When you buy an immovable property in India (other than rural agricultural land) for ₹50 lakh or more, you must deduct TDS @ 1% on the higher of the sale consideration or the stamp duty value (SDV) and pay it via Form 26QB within 30 days; then issue Form 16B to the seller. If the seller is an NRI, Section 195 applies (different process and rates). (Income Tax India)
Why this matters
A missed or incorrect TDS can derail registration, block refunds, and trigger interest/penalties. This guide gives Indian home buyers and HNIs a clear, compliant checklist—whether you’re buying from a resident or an NRI.
When does TDS apply on property purchases?
1) Buying from a resident seller → Section 194-IA
TDS applies if:
- The asset is any immovable property (land/building) other than rural agricultural land; and
- Sale consideration or SDV—whichever is higher—is ₹50,00,000 or more.
- Rate: 1% of the higher of consideration or SDV.
- Trigger: At credit or payment, whichever is earlier (applies to instalments too). (Income Tax India)
What counts as “consideration”: Add club membership, car parking, electricity/water, maintenance, advance or similar incidental charges. (Income Tax India)
Joint buyers/sellers: The threshold is for the property as a whole (aggregate across all buyers/sellers). A specific proviso clarifies aggregation. (Income Tax India)
TAN not required: Section 203A does not apply to 194-IA deductors (use PANs). (Income Tax India)
Formula (194-IA):
TDS = 1% × max(Sale Consideration, SDV)
Example (Mumbai apartment):
- Agreement value ₹48 lakh; SDV ₹52 lakh → TDS on ₹52 lakh = ₹52,000.
- If paid in 4 instalments, deduct proportionately each time.
2) Buying from an NRI seller → Section 195
- Section 195 applies (not 194-IA). You’ll typically need a TAN, deposit TDS using ITNS-281, and file Form 27Q (quarterly). (Income Tax India)
- Rate: “Rates in force” on the sum chargeable (linked to capital gains character). In practice, many buyers deduct at LTCG 20% (+ SC/Cess) if the property is long-term, or at slab rates if short-term, unless the seller furnishes a lower/NIL TDS certificate u/s 197 (Form 13). (Use the seller’s AO-issued certificate to deduct at the sanctioned rate.)
- Tip: Ask the NRI seller early to apply for a Section 197 certificate if the capital gain is substantially lower than the sale price.
Compliance steps (Resident seller – Section 194-IA)
- Deduct TDS at time of payment/credit. Base = higher of price or SDV; include incidental charges. (Income Tax India)
- Pay & file challan-cum-statement Form 26QB within 30 days from the last day of the month in which TDS is deducted. (Income Tax India)
- Download & issue Form 16B to the seller within 15 days from the due date of furnishing Form 26QB (visible in the Tax Calendar). (Income Tax India)
- Use the Income Tax portal’s “TDS on Sale of Property” workflow (26QB e-pay + TRACES for 16B). (Income Tax India)
Not quarterly: 194-IA uses Form 26QB (one-time per payment/party combination), not the quarterly TDS returns used elsewhere. (Income Tax India)
Interest & penalties you should avoid
- Interest (Section 201(1A))
- 1% per month: delay in deduction (from the date tax was deductible to actual deduction).
- 1.5% per month: delay in deposit after deduction (from deduction to payment). (Income Tax India)
- Late filing fee (Section 234E): ₹200/day for delay in furnishing the TDS statement (capped at TDS amount). (Income Tax India)
- Penalty (Section 271H): May apply for non-filing/incorrect filing of TDS statements (in addition to 234E). (Income Tax India)
Special situations & edge cases
- Multiple buyers/sellers: Check the aggregate value; file separate 26QB per buyer–seller combination. (Aggregation rule is in the Act; operationally, 26QB is per party-pair.) (Income Tax India)
- Under-construction / instalments: Deduct on each payment as it’s made (credit/payment—whichever earlier). (Income Tax India)
- Rural agricultural land: Excluded from 194-IA; definition mirrors Section 2(14)(iii) parameters. (Income Tax India)
- Non-filers’ higher-rate rule (206AB): Not applicable to 194-IA—explicitly excluded in the Act. (Income Tax India)
- Joint Development Agreements: Payments to a resident landowner under Section 45(5A) attract TDS @ 10% u/s 194-IC (monetary part). (Income Tax India)
Quick reference table
| Scenario | Section | Threshold | TDS Base | TDS Rate | Form & Due Date |
|---|---|---|---|---|---|
| Buy from resident | 194-IA | ₹50,00,000 (consideration or SDV) | Higher of consideration or SDV; includes incidental charges | 1% | 26QB within 30 days; 16B within 15 days thereafter. (Income Tax India) |
| Buy from NRI | 195 | No fixed threshold | “Sum chargeable” (capital gains nature) | Rates in force (+ SC/Cess) or as per 197 certificate | 27Q (quarterly), TAN required; deposit via ITNS-281. (Income Tax India) |
Worked examples
A) Gurgaon plot (resident seller)
- Agreement value ₹1.10 crore; SDV ₹1.05 crore; parking ₹2 lakh.
- Consideration for TDS = ₹1.12 crore (₹1.10 cr + ₹2 lakh). SDV is ₹1.05 cr.
- Base = higher of ₹1.12 cr or ₹1.05 cr = ₹1.12 cr.
- TDS = 1% × ₹1.12 cr = ₹1,12,000. (Income Tax India)
B) Pune flat (resident, value below ₹50 lakh but SDV ≥ ₹50 lakh)
- Agreement value ₹49 lakh; SDV ₹50.5 lakh → 194-IA applies; TDS on ₹50.5 lakh = ₹50,500. (Income Tax India)
C) Bengaluru villa (NRI seller, long-term)
- Sale consideration ₹4.00 crore; seller says indexed LTCG ≈ ₹60 lakh.
- Buyer should ask for Section 197 certificate to deduct on gains (not on the full ₹4 cr). Otherwise, banks/payers often insist on deducting at “rates in force” on the gross consideration. (Follow certificate strictly once issued.)
Filing pointers (smooth execution)
- Collect PANs (buyer & seller). (PAN/Aadhaar quoting is mandatory where 194-IA applies.) (Income Tax India)
- Use the portal path: e-File → e-Pay Tax → 26QB (TDS on Sale of Property); after payment, pull Form 16B from TRACES. (Income Tax India)
- Calendar reminders matter: The Tax Calendar lists the monthly due dates for 26QB and 16B. (Income Tax India)
FAQs
Is TDS under 194-IA calculated on agreement value or circle rate?
On the higher of sale consideration or stamp duty value. (Income Tax India)
Property is ₹48 lakh but SDV is ₹51 lakh—does TDS apply?
Yes. Threshold checks either amount; if either is ≥ ₹50 lakh, TDS applies. (Income Tax India)
Do I need a TAN for 194-IA?
No—TAN not required for 194-IA deductors; PANs suffice. (Income Tax India)
By when must I pay TDS and give the certificate?
File Form 26QB within 30 days from month-end of deduction and issue Form 16B within 15 days after the 26QB due date. (Income Tax India)
Does the higher-rate rule for non-filers (206AB) increase the 1%?
No—194-IA is expressly excluded from 206AB. (Income Tax India)
Key takeaways for Indian investors
- Budget purchase flows to ensure timely 26QB and 16B—these dates are enforced. (Income Tax India)
- Always compare agreement value vs SDV and include incidental charges before computing TDS. (Income Tax India)
- For NRI sellers, move early on a Section 197 certificate to avoid over-deduction under Section 195; then comply via TAN → 27Q. (Income Tax India)
- Avoid interest/penalties by tracking 201(1A) and 234E/271H consequences. (Income Tax India)