Key Takeaways
- 1% TDS is mandatory when a resident buyer purchases immovable property (other than agricultural land) for Rs 50 lakh or more, under Section 194-IA of the Income-tax Act, 1961.
- The 1% is charged on the sale consideration or the stamp-duty (ready-reckoner) value, whichever is higher — a rule in force since 1 April 2022.
- You deposit the TDS using Form 26QB within 30 days from the end of the month in which you deducted it, then issue Form 16B to the seller within 15 days of that due date.
- No TAN is needed — the buyer uses their PAN. But if the seller does not give a PAN, TDS jumps to 20% under Section 206AA.
- From 1 October 2024, joint buyers or joint sellers are assessed on the aggregate consideration — sub-Rs 50 lakh shares no longer escape TDS.
- If the seller is an NRI, Section 194-IA does not apply — a different, higher regime under Section 195 takes over.
The 1% TDS rule on a property purchase, in one answer
When a resident buyer purchases immovable property — other than agricultural land — for Rs 50 lakh or more, the buyer must deduct 1% TDS under Section 194-IA of the Income-tax Act, deposit it through Form 26QB within 30 days from the end of the month of deduction, and hand the seller a Form 16B certificate. The tax is the buyer’s legal responsibility, not the seller’s, and it is calculated on the sale consideration or the stamp-duty value, whichever is higher.
This catches many first-time buyers by surprise: you cannot simply pay the full price to the seller and settle up later. You pay the seller 99% and route the remaining 1% to the government in the seller’s name. Get the mechanics wrong and the interest, late-filing fee, and penalty land on you, the buyer — so this guide walks through every step, deadline, and edge case for 2026.
When does Section 194-IA apply? The Rs 50 lakh threshold
Section 194-IA applies whenever the consideration for the property, or its stamp-duty value, is Rs 50,00,000 (Rs 50 lakh) or more. If both the consideration and the stamp-duty value are below Rs 50 lakh, no TDS is due at all. The section covers buildings, flats, and land — but expressly excludes agricultural land.
Two points trip people up. First, the threshold is not “the price you negotiated” — it is the higher of the price and the government’s stamp-duty (ready-reckoner) value. A flat agreed at Rs 48 lakh can still cross the line if its ready-reckoner value is Rs 52 lakh. Second, the 1% is deducted on the whole value, not just the amount above Rs 50 lakh. There is no basic exemption slab here.
What is the 1% calculated on — price or ready-reckoner value?
The 1% is calculated on the sale consideration or the stamp-duty value, whichever is higher. This “whichever is higher” basis was inserted by the Finance Act 2022 with effect from 1 April 2022, aligning Section 194-IA with the anti-undervaluation logic already in Sections 50C and 56(2)(x). Before that, TDS was computed only on the stated consideration.
Here is how the arithmetic plays out in the three situations buyers most often face:
| Scenario | Agreement value | Stamp-duty value | TDS applies? | 1% TDS deducted |
|---|---|---|---|---|
| Standard purchase | Rs 80,00,000 | Rs 78,00,000 | Yes (≥ Rs 50L) | Rs 80,000 (on Rs 80L) |
| Ready-reckoner higher than price | Rs 48,00,000 | Rs 55,00,000 | Yes (higher value ≥ Rs 50L) | Rs 55,000 (on Rs 55L) |
| Both values below threshold | Rs 46,00,000 | Rs 49,00,000 | No | Nil |
In the standard Rs 80 lakh case, you pay the seller Rs 79,20,000 and deposit Rs 80,000 with the government against the seller’s PAN. The seller later claims that Rs 80,000 as a credit when filing their own income-tax return.
Buying jointly? The October 2024 aggregate-consideration rule
From 1 October 2024, where a property has more than one buyer or more than one seller, the consideration is the aggregate of all amounts paid by all buyers to all sellers — so individual sub-Rs 50 lakh shares no longer escape TDS. This was fixed by a proviso to Section 194-IA(2) inserted by the Finance (No. 2) Act 2024 (Clause 58).
The change closed a loophole. Earlier, a couple buying a Rs 90 lakh flat at Rs 45 lakh each could argue that neither share crossed Rs 50 lakh, so no TDS was due. That reading is now expressly blocked: the department looks at the Rs 90 lakh aggregate, confirms it is over the threshold, and each buyer deducts 1% on their own share and files a separate Form 26QB. In the Rs 90 lakh, 50:50 example, each spouse files Form 26QB for their Rs 45 lakh share and deposits Rs 45,000.
How to file Form 26QB: step-by-step
Form 26QB is a combined challan-cum-statement filed and paid online — you do not need a TAN, only the PAN of both the buyer and the seller. The process runs entirely on the Income-tax e-filing portal:
- Log in to the Income-tax e-filing portal and open e-Pay Tax → New Payment → “TDS on Sale of Property (Form 26QB)”.
- Select whether you are buying from a resident, and confirm the number of buyers and sellers (this drives the aggregate-consideration rule above).
- Enter the PAN of the buyer and the seller, the property address, the agreement date, the total consideration, and the stamp-duty value.
- The portal computes 1% of the higher value as the tax payable. Verify the figure against your own calculation.
- Pay online (net banking, debit card, or over-the-counter via the generated challan) and save the acknowledgement.
- After a few days, register on TRACES as a taxpayer and download Form 16B — the TDS certificate you must give the seller.
File a separate Form 26QB for each buyer-seller pairing. Two buyers and one seller means two Form 26QBs; one buyer and two sellers means two as well.
Form 16B — the certificate you must give the seller
Form 16B is the TDS certificate that proves you deposited the 1% against the seller’s PAN, and you must download it from TRACES and issue it to the seller within 15 days of the Form 26QB due date. Without it, the seller cannot cleanly claim credit for the tax you deducted, and disputes at handover are common when it is skipped.
Practically, sellers increasingly ask for Form 16B before releasing possession or the final no-dues letter, so treat it as part of closing — not an afterthought weeks later.
Deadlines and penalties at a glance
Every obligation under Section 194-IA is date-stamped. Missing a date shifts the cost onto the buyer, so keep this table beside your closing checklist:
| Obligation | Deadline / rate | What triggers a cost |
|---|---|---|
| Deduct 1% TDS | At payment / credit to seller | Interest at 1% per month for non-deduction |
| Deposit via Form 26QB | Within 30 days from end of the month of deduction | Interest at 1.5% per month for late deposit |
| Issue Form 16B to seller | Within 15 days of the 26QB due date | Seller cannot claim TDS credit smoothly |
| Late filing of Form 26QB | — | Fee of Rs 200 per day under Section 234E |
| Seller has no PAN | TDS at 20% (not 1%) | Higher deduction under Section 206AA |
On top of the above, a penalty of up to Rs 1,00,000 can apply under Section 271H for failure to file the statement. These are avoidable costs — none of them arise if you deduct, deposit, and certify on time.
When 194-IA does NOT apply: NRI sellers and Section 195
If the seller is a Non-Resident Indian (NRI), Section 194-IA and its comfortable 1% rate do not apply — the buyer must instead deduct TDS under Section 195, at rates far higher than 1%. This is the single most expensive mistake a buyer can make: deducting 1% from an NRI seller leaves you exposed for the shortfall, because the responsibility to deduct the correct amount is yours.
The Section 195 regime has its own mechanics — TDS on the capital gain, a TAN requirement, and Form 27Q instead of Form 26QB. We cover it in full in our dedicated guide to tax, TDS and repatriation when an NRI sells property in India, so this guide stays focused on the resident-seller case.
“Buyers treat TDS as the seller’s paperwork. It isn’t. Under 194-IA the liability sits with the buyer, so the day you deduct 1% you have taken on a compliance duty with hard deadlines. On a Rs 80 lakh purchase that is Rs 80,000 you are personally answerable for — file the 26QB, download the 16B, and keep both with your title papers. It costs nothing to do on time and a great deal to fix late.”
— Girish Chhalwani, Founder & CEO, THE EDGE Developments
Frequently asked questions
Is TDS calculated on the property price or the ready-reckoner value?
It is calculated on the higher of the two. Since 1 April 2022, Section 194-IA charges 1% on the sale consideration or the stamp-duty (ready-reckoner) value, whichever is higher. So if your agreement value is Rs 48 lakh but the ready-reckoner value is Rs 55 lakh, you deduct 1% of Rs 55 lakh.
I’m buying with my spouse — do we each deduct TDS or just once?
Since 1 October 2024, joint buyers are assessed on the aggregate consideration. If the combined value is Rs 50 lakh or more, each co-buyer deducts 1% on their own share and files a separate Form 26QB. A Rs 90 lakh flat split 50:50 means each spouse deposits Rs 45,000 — the sub-Rs 50 lakh individual shares no longer exempt you.
What happens if the seller doesn’t give me their PAN?
If the seller does not furnish a valid PAN, you must deduct TDS at 20% instead of 1%, under Section 206AA. PAN of both the buyer and the seller is mandatory on Form 26QB, so obtain the seller’s PAN in writing before you close.
Do I need a TAN to deduct TDS on a property purchase?
No. Section 194-IA specifically waives the TAN requirement for property buyers — you use your own PAN to file Form 26QB. A TAN is only needed in the separate case where the seller is an NRI and Section 195 applies.
My property is Rs 49 lakh — do I still need to deduct TDS?
Only if the stamp-duty value is Rs 50 lakh or more. If both the agreement value and the ready-reckoner value are below Rs 50 lakh, no TDS is due. But check the ready-reckoner value first, because it often exceeds the negotiated price and can pull you over the threshold.
The seller is an NRI — is the TDS still 1%?
No. When the seller is a Non-Resident Indian, Section 194-IA does not apply and the 1% rate is irrelevant. You must deduct under Section 195 at much higher rates, obtain a TAN, and file Form 27Q. See our separate NRI-seller guide for the full procedure.
When is Form 26QB due, and what is the penalty if I file late?
Form 26QB and the tax payment are due within 30 days from the end of the month in which you deducted the TDS. Late deposit attracts interest at 1.5% per month, late filing carries a fee of Rs 200 per day under Section 234E, and a penalty of up to Rs 1,00,000 can apply under Section 271H.
Buying a plot or villa near Mumbai?
THE EDGE Developments handles the full compliance trail — title, stamp duty, TDS, and registration — on every branded plotted and villa purchase, so nothing slips between agreement and possession. Explore our branded plots and villa developments, or talk to our land-investment team.
Related reading
- NRI Selling Property in India: Tax, TDS & Repatriation — the Section 195 regime when your seller is an NRI.
- Stamp Duty, Registration & Ready Reckoner Rate on Land in Maharashtra 2026 — the value your TDS is benchmarked against.
- Capital Gains Tax on Land Sale in India 2026 — how the seller is taxed on the gain you deducted against.
- Land Investment Tax Guide India 2026 — capital gains, Section 54F and the year’s budget changes.
- How to Get an Encumbrance Certificate in Maharashtra — the due-diligence step before you pay.
Citations & sources
- Income Tax Department — Section 194-IA, Income-tax Act 1961 (TDS on transfer of immovable property; primary source, browser-accessible).
- ClearTax — How to File TDS on Sale of Property (1% rate, Rs 50L threshold, Form 26QB 30-day and Form 16B 15-day timelines, PAN requirement, 20% under Section 206AA).
- TaxGuru — New TDS Rules on Immovable Property Sales Effective 1st October 2024 (Finance (No. 2) Act 2024 aggregate-consideration proviso).
- Income Tax e-Filing portal — e-Pay Tax / TDS on Sale of Property (Form 26QB) (the filing service itself).
