TDS on property purchase — tax deducted at source on immovable property transactions — is one of the most commonly misunderstood obligations in Indian real estate. The rule is simple: if you buy a property above ₹50 lakh, you must deduct 1% of the purchase price from your payment to the seller and deposit it with the Income Tax Department. The law is Section 194-IA of the Income Tax Act, 1961. The form is 26QB. The deadline is 30 days from the end of the month in which the transaction occurred.
Failure to comply has real consequences: interest on the TDS amount at 1.5% per month, penalty under Section 271H of up to ₹1 lakh, and in some cases prosecution under Section 276B. More practically, it creates complications during property registration and delays the seller’s ability to claim the deduction in their income tax return.
This article explains exactly how TDS on property works, who is responsible for what, and how to comply without errors — for buyers, sellers, and the brokers who advise both.
| TDS on property purchase India (Section 194-IA): 1% TDS on all immovable property above ₹50 lakh. Buyer deducts from payment to seller. Deposit via Form 26QB within 30 days of month-end. TDS certificate: Form 16B issued to seller. No TAN required — buyer’s PAN sufficient. If seller has no PAN: rate jumps to 20%. Source: Income Tax Act 1961, Section 194-IA; CBDT circulars. |
The Rule — Who, What, and When
Section 194-IA applies to every purchase of immovable property (other than agricultural land) for consideration of ₹50 lakh or more. The obligation falls on the buyer. The buyer must deduct 1% of the total purchase consideration at the time of payment — whether at booking, in construction-linked instalments, or as a lump sum at possession.
| KEY RULES OF TDS ON PROPERTY PURCHASE Who deducts → The buyer. Not the seller, not the broker, not the bank. Even if the bank disburses directly to the developer, the TDS obligation is the buyer’s. The buyer must deduct and file 26QB regardless of payment mechanism. Threshold → ₹50 lakh aggregate consideration. If you are buying two units and each costs ₹45 lakh but the total on the same agreement is ₹90 lakh, TDS applies on the full ₹90 lakh. As clarified by Finance Act amendment, TDS applies if aggregate sale consideration or the stamp duty value exceeds ₹50 lakh — whichever is higher. Rate → 1% of the total sale consideration. No surcharge or cess. On a ₹1 crore property: ₹1 lakh TDS. On ₹2.5 crore: ₹2.5 lakh TDS. If the seller does not have a PAN or furnishes incorrect PAN, the rate rises to 20% under Section 206AA. When to deduct → At the time of credit to the seller’s account or time of payment — whichever is earlier. For under-construction properties, TDS must be deducted on each instalment once the aggregate crosses ₹50 lakh. Track the running total from payment one. No TAN required → Unlike most TDS obligations, Section 194-IA does not require the buyer to obtain a Tax Deduction Account Number (TAN). The buyer’s PAN is sufficient. The obligation to file Form 26QB remains regardless. |
How to File Form 26QB — Step by Step
| Step | Action | What You Need |
|---|---|---|
| 1 | Go to incometax.gov.in → e-Pay Tax → Form 26QB | Internet banking access |
| 2 | Enter buyer’s PAN, seller’s PAN, property address, total sale consideration, TDS amount | PAN of both buyer and seller (mandatory) |
| 3 | Select payment mode — net banking or bank payment | Sufficient balance for TDS amount |
| 4 | Submit and save the acknowledgment immediately | Print or save PDF — needed for Form 16B |
| 5 | Download Form 16B from TRACES (tdscpc.gov.in) after 5 working days | TRACES login (register separately if needed) |
| 6 | Provide Form 16B to the seller within 15 days of filing 26QB | Seller needs 16B to claim TDS credit in ITR |
Source: Income Tax Department portal; TRACES portal; CBDT circular on Section 194-IA compliance.
| Deadline: 26QB must be filed and TDS deposited within 30 days from the end of the month of deduction. Payment made July 10 → deadline August 31. Payment made July 31 → still August 31. Payment made August 1 → deadline September 30. Missing this deadline triggers interest at 1.5% per month from the date TDS should have been deducted. |
The PAN Requirement — Why Getting the Seller’s PAN Right Is Critical
Both buyer and seller PAN are mandatory for Form 26QB. If the seller does not provide their PAN, or provides an incorrect PAN, the buyer’s TDS rate automatically increases to 20% under Section 206AA instead of 1%. On a ₹1 crore property, that is ₹20 lakh instead of ₹1 lakh — borne by the buyer through a higher government payment while the seller still receives only their agreed consideration minus standard TDS.
For resale: obtain a self-attested copy of the seller’s PAN card and cross-verify against title documents before any payment. For under-construction: the developer’s PAN is on the RERA project registration — cross-check the 26QB PAN against the RERA portal.
Common TDS Mistakes — And How to Avoid Them
| Mistake | Consequence | How to Avoid |
|---|---|---|
| Not deducting TDS on milestone payments for under-construction property | Interest + penalty on all missed instalments | Track aggregate from day 1; deduct on every payment once ₹50L threshold crossed |
| Wrong PAN of seller in 26QB | Mismatch in TRACES; seller cannot claim credit | Verify PAN against PAN card + RERA or title documents before filing |
| Deducting TDS on registration value instead of sale consideration | Under-deduction if circle rate > agreement value | TDS applies on the higher of sale consideration or circle rate-based valuation |
| Missing the 30-day deposit deadline | Interest 1.5%/month + Section 271H penalty up to ₹1 lakh | File 26QB on or before the last day of the month following payment month |
| Not providing Form 16B to seller | Seller cannot claim TDS credit in ITR; dispute | Download from TRACES within 5 days; hand to seller within 15 days of filing |
What Brokers Must Tell Both Buyer and Seller
TDS on property is a point of friction that most buyers discover at the registration table, not before. The broker who proactively explains TDS obligations to both parties before the transaction begins prevents a last-minute complication — and the kind of complication that can delay registration, create disputes, and reflect badly on everyone involved.
For the buyer: 1% of total consideration must be deducted before paying the seller, both PANs are mandatory, Form 26QB must be filed within 30 days of month-end, and the TDS amount goes to the government — not to anyone else. For the seller: the buyer will deduct 1% before paying the net consideration, this is a legal obligation not a negotiating point, and they will receive Form 16B from the buyer after filing — which must be used to claim TDS credit in their ITR. Read: Before You Show the Property: The Verification Checklist Every Broker Should Follow. For protecting your commission in high-value transactions: Don’t Lose Your Brokerage: The Commission Clarity Guide.
Sirf Broker POV
TDS on property is a tax compliance obligation that the Indian real estate market treats as an afterthought. It gets explained at the registration table, rushed through in the final payment, and frequently misfiled because the buyer has no PAN clarity on the seller and no understanding of the Form 26QB deadline. The consequences — interest, penalties, and seller ITR complications — follow months later when neither party remembers the transaction clearly enough to fix errors efficiently.
The broker’s role here is educational, not technical. You are not a tax advisor. But you are the person closest to both parties during the transaction. A 10-minute explanation of TDS on property — who deducts, what rate, what form, what deadline — before the first payment is made, prevents 90% of the errors we see. That conversation costs nothing. The errors it prevents cost significantly.
One practical recommendation: maintain a simple TDS checklist as part of your deal closing process — buyer PAN verified, seller PAN verified, aggregate consideration calculated, 26QB deadline calendared. Five minutes per deal. Positions you as the professional who thinks about the complete transaction, not just the commission.
Conclusion
TDS on property purchase under Section 194-IA is a 1% deduction on all immovable property transactions above ₹50 lakh in India. The buyer deducts, files Form 26QB within 30 days of month-end, and provides Form 16B to the seller within 15 days. Both PANs are mandatory — incorrect PAN triggers 20% TDS instead of 1%. Brokers who explain TDS obligations to both parties before the first payment eliminate the most common transaction-stage friction in high-value Indian property deals.
Frequently Asked Questions
1. What is TDS on property purchase and who pays it in India?
Under Section 194-IA of the Income Tax Act, the buyer of any immovable property (other than agricultural land) above ₹50 lakh must deduct 1% of the sale consideration from payment to the seller and deposit it with the Income Tax Department. The obligation is on the buyer — not the seller, broker, or bank.
2. What is Form 26QB and how do I file it?
Form 26QB is the online challan-cum-statement for TDS under Section 194-IA, filed at incometax.gov.in. You need PAN of both buyer and seller, property address, total consideration, and TDS amount. Payment is via net banking. After filing, download Form 16B from TRACES (within 5 working days) and provide to the seller.
3. What is the deadline for filing Form 26QB?
Within 30 days from the end of the month of deduction. July payment → August 31 deadline. August payment → September 30 deadline. Missing this attracts interest at 1.5%/month plus penalty of up to ₹1 lakh under Section 271H.
4. Does TDS apply to under-construction properties too?
Yes. TDS applies to each payment once aggregate consideration crosses ₹50 lakh. Buyers making milestone payments must track the running total and deduct TDS on every payment after the threshold is crossed. A separate Form 26QB must be filed for each payment on which TDS is deducted.
5. What happens if the seller does not provide their PAN?
TDS rate increases from 1% to 20% under Section 206AA. On a ₹1 crore property: ₹20 lakh TDS instead of ₹1 lakh. Always obtain and verify the seller’s PAN before any payment.
6. What is Form 16B and why does the seller need it?
Form 16B is the TDS certificate the buyer provides to the seller after depositing TDS. The seller uses it to claim TDS credit in their ITR — proving the tax was already deducted on their property sale income. Buyers must provide Form 16B within 15 days of filing Form 26QB.
Sources and References
- Income Tax Act, 1961 — Section 194-IA — incometaxindia.gov.in
- CBDT — Circular on Section 194-IA — cbdt.gov.in
- Income Tax Department — incometax.gov.in — Form 26QB filing portal
- TRACES — Form 16B download. tdscpc.gov.in
Disclaimer
| This article is published by Sirf Broker for educational and informational purposes only. Tax laws and rates are subject to change. Consult a qualified Chartered Accountant for advice specific to your transaction. This is not legal or tax advice. |