TDS on Property Purchase in India — Buyer's Complete Guide to Section 194-IA and Form 26QB for AY 2026-27

When you buy a house, flat, plot, or commercial property in India for more than ₹50 lakh, you are legally required to deduct TDS from the payment you make to the seller. This obligation catches many first-time property buyers off guard — they assume tax compliance is the seller's problem. It is not.

Under Section 194-IA of the Income Tax Act, every buyer of immovable property (other than agricultural land) must deduct 1% TDS on the sale consideration, deposit it with the government using Form 26QB, and issue Form 16B to the seller. Miss any of these steps and you face interest charges, late fees, and potential penalties from the income tax department.

This guide walks you through everything you need to know as a property buyer — when TDS applies, how much to deduct, how to file Form 26QB on the e-filing portal, and the common mistakes that lead to notices.

When Does Section 194-IA Apply?

TDS under Section 194-IA must be deducted when all of the following conditions are met:

• The property being transferred is immovable property — a residential flat, house, commercial space, plot of land, or any building
• The property is not agricultural land
• The total sale consideration is ₹50 lakh or more (this includes all payments — token money, instalments, final settlement)

The ₹50 lakh threshold applies to the total transaction value, not individual payments. If you buy a flat for ₹75 lakh and pay in five instalments, you must deduct TDS on every instalment — not just the ones that push the total past ₹50 lakh.

Agricultural land is exempt from Section 194-IA regardless of the transaction value. However, "agricultural land" has a specific definition under the Income Tax Act — land within municipal limits or within a specified distance from a municipality does not qualify as agricultural land for tax purposes, even if it is used for farming.

TDS Rate and the Stamp Duty Value Rule

The TDS rate under Section 194-IA is 1% of the sale consideration.

Starting 1 October 2024, TDS must be deducted on the sale consideration or the stamp duty value of the property, whichever is higher. This change closes a loophole where buyers and sellers would declare a lower sale price in the agreement while registering the property at stamp duty value.

Example: You purchase a flat for ₹80 lakh, but the circle rate (stamp duty value) set by the state government is ₹90 lakh. You must deduct TDS at 1% of ₹90 lakh = ₹90,000, not ₹80,000.

If the seller does not provide their PAN — or provides an invalid PAN — the TDS rate jumps to 20%. Always verify the seller's PAN before making any payment.

How to File Form 26QB — Step by Step

Form 26QB is the challan-cum-statement that you use to report the TDS deduction and pay it to the government. Unlike regular TDS where you need a TAN (Tax Deduction Account Number), property buyers can file Form 26QB using just their PAN.

Here is the step-by-step process:

Step 1: Gather the Required Information

Before you start, keep the following ready:

• PAN of the buyer (yours)
• PAN of the seller
• Complete address of the property
• Date of agreement and date of payment
• Total sale consideration and stamp duty value
• Amount being paid in this instalment
• TDS amount (1% of consideration or stamp duty value, whichever is higher)

Step 2: Log In to the e-Filing Portal

Go to incometax.gov.in and log in with your PAN and password. Navigate to e-File → e-Pay Tax → New Payment → 26QB (TDS on Property).

Step 3: Fill in the Form

Enter the property details, buyer and seller information, and payment details. The form will auto-calculate the TDS amount based on the consideration you enter. If paying in instalments, you will file a separate Form 26QB for each payment.

Step 4: Pay the TDS

Pay the TDS amount through net banking, debit card, or the NEFT/RTGS option available on the portal. You will receive a challan receipt with a unique acknowledgment number — save this carefully.

Step 5: Download Form 16B

After the TDS payment reflects in your account (usually within 3–5 working days), go to TRACES (tdscpc.gov.in) to download Form 16B. This is the TDS certificate that you must provide to the seller as proof of deduction.

Timeline You Must Follow

Example timeline: You make a payment of ₹30 lakh to the seller on 15 August 2025. You must file Form 26QB and pay the TDS by 30 September 2025. You must then download and issue Form 16B to the seller by 15 October 2025.

TDS on Instalment Payments

Most property purchases involve multiple payments — token or earnest money, part payments during construction, and a final settlement at possession. You must deduct TDS on every payment and file a separate Form 26QB for each one.

Example: You buy an under-construction flat for ₹1.2 crore, paid as follows:

Each payment triggers a separate Form 26QB with its own deadline. Missing even one creates a compliance gap that the income tax department's systems will flag.

Joint Buyers and Joint Sellers

Property purchases with multiple buyers or sellers are common — a married couple buying a flat together, or siblings selling inherited property. The TDS rules here require careful handling.

Joint buyers: Each buyer must file a separate Form 26QB for their proportionate share. If you and your spouse buy a property for ₹80 lakh with a 60:40 split, you file Form 26QB for ₹48 lakh (TDS ₹48,000) and your spouse files for ₹32 lakh (TDS ₹32,000).

Joint sellers: If there are two sellers with equal shares, each buyer must file a separate Form 26QB for the amount paid to each seller. With 2 buyers and 2 sellers, that means 4 separate Form 26QB filings for a single property transaction.

When the Seller Is an NRI

If the seller is a Non-Resident Indian (NRI), Section 194-IA does not apply. Instead, you must deduct TDS under Section 195, which requires:

• A TAN (Tax Deduction Account Number) — you must apply for one if you do not have it
• TDS at the applicable capital gains tax rate, which is significantly higher than 1%:
  • Long-term capital gains (property held for more than 2 years): 12.5% without indexation
  • Short-term capital gains: At the NRI's applicable income tax slab rate
• Filing Form 27Q (quarterly TDS return) instead of Form 26QB
• Issuing Form 16A instead of Form 16B

The NRI seller can apply for a lower deduction certificate under Section 197 if their actual tax liability is lower than the TDS amount. As a buyer, if the seller provides this certificate, you deduct TDS at the rate specified in the certificate instead of the full rate.

This is one of the most complex areas of property TDS — if you are buying from an NRI, consult a tax professional before making any payment.

Penalties for Non-Compliance

The income tax department takes property TDS compliance seriously. Here is what you face if you miss your obligations:

Interest for late deduction: If you fail to deduct TDS at the time of payment, you owe interest at 1% per month (or part of a month) from the date the TDS should have been deducted until the date it is actually deducted.

Interest for late deposit: If you deduct TDS but fail to deposit it with the government on time, interest is charged at 1.5% per month from the date of deduction until the date of deposit.

Late filing fee under Section 234E: A fee of ₹200 per day is levied for each day of delay in filing Form 26QB, capped at the TDS amount itself.

Penalty under Section 271H: For failure to file or filing with incorrect information, a penalty between ₹10,000 and ₹1,00,000 can be imposed.

Disallowance under Section 40(a)(ia): If the property purchase is for business purposes and you fail to deduct TDS, 30% of the payment amount is disallowed as a business expense.

How the Seller Claims TDS Credit

The TDS you deduct is not lost money for the seller. It is a prepayment of their income tax liability. The seller claims credit for this TDS in their ITR for the year in which the property was sold.

The credit appears in the seller's Form 26AS once you file Form 26QB. If the credit does not appear, it usually means:

• You entered the seller's PAN incorrectly in Form 26QB
• You have not yet filed Form 26QB
• The challan is still being processed

This is exactly why issuing Form 16B to the seller matters — it serves as their proof of TDS deducted, and they can use it to follow up if the credit is missing from Form 26AS.

Common Mistakes Buyers Make

1. Ignoring the ₹50 lakh threshold calculation. The threshold includes all charges — sale price, club membership transfer fees, car parking charges, and any other amounts paid to the seller as part of the deal. Underreporting the total consideration to stay below ₹50 lakh invites scrutiny.

2. Not deducting TDS on the first payment. Many buyers skip TDS on the token or booking amount, thinking it does not count. Every payment counts from the very first rupee once the total deal value crosses ₹50 lakh.

3. Entering incorrect PAN. A single digit wrong in the seller's PAN means the TDS credit will not reflect in their Form 26AS. Double-check both PANs before filing.

4. Filing one Form 26QB for multiple payments. Each payment needs its own Form 26QB. Clubbing payments into a single filing creates mismatches.

5. Forgetting to issue Form 16B. Filing 26QB is half the compliance. Downloading and issuing Form 16B to the seller within 15 days completes it.

6. Not checking stamp duty value. Since October 2024, TDS applies on the higher of the sale consideration or stamp duty value. Ignoring this results in short deduction, which triggers interest and penalty.

Reporting Property Purchase in Your ITR

When you file your income tax return, you must report the property purchase in the appropriate schedule:

• Schedule AL (Assets and Liabilities): If your total income exceeds ₹50 lakh, you must declare immovable property holdings in this schedule
• Home loan interest and principal: Claim deductions under Section 24(b) and Section 80C if applicable
• TDS deducted: The TDS amount you deducted as a buyer is the seller's credit, not yours — do not claim it as your own tax credit

Key Takeaway

As a property buyer in India, your TDS obligation under Section 194-IA is straightforward but unforgiving on deadlines. Deduct 1% on every payment, file Form 26QB within 30 days, and issue Form 16B to the seller within 15 days after that. Verify the seller's PAN before payment, compare the sale consideration with the stamp duty value, and file separate forms for each instalment and each buyer-seller combination. Getting this right from the first payment saves you from interest, penalties, and the hassle of correction requests later.