TDS on Property Purchase (Section 194-IA) — Buyer’s Guide 2025

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TDS on Purchase of Property (Section 194-IA) – Complete Buyer’s Guide 2025

Buying a property is one of the biggest financial decisions most people make. But many buyers miss a crucial compliance step — TDS (Tax Deducted at Source) on property purchases. This guide explains Section 194-IA simply, with practical steps you can follow right away.

What is TDS on property purchase?

Section 194-IA requires the buyer to deduct 1% TDS from the consideration paid to the seller when the sale consideration or stamp duty value is ₹50,00,000 or more. You must deduct TDS before paying the seller.

When does Section 194-IA apply?

  • Applies to purchase of immovable property (land, building, flat) — except agricultural land.

  • Applies when sale consideration or SDV ≥ ₹50,00,000 (higher of the two).

  • Applies if the seller is resident in India. For non-residents, Section 195 is relevant.

TDS rate

  • 1% of the sale consideration (or stamp duty value).

  • If seller does not provide PAN, TDS rate can rise to 20% under Section 206AA.

What is included in “sale consideration”?

Sale consideration includes the basic price and amounts paid to the seller such as:

  • Car parking / reserved parking charges

  • Clubhouse or membership fees paid to seller

  • Upfront maintenance or development charges paid to seller
    If these are paid to someone else (builder’s escrow or third party), treat them accordingly.

When to deduct TDS

Deduct TDS at the earlier of:

  • The time of actual payment, OR

  • The time the amount is credited to the seller’s account
    This rule applies even when payments are made in installments or by bank disbursement under a home loan.

How to deposit TDS — Step-by-step (Form 26QB)

  1. Go to the TIN portal / Income Tax e-filing portal.

  2. Select Form 26QB — TDS on property.

  3. Enter buyer and seller details (PANs), property details, and value.

  4. Make online payment (net-banking / debit card / NEFT/RTGS).

  5. Download the acknowledgment and Form 16B (TDS certificate) and give it to the seller.

Deadlines & due dates

  • Deposit TDS: Within 30 days from the end of the month in which TDS was deducted.

  • Issue Form 16B: Available after deposit; provide it to the seller.

Consequences of non-compliance

  • Interest: 1% per month if TDS not deducted; 1.5% per month if deducted but not deposited.

  • Late fee: ₹200 per day for late filing of Form 26QB (subject to limits).

  • Penalties and prosecution may apply in severe cases.

Special situations

  • Joint buyers / sellers: File separate Form 26QB for each buyer–seller combination.

  • Home loan disbursement by bank: Buyer still responsible to deduct and deposit TDS.

  • Under-construction property: Deduct TDS on each installment paid.

  • If SDV > sale price: Deduct TDS on the higher (SDV) amount.

Practical example

Sale consideration: ₹80,00,000
Stamp duty value: ₹85,00,000 → Higher = ₹85,00,000
TDS at 1% = ₹85,000
Buyer pays seller: ₹80,00,000 − ₹85,000; Government receives ₹85,000

Exemptions & exceptions

  • Transactions below ₹50 lakh (both sale value and SDV) — no TDS under 194-IA.

  • Agricultural land transfers — generally excluded.

  • Non-resident seller — Section 195 applies; different rules.

Final checklist for buyers (quick)

  • ✔ Verify seller’s PAN and collect PAN copy.

  • ✔ Check stamp duty value vs sale consideration; deduct on the higher.

  • ✔ File and pay via Form 26QB.

  • ✔ Download and hand over Form 16B to seller.

  • ✔ Keep proofs of payment and acknowledgment


FAQs

Q: What is the TDS rate on property purchases?
A: 1% on sale consideration or stamp duty value (higher of the two). If seller lacks PAN, higher rate (20%) may apply.

Q: Who is responsible for deducting TDS?
A: The buyer of the property.

Q: Do I need a TAN to file Form 26QB?
A: No — you can file Form 26QB without a TAN.

Q: Does TDS apply if I pay the builder through a home loan?
A: Yes — the buyer remains responsible to deduct and deposit TDS.

Q: What happens if I don’t deduct TDS?
A: Interest, late fees, penalties, and possible prosecution depending on severity.


M A Ashraf & Co. – Chartered Accountants
Specialising in GST, Income Tax, and Startup Advisory
📍 Serving PAN India | 💼 camdayazashraf.blogspot.com

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