TDS on property purchase is the 1% tax the buyer must deduct when buying immovable property worth Rs 50 lakh or more from a resident seller. The tax is deducted from every payment, deposited with the government through Form 26QB, and the seller receives a Form 16B certificate to claim the credit in their income tax return.
Quick answer: If you are buying a flat for Rs 50 lakh or more from a resident seller, you — the buyer — must deduct 1% TDS on every payment, including the token amount. File Form 26QB (Form 141 from 1 April 2026) within 30 days from the end of the month, give the seller Form 16B (Form 132 from 1 April 2026), and you never need a TAN. Missing the deduction draws interest and a daily late fee.
The key numbers at a glance
- 1 June 2013 — Section 194-IA introduced by the Finance Act 2013, the first law that made property buyers deduct TDS.
- 1% — the flat rate, applied on the full consideration once the threshold is crossed, not only on the amount above Rs 50 lakh.
- 1 July 2022 — the “higher-of” rule took effect (Finance Act 2022): 1% is worked out on the sale price or the stamp-duty value, whichever is higher.
- 1 October 2024 — the Rs 50 lakh test became an aggregate test (Finance (No. 2) Act 2024): it now counts the total deal value across all buyers and sellers combined.
- 20% — the rate if the seller does not give a valid PAN (Section 206AA of the 1961 Act, Section 397 of the 2025 Act).
- Rs 200/day — the late-filing fee for Form 26QB under Section 234E, capped at the TDS amount.
Who deducts TDS on a property purchase — the buyer or the seller?
The buyer deducts it. The seller does nothing except receive the net amount and later claim the TDS credit in their income tax return.
- For payments made on or before 31 March 2026, the rule sits in Section 194-IA of the Income-tax Act, 1961.
- For payments made on or after 1 April 2026, it moves to Section 393(1), Table Sl. No. 3(i) of the Income-tax Act, 2025.
The buyer must collect the seller’s PAN before the first payment and deduct the tax at the time of each payment.
Which transactions are covered?
Section 194-IA applies when all three conditions are met:
- The property is immovable — land or building, residential or commercial.
- It is not agricultural land. Rural agricultural land is excluded; urban agricultural land is covered.
- The seller is a resident of India.
If the seller is an NRI, Section 194-IA does not apply at all. Section 195 applies instead: there is no Rs 50 lakh threshold, the rate is much higher (worked on the seller’s capital gains), a TAN is compulsory, and the buyer files Form 27Q. See our full guide: TDS on Sale of Property by NRI: Section 195 Rates, Form 13 & Refund.
How does the Rs 50 lakh threshold actually work?
TDS applies when the higher of the sale consideration and the stamp-duty value is Rs 50,00,000 or more. Two refinements decide most real cases:
- Higher-of rule (since 1 July 2022): compare the contract price with the stamp-duty (circle) value adopted by the state authority and use the larger figure. If your agreed price is Rs 80 lakh but the stamp-duty value is Rs 82 lakh, the 1% is worked out on Rs 82 lakh.
- Aggregate rule (since 1 October 2024): the Rs 50 lakh test looks at the total consideration for the property across all buyers and sellers. Splitting a Rs 60 lakh deal into two Rs 30 lakh halves no longer escapes TDS.
Once the threshold is crossed, the 1% applies to the entire amount. A flat priced at Rs 80 lakh attracts TDS of Rs 80,000 — not 1% of the Rs 30 lakh above the threshold.
What is the TDS rate, and why does the seller’s PAN matter so much?
- Normal rate: 1% of the full consideration (or stamp-duty value).
- No-PAN rate: 20% if the seller does not furnish a PAN or the PAN is inoperative — under Section 206AA of the 1961 Act, or Section 397 of the 2025 Act from 1 April 2026.
The 20% jump is the most expensive mistake in property TDS. Ask the seller for a copy of their PAN card before you hand over token money, because the token payment already attracts TDS. Verify the PAN on the income-tax e-filing portal before the payment is made.
When must you deduct — one lump sum at registration?
No. The deduction happens at the earlier of payment or credit to the seller’s account. That means:
- Deduct 1% on every instalment — the token amount, the down-payment, each progress payment, and the final payment.
- On an under-construction flat: if you pay a builder Rs 90 lakh in 3 instalments of Rs 30 lakh each, you deduct Rs 30,000 from every instalment (Rs 90,000 in total), filing a separate form for each.
- If the invoice shows a GST component separately, the GST amount is excluded from the base for TDS.
- Waiting for possession or the registered sale deed to deduct is a common and costly error.
How do you file — Form 26QB, and what changes from 1 April 2026?
Form 26QB is a challan-cum-statement: it is both the payment instrument and the reporting form. No TAN is needed — the buyer’s and seller’s PANs are enough.
- Due date: file and deposit the TDS within 30 days from the end of the month in which the deduction was made. Paid in March, deposit by 30 April.
- One form per buyer-seller pair per instalment: 2 buyers × 2 sellers = 4 separate forms for each instalment. Enter the total consideration in each form, but only the buyer’s own share as the amount paid.
- Corrections: mistakes in a filed Form 26QB can be corrected through the TRACES portal; certain fields need the Assessing Officer’s approval.
Form 16B — the certificate for the seller
After the payment is processed, the buyer generates Form 16B on the TRACES portal and hands it to the seller within 15 days of the Form 26QB due date. The seller needs this as proof that TDS was deposited against their PAN.
What changed from 1 April 2026?
| Aspect | Up to 31 March 2026 (1961 Act) | From 1 April 2026 (2025 Act) |
|---|---|---|
| Governing section | Section 194-IA | Section 393(1), Table Sl. No. 3(i) |
| Deduction statement | Form 26QB | Form 141 (Schedule B) |
| TDS certificate to seller | Form 16B | Form 132 |
| No-PAN rate | 20% (Section 206AA) | 20% (Section 397) |
What stayed the same
- The 1% rate and the Rs 50 lakh threshold are unchanged.
- The 30-days-from-month-end deadline for the statement is unchanged.
- No TAN is needed; PANs of buyer and seller suffice.
- The higher-of rule (1 July 2022) and the aggregate-threshold rule (1 October 2024) continue to apply.
Penalties for missing it
| Default | Interest | Late fee |
|---|---|---|
| Did not deduct TDS | 1% per month or part of the month (Section 201) | — |
| Deducted but did not deposit | 1.5% per month or part of the month (Section 201) | — |
| Filed Form 26QB / 141 late | — | Rs 200 per day under Section 234E, capped at the TDS amount |
| Did not file the statement at all | — | Penalty of Rs 10,000 to Rs 1,00,000 under Section 271H |
Worked examples
Example 1 — single buyer, single seller
- Agreed sale price: Rs 80,00,000
- Stamp-duty value: Rs 82,00,000 (higher — this is the base)
- TDS: 1% of Rs 82,00,000 = Rs 82,000
- The buyer pays the seller Rs 79,18,000 (Rs 80,00,000 − Rs 82,000) and deposits Rs 82,000 with the government.
- The buyer files Form 26QB within 30 days from the end of the payment month and hands the seller Form 16B within 15 days of that due date.
Example 2 — two buyers, two sellers
- Total consideration: Rs 60,00,000 (aggregate test met)
- Buyers A and B each pay Rs 30,00,000; sellers X and Y each receive Rs 30,00,000
- Four forms: A→X, A→Y, B→X, B→Y
- Each buyer deducts 1% of Rs 30,00,000 = Rs 30,000 per form and deposits it
- Each seller receives Rs 29,70,000 per share, plus a Form 16B
What does this mean for a first-time buyer?
Coordinating with a home-loan bank
The bank will usually disburse its share of the loan directly to the seller. The legal TDS obligation still sits with you, the buyer. Ask your bank to release each disbursement net of the 1% TDS, or deduct the 1% from your own contribution before the money reaches the seller. Confirm with the bank which side is deducting, in writing, so nobody pays twice or nobody pays at all.
Your practical checklist
- Get the seller’s PAN copy before token money and verify it on the e-filing portal.
- Check the stamp-duty value of the property — if it is higher than your agreed price, your 1% is worked out on the higher figure.
- Deduct 1% from every payment, including the token.
- File Form 26QB (Form 141 from 1 April 2026) within 30 days from the end of each deduction month.
- Generate Form 16B (Form 132 from 1 April 2026) on TRACES and give it to the seller within 15 days of the form’s due date.
- Verify the credit in the seller’s Form 26AS afterwards.
What the seller does with the TDS
The deducted amount appears in the seller’s Form 26AS. While filing the income tax return, the seller reports the sale under capital gains and claims the TDS as a credit — the ITR utility auto-populates it from Form 26AS, but manual verification is wise. If the TDS is higher than the actual tax (for example, after claiming a Section 54 exemption on reinvestment in a new house), the excess is refunded after the ITR is processed. Our guide to the capital gains rules: Capital Gains Tax 2026: LTCG 12.5%, STCG 20% Rates & Section 54 Exemption.
Frequently asked questions
1. Who deducts TDS on a property purchase — the buyer or the seller?
The buyer deducts it. The obligation sits entirely with the person buying the property — an individual, HUF, company or firm — and the seller simply receives the net amount plus a Form 16B certificate.
2. What is Form 26QB and what is its due date?
Form 26QB is the challan-cum-statement through which the buyer deposits the deducted TDS and reports the transaction. It must be filed within 30 days from the end of the month in which the deduction was made. From 1 April 2026, Form 141 (Schedule B) takes its place.
3. Is a TAN required to file Form 26QB?
No. Unlike normal business TDS, a buyer filing Form 26QB does not need a TAN. The PANs of the buyer and the seller are the only tax identifiers required.
4. What happens if I don’t deduct TDS on my property purchase?
Interest of 1% per month (or part of a month) applies on the amount you should have deducted, under Section 201. If you deducted but did not deposit, the interest is 1.5% per month. A late statement also draws Rs 200 per day under Section 234E, capped at the TDS amount.
5. What if the seller doesn’t give me their PAN?
You must deduct TDS at 20% instead of 1%, under Section 206AA (Section 397 of the 2025 Act). This is why collecting and verifying the seller’s PAN before the token payment is the single most important step.
6. How do multiple buyers or sellers file Form 26QB?
File one Form 26QB for each buyer-seller combination for each instalment — 2 buyers and 2 sellers means 4 forms. Since 1 October 2024, the Rs 50 lakh threshold test is on the aggregate deal value, so splitting a deal across buyers or sellers no longer avoids TDS.
7. Can Form 26QB be corrected after filing?
Yes. Corrections to a filed Form 26QB can be made on the TRACES portal; for certain fields the correction needs approval from the Assessing Officer. Fix PAN and amount errors as soon as you spot them, so the seller’s Form 26AS shows the right credit.
Official sources
- Income-tax e-filing portal — file Form 26QB (Form 141 from 1 April 2026), pay and verify TDS.
- Income-tax Department tax information network — TDS rules, rates and TRACES guidance.
- India Code — full text of the Income-tax Act, 2025, including Section 393.
Reviewed by Asuthod Rathod, CA · Last updated: 19 October 2026
Tax rules change with every Budget. The section and form numbers above reflect the law as it stands for FY 2026-27; payments made before 1 April 2026 still follow the 1961 Act sections and forms.
Disclaimer: This article is for general information only and is not tax advice. Property transactions involve large sums — confirm the exact TDS treatment of your deal with a chartered accountant before you pay.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.