How does TDS on a property purchase work?
Reviewed by Ranga & Company
TDS on property purchase: When you buy property worth ₹50 lakh or more from a resident seller, you must deduct 1% TDS under section 194-IA from the payment and deposit it with Form 26QB.
At a glance
- Section
- 194-IA of the 1961 Act
- Rate
- 1% of the higher of sale price and stamp duty value
- Threshold
- Consideration or stamp value of ₹50 lakh or more
- Who deducts
- The buyer (no TAN needed; uses PAN)
- Pay with
- Form 26QB within 30 days from the end of the month of deduction
- Certificate
- Form 16B to the seller within 15 days of the 26QB due date
Step by step for buyers
- Collect the seller's PAN and check it is operative
- Deduct 1% from each instalment you pay, including advance payments
- File Form 26QB and pay the TDS online (incometax.gov.in → e-Pay Tax)
- Download Form 16B from TRACES and give it to the seller
NRI sellers
If the seller is a non-resident, section 194-IA doesn't apply. The buyer must deduct tax under section 195 on the capital gain at much higher rates, needs a TAN, and files Form 27Q. The seller can apply for a lower-deduction certificate.
Common mistakes
- Deducting on the agreement value when the stamp duty (DLC) value is higher
- Forgetting TDS on advance and instalment payments
- Paying an NRI seller without deducting under section 195
Frequently asked questions
Is TDS deducted on property below ₹50 lakh?
No. Section 194-IA applies only when the consideration or stamp duty value is ₹50 lakh or more.
Does the buyer need a TAN for TDS on property?
No. For a resident seller, the buyer uses their PAN with Form 26QB.
What if the buyer doesn't deduct TDS?
The buyer is treated as in default and pays interest and late fees, and may face penalties.
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