TDS on Property Purchase: Section 194-IA Explained

Buying a property involves more than the sale price and registration. Buyers need to check tax deductions. For qualifying purchases from resident sellers, the buyer must deduct and deposit TDS on time. The buyers should understand TDS on property purchase before making payments.

When Does TDS Apply on Property Transactions?

The rule applies on transfers of immovable property other than agricultural land when the seller is a resident. Under the earlier Income-tax Act, Section 194-IA 1% deduction will be applicable when the transaction crosses ₹50 lakh threshold. From April 1, 2026, these transactions are covered under Section 393 of the Income-tax Act, 2025.

Threshold Limit of ₹50 Lakh

The ₹50 lakh limit is checked against both the sale consideration and the stamp duty value.

• No TDS is required when both are below ₹50 lakh.
• If either amount is ₹50 lakh or more, TDS is calculated on the higher amount.
• For joint buyers or sellers, the total consideration is taken into account.

For example, the sale price is ₹48 lakh, while the stamp duty value is ₹52 lakh. In this case, TDS is calculated on ₹52 lakh. Dividing the payment between two buyers does not remove the TDS requirement.

Resident vs NRI Seller Rules

The 1% TDS applied is for transactions with a seller who is a resident of India. This is not the case if the seller is a non-resident. The purchase of property from NRI TDS is generally considered to be in the category of section 195.

The rate would vary based on the nature of the income and the tax situation of the seller.

The basic rate is 12.5% for qualifying LTC on transfers from 23.07.2024 onwards. The rate may be different for short-term gains. There may be a surcharge or a cess.

Before making the payment, check whether the seller is a resident or non-resident.

How to Calculate and Deduct TDS?

In the case of a resident seller, TDS is normally 1% of the higher of the sale consideration or the stamp duty value. TDS is deducted by the buyer in the amount paid or credited, whichever is earlier.

In case of purchase made in installments, TDS is deducted with each instalment.

Example:

• Consideration: ₹80 lakh
• Stamp duty value: ₹82 lakh
• TDS base: ₹82 lakh
• TDS at 1%: ₹82,000

In this case, the buyer pays ₹82,000 and pays it within the time period. The TDS on the sale of property at the rate of 1% for eligible transactions is levied by the person selling the property who is a resident.

If a deduction is made before 31st March 2026, then Form 26QB shall be used. From April 1, 2026, Form 141 is used under the Income-tax Act, 2025.

Keep your purchase of property TDS records for each payment. Ensure that the amount of TDS deducted on the purchase of property is checked before each instalment.

Step-by-Step: Filing Form 26QB

Form 26QB applies to eligible deductions made on or before March 31, 2026. From April 1, 2026, Form 141 is used instead.

1. Confirm the seller's status: Check whether the seller is a resident or non-resident.
2. Collect details: Keep the PAN of both parties, property address, agreement date, payment date and transaction value ready.
3. Calculate TDS: For a resident seller, apply 1% to the higher of the consideration or stamp duty value.
4. Deduct the amount: Deduct TDS when the payment is made or the amount is credited, whichever happens first.
5. File and pay: Use Form 26QB or Form 141, based on the date of deduction.
6. Keep proof: Save the acknowledgement and TDS certificate for your records.

For transactions covered by the new system in 2026, Form 141 is filed online. Make the property purchase TSD payment within the required time.

Each TDS purchase of property record should match the purchase of property TDS amount and the related payment.

Common Mistakes Buyers Make

TDS errors often happen because buyers miss one small detail.

• Checking only the agreement value
• Not checking the stamp duty value
• Applying the ₹50 lakh limit separately to each buyer
• Forgetting TDS on instalment payments
• Entering an incorrect PAN
• Treating an NRI seller as a resident seller
• Missing the filing deadline

Before making a payment, check the seller's status and PAN. Also compare the sale consideration with the stamp duty value.

For a joint purchase, make sure the buyer and seller details match the actual ownership and payment arrangement.

What Happens If TDS Is Not Deducted?

If any interest and other tax consequences arise due to failure to deduct or deposit TDS, it may be considered a failure. The interest may be charged on the amount of the delayed deduction at the rate of 1% per month or part of a month.

If the TDS is deducted but there is delay in payment then interest may be levied at 1.5% per month/part of a month. Late filing fee may be charged on late filing of challan-cum-statement.

If a deduction is not made, it should be corrected as soon as possible. Be sure to retain the payment and filing records securely.

The responsibility of TDS on property purchase shifts to the buyer in the case of an eligible resident-seller transaction.

The correct compliance of TDS from property purchase involves taking the correct amount, paying it on time, and filing the appropriate form. Maintain a consistent and clear record of all property transactions made with TDS.

Frequently Asked Questions

1. Is TDS on property purchase applicable if the property value is below ₹50 lakh?

Ans: No, in general, no deduction is required where both the value of consideration and the stamp duty is less than ₹50 lakh.

2. What is the TDS rate on property purchase in 2026?

Ans: In case of purchase from a qualifying seller the rate is 1% of the applicable TDS base. The rules for transactions with NRIs as sellers are different under Section 195.

3. Who is responsible for deducting TDS — buyer or seller?

Ans: It is the duty of the buyer to deduct and deposit the necessary TDS while purchasing a property. No such deduction is made by the seller under the resident seller.

4. What happens if TDS is deducted but Form 26QB is not filed?

Ans: The buyer has to submit the challan-cum-statement in the stipulated time frame for deductions under Form 26QB. If the deductions are made for the period April 1, 2026, then Form 141 is used instead.