A Step-by-Step Guide to TDS Deduction on Property Purchases

If you're buying a property worth ₹50 lakh or more in India, you — the buyer — must deduct 1% TDS under Section 194-IA and deposit it using Form 26QB within 30 days. No TAN is needed, only PAN. The rate rises to 20% if the seller has no PAN, and NRI sellers fall under a separate provision, Section 195, instead. This guide covers the process, forms, deadlines, penalties and refunds for buyers in Bengaluru, Chennai and Hyderabad.

Buying a property is one of the biggest financial decisions you'll make, and getting your tax obligations right matters just as much as picking the right home. One responsibility every property buyer in India must know about is TDS on property purchases.

Tax Deducted at Source (TDS) is how the government collects tax at the point of a high-value transaction, instead of waiting for the seller to declare it later. This keeps property deals transparent and helps prevent tax evasion.

Under Section 194-IA of the Income Tax Act, if you buy an immovable property (other than agricultural land) worth ₹50 lakh or more, you must deduct 1% TDS from the payment and deposit it with the Income Tax Department — no TAN required, just your PAN and the seller's PAN. This applies to residential and commercial properties alike.

Missing a TDS deadline can mean interest and penalties, so it helps to know the exact process upfront. Here's everything you need, step by step.

What is TDS on Property Purchase?

TDS on property purchase is a tax deduction mechanism that ensures the government receives its share of tax at the time of a high-value property transaction, instead of relying on the seller to pay it later. It applies once the transaction value crosses ₹50 lakh, and the buyer — not the seller — carries the responsibility of deducting and depositing it.

Properties Covered and Excluded Under Section 194-IA

Not every property sale attracts TDS. Here's what falls in and out of Section 194-IA:

Covered:

• Residential flats and apartments — new, resale or under-construction
• Independent houses and villas
• Commercial units and office spaces
• Non-agricultural plots and land

Excluded:

• Agricultural land, as defined under the Income Tax Act
• Any property where the total consideration is below ₹50 lakh

Whether you're buying a new-launch apartment or a resale flat, the same TDS rule applies once the value crosses the threshold.

Purpose of TDS on Real Estate Transactions

TDS ensures that a portion of the transaction amount is withheld and deposited with the government before the full payment is made to the seller.

• TDS aims to prevent tax evasion and ensure that real estate transactions are transparent.
• It is the buyer's responsibility to deduct and deposit the TDS, not the seller's.
• The seller can claim credit for the TDS deducted while filing their income tax returns.

When is TDS Applicable?

• TDS on property purchase is applicable when the property's total sale value is ₹50 lakh or more.
• This rule applies to both residential and commercial properties, excluding agricultural land.
• The ₹50 lakh threshold is based on the total agreed sale value, not each individual instalment — so even if you're paying in parts, TDS applies to every payment once the total deal value crosses ₹50 lakh.
• It applies equally to new, resale and under-construction properties.

Who Pays TDS – Buyer or Seller?

• The buyer, not the seller, is responsible for deducting and depositing TDS on the property purchase.
• The buyer must deduct 1% of the sale consideration before paying the seller.
• The buyer must ensure TDS is deposited on time and that Form 16B is issued to the seller as proof of deduction.

TDS Rate on Property Purchase

• The standard TDS rate is 1% of the sale consideration or the property's stamp duty value, whichever is higher.
• No TAN (Tax Deduction Account Number) is required — the PAN of both buyer and seller is enough to file Form 26QB.
• If the seller does not provide a valid PAN, the TDS rate increases to 20%.
• If multiple buyers are involved, each buyer deducts TDS proportionately, based on their share of ownership.
• If the seller is an NRI, TDS is governed by Section 195 instead, at rates that can go up to 20–30% depending on capital gains.

Do you need a TAN to pay TDS on property?

No. Unlike most other TDS payments, Section 194-IA does not require a TAN. Your PAN and the seller's PAN are enough to file Form 26QB.

How to Calculate TDS on Property Transactions

How much TDS you owe depends on the property value, the seller's residency status, and whether you're paying in one go or in instalments.

Example: Suppose you purchase a property worth ₹75 lakh.

• TDS payable = 1% of ₹75 lakh = ₹75,000
• Amount paid to the seller = ₹74,25,000
• The ₹75,000 is deposited with the government using Form 26QB

Suggested Read – Pros & Cons of Buying vs Renting a Property

TDS on an Under-Construction Property Paid in Instalments

If you're buying an under-construction flat and paying the builder in instalments — booking amount, milestone payments, final payment — TDS applies to every instalment, not just the last one, as long as the total agreed value is ₹50 lakh or more.

Example: For a ₹90 lakh under-construction flat paid in 3 instalments of ₹30 lakh each, you deduct 1% (₹30,000) from every instalment — a total of ₹90,000 across the three payments, filed as three separate Form 26QB submissions.

TDS When There Are Multiple Buyers or Sellers

In joint purchases, each buyer deducts and deposits TDS on their own share of the payment and files a separate Form 26QB for their portion. For example, on a ₹1 crore flat bought equally by two buyers, each buyer deducts 1% on their ₹50 lakh share (₹50,000 each) and files their own Form 26QB — not one combined filing.

TDS When the Seller is an NRI

If you're buying from an NRI seller, Section 194-IA doesn't apply — Section 195 does instead. TDS is deducted at capital gains rates that can range up to 20–30% depending on how long the seller has held the property, plus surcharge and cess, and it requires a TAN and Form 27Q rather than Form 26QB. Buyers can now remit this TDS using just the seller's PAN, which has simplified the paperwork — see our guide on why NRIs should invest in Indian real estate for more. If you're an NRI yourself buying a home in India, Brigade's NRI Corner has dedicated guidance on financing, documentation and repatriation.

Step-by-Step Process to Deduct and Pay TDS on Property Purchase

Step 1: Verify if TDS applies

• Check if the property's total sale value exceeds ₹50 lakh.
• Confirm the seller's residential status (resident or NRI).
• Collect the seller's PAN — without it, TDS jumps to 20%.

Step 2: Deduct 1% TDS at every payment

• Deduct 1% from each payment before transferring the balance to the seller.
• For instalment payments, deduct proportionately from each instalment.

Step 3: Deposit TDS using Form 26QB

• File Form 26QB online via the Income Tax e-filing portal or TIN-NSDL.
• Enter buyer, seller and property details along with the TDS amount, and pay via net banking, debit card or an authorised bank branch.
• Save the acknowledgement number and download the challan receipt.

Step 4: Download and issue Form 16B to the seller

• Register on the TRACES portal and download Form 16B, usually available 10–15 days after the TDS deposit.
• Hand it to the seller as proof of deduction — they'll need it to claim credit in their ITR.

Step 5: File within the deadline

• Form 26QB must be filed within 30 days from the end of the month in which TDS was deducted.
• Keep copies of every challan and Form 16B for your records.

Form 26QB vs Form 16B: Quick Reference

Consequences of Non-Compliance

Interest and Penalty for Late Payment

• 1% per month for failing to deduct TDS.
• 1.5% per month for failing to deposit TDS after deduction, calculated from the due date until the actual payment date.
• A late fee of ₹200 per day applies for delayed filing of Form 26QB under Section 234E.
• The department can also levy a penalty of ₹10,000 to ₹1,00,000 under Section 271H for not filing Form 26QB at all.
• Continued non-compliance under Section 201 can also attract prosecution.

How to Correct Mistakes or Claim a TDS Refund

• If you deducted the wrong amount or entered incorrect details in Form 26QB, you can file an online correction request through the TRACES portal.
• If excess TDS was deducted from the sale amount, the seller claims it back — not the buyer — by reporting the TDS shown in their Form 26AS/AIS as tax already paid when filing their income tax return (ITR). The excess is refunded automatically.
• If the buyer accidentally deposited more TDS than required, the buyer can request a refund of the extra amount using Form 26B on the TRACES portal.

Common Mistakes to Avoid

• Not deducting TDS on time — always deduct before transferring funds to the seller.
• Calculating TDS on the loan amount instead of the full sale consideration (or stamp duty value, if higher).
• Missing the 30-day deposit deadline, which attracts 1.5% monthly interest plus a daily late fee.
• Forgetting to issue Form 16B to the seller after depositing TDS.
• Entering the seller's PAN incorrectly, which pushes the deduction rate up to 20%.
• Not filing TDS returns at all, which invites penalties under Section 271H.

Conclusion

TDS on property purchase comes down to three things: deduct 1% (or the correct rate for your case), deposit it within 30 days using Form 26QB, and issue Form 16B to the seller. Get these right, and the rest of your property registration goes through without any tax-related hold-ups.

Once your TDS and tax compliance is sorted, you can explore Brigade's RERA-registered residential projects in Bengaluru, Chennai and Hyderabad — or read our step-by-step guide to the property transfer and registration process in India for what comes after TDS.

FAQ's

1. What is the TDS limit for property purchase?

The TDS limit for property purchase is ₹50 lakh. If the sale consideration (or stamp duty value, if higher) crosses this amount, the buyer must deduct 1% as TDS. No TDS applies to properties below ₹50 lakh or to agricultural land.

2. How to pay TDS on property purchase?

Log in to the Income Tax e-filing portal, fill out Form 26QB with the buyer, seller and property details, and pay the 1% TDS online — no TAN needed, just PAN. Download the payment acknowledgement, and later issue the seller Form 16B as proof. Complete the whole process within 30 days of deduction.

3. Is TDS refundable on purchase of property?

Yes, but the seller claims it, not the buyer — by reporting the TDS shown in their Form 26AS/AIS as tax already paid while filing their ITR; any excess is refunded automatically. If the buyer mistakenly deposited more TDS than required, the buyer can separately request a refund via Form 26B on the TRACES portal.

4. Who can claim TDS on sale of property?

The seller can claim credit for the TDS deducted on their sale. The buyer's job is only to deduct and deposit the 1% TDS (if the property value is above ₹50 lakh) and share Form 16B with the seller.

5. Can TDS be paid after property registration?

TDS should ideally be deducted and deposited before or at the time of each payment to the seller, not after registration. Many sub-registrar offices now ask for the Form 26QB acknowledgement at the time of registration itself, so paying TDS after registration can delay the process and may attract interest for late deduction. Read our guide on the property registration process in India for the full sequence of steps.

6. Do you need a TAN to pay TDS on property purchase?

No. Section 194-IA is one of the few TDS provisions that doesn't require a TAN. The PAN of both the buyer and the seller is enough to file Form 26QB and complete the payment.

7. How is TDS calculated on an under-construction property paid in instalments?

TDS is deducted on every instalment you pay, not only on the final payment, as long as the total agreed value of the property is ₹50 lakh or more. For example, on a ₹90 lakh flat paid in three ₹30 lakh instalments, you deduct 1% (₹30,000) from each instalment and file a separate Form 26QB each time.

8. Can I file TDS on property purchase myself, without a CA?

Yes. Filing Form 26QB is a self-service process on the Income Tax e-filing portal — you don't need a Chartered Accountant or a TAN to do it. Most buyers complete it in under 30 minutes with the PAN details, property details and payment information at hand. A CA is only useful if your case involves an NRI seller, multiple sellers with a complex ownership split, or a TDS correction.