TDS on Property Purchase: Section 194-IA and Form 26QB

If you buy any immovable property in India (other than agricultural land) where the consideration or stamp duty value is Rs 50,00,000 or more, you, as the buyer, must deduct 1 percent TDS from the payment to the seller and remit it to the government. The seller doesn't deduct anything. The seller doesn't even handle the paperwork. The legal liability sits squarely on the buyer. Most first-time property buyers don't realize this until their CA flags it three months later, by which time the late fee is already running.

Section 194-IA applies to every buyer, individual, HUF, company, firm, anyone, regardless of whether you're tax audited or whether you have a TAN. That's deliberate. Unlike most TDS provisions which require a TAN, 194-IA lets you file using your PAN. The exemption list is short:

TDS is 1 percent of the higher of (a) sale consideration, or (b) stamp duty value. So if you negotiated Rs 80L but the circle rate values it at Rs 95L, you deduct 1 percent on Rs 95L = Rs 95,000. If the seller doesn't have a PAN, the rate jumps to 20 percent under Section 206AA, which means you'd deduct Rs 19L on a Rs 95L property. Always insist on the seller's PAN before transferring any money.

Form 26QB is a challan-cum-statement combined into one. It's filed online on the TIN-NSDL portal. You need: PAN of buyer, PAN of seller, complete property address, total consideration, payment date, payment mode, and the TDS amount. Once you submit and pay (via internet banking or debit card), you generate Form 16B from the TRACES portal a few days later. Form 16B is the seller's TDS certificate, hand it to them as soon as it's available. They need it to claim credit while filing their own return.

Most property purchases happen in instalments, especially under-construction flats with construction-linked plans. Each instalment triggers its own TDS event. So if you pay 20 percent at booking, 30 percent at slab, 30 percent at completion, and 20 percent at possession, you file Form 26QB four times, once per instalment. The 1 percent applies to each payment. Track this carefully because builders rarely remind you and the Income Tax Department's matching system will catch the mismatch eventually.

When more than one person is named as buyer or seller, things get fiddly. The CBDT's official position (Circular No. 17/2014 and Notification 30/2016) is that each buyer-seller pair files a separate Form 26QB. So two buyers and one seller means two forms. Two buyers and two sellers means four forms. Each form covers the proportional share. If a husband and wife jointly buy a Rs 1Cr property from a single seller, with 50:50 ownership, each spouse files Form 26QB for their Rs 50,000 TDS share. Many builders' templates ignore this and ask for one combined form, which is technically wrong and causes credit-matching errors at the seller's end.

Section 194-IA does not apply when the seller is a non-resident. Instead, Section 195 kicks in, and the rates are very different. For long-term capital gains (property held over 24 months), the Finance (No. 2) Act 2024 amended Section 112(1)(c) to apply a flat 12.5 percent rate (without indexation) on transfers on or after 23 July 2024 for non-residents (the resident-taxpayer optional 20 percent with indexation regime is not available to NRIs). For transfers up to 22 July 2024, the older 20 percent with indexation rate continued to apply. Adding the applicable surcharge (capped at 15 percent on LTCG since Budget 2022) and 4 percent health and education cess, the effective TDS on LTCG works out to approximately 14.95 percent at the base level and up to 23.92 percent at the highest surcharge slab. Short-term gains (property held 24 months or less) attract 30 percent plus surcharge and cess. The buyer must (until the law changes effective 1 October 2026, after which a PAN-based simplified process applies) obtain a TAN, file Form 27Q quarterly TDS returns, and issue Form 16A (not 16B) to the seller. The threshold of Rs 50L doesn't apply, even a Rs 10L property purchase from an NRI triggers TDS. The TDS is statutorily required on the entire sale consideration, not just the capital gain, unless the NRI seller obtains a Lower Deduction Certificate from the Assessing Officer in Form 13 in advance. This is the single biggest pitfall in NRI property transactions, and we strongly recommend involving a CA before signing the agreement to sell, not after.

Late filing or non-filing of Form 26QB is expensive: