two sellers means four forms.
- Pay by net banking or through a bank counter. Save the challan.
- Download Form 16B from TRACES after the payment reflects (usually a few days) and give it to the seller within 15 days of the Form 26QB due date.
For instalment payments to a builder, deduct 1% from each instalment as it is paid, and file a 26QB for each one.
What happens if you miss the deadline?
The buyer carries the liability. Here is the ready reckoner:
| Default | Consequence | Provision |
|---|---|---|
| TDS not deducted | Interest 1% per month or part month | Sec. 201(1A) |
| Deducted but deposited late | Interest 1.5% per month or part month | Sec. 201(1A) |
| Form 26QB filed late | ₹200 per day, capped at the TDS amount | Sec. 234E |
| Statement not filed beyond one year | Penalty ₹10,000 to ₹1,00,000 | Sec. 271H |
| TDS not deducted at all | Buyer treated as "assessee in default" for the tax amount | Sec. 201(1) |
Worked example
Ravi buys a Whitefield flat for ₹90 lakh (stamp duty value ₹92 lakh) and pays in full on 10 January. TDS due: ₹92,000, deposit due by 28 February (30 days from end of January).
He files on 20 May:
- Interest for late deposit: 1.5% × 5 months (Jan to May, part months count) × ₹92,000 = ₹6,900
- Late fee: 81 days × ₹200 = ₹16,200 (below the ₹92,000 cap)
- Total avoidable cost: ₹23,100, plus a notice from the TDS centre.
Common mistakes we fix
- Deducting 1% for an NRI seller. The buyer then faces a Section 195 shortfall demand.
- Filing one 26QB for joint sellers instead of one per seller.
- Calculating TDS on the agreement value when the guidance value is higher.
- Entering the wrong assessment year or payment date, which blocks Form 16B. Corrections go through TRACES, and the seller cannot claim credit until they are done.
How SP & SC helps
We check the seller's PAN status, calculate TDS on the correct value, file every Form 26QB, download Form 16B and fix mismatches on TRACES. If a default notice has already arrived, we calculate the exact interest, file the correction and reply to the notice. See our TDS return filing service, or ask for a fixed-fee quote. For NRI sellers we handle the TAN application and the Section 195 compliance end to end.
Frequently asked questions
Is TDS required if the property is below ₹50 lakh?
No. If both the total consideration and the stamp duty value are below ₹50 lakh, Section 194-IA does not apply.
Do I need a TAN to deduct TDS on property?
No, if the seller is a resident. Form 26QB uses your PAN. You need a TAN only when buying from an NRI.
Does TDS apply to agricultural land?
No. Agricultural land, as defined in Section 2(14), is excluded from Section 194-IA.
Is TDS deducted on the home loan amount too?
Yes. TDS is on the total consideration, whether paid from your savings or disbursed by your bank. Many banks ask for the 26QB challan before disbursing.
Can the seller claim the TDS back?
Yes. The seller claims credit for the 1% in their income tax return. It reflects in their Form 26AS and AIS once your 26QB is processed.
Written by
SP & SC Editorial
Editorial team at SP & SC Legal and Taxation Services — practising advocates, chartered accountants, and company secretaries publishing hands-on guidance from live client files.
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