When you buy immovable property in India from a resident seller for ₹50 lakhs or more, you must deduct 1% of the sale consideration as TDS on the purchase of immovable property, deposit it with the central government, and file a return before paying the seller in full. This obligation sits on the buyer, not the seller, under Section 194-IA of the Income Tax Act.1Income Tax Department. Income Tax Act 1961 – Section 194IA Miss any step and the interest, penalty, and late fees add up fast.
When the 1% Deduction Applies
Section 194-IA applies to land (other than agricultural land) and to any building or part of a building.1Income Tax Department. Income Tax Act 1961 – Section 194IA The threshold is triggered when both the sale consideration and the stamp duty value reach ₹50 lakhs. If both figures are below ₹50 lakhs, no TDS is required.2Income Tax Department. TDS – Purchase of Immovable Property
The rate is 1% of the total consideration for Assessment Year 2026-27.3Income Tax Department. TDS Rates Deduction happens at the time of credit or payment to the seller, whichever comes first.2Income Tax Department. TDS – Purchase of Immovable Property
One condition matters more than any other: the seller must be a resident of India. If you are buying from an NRI or a foreign national, Section 194-IA does not apply and a different, heavier withholding rule takes over. See the section on non-resident sellers below.
How to Calculate and Pay
Multiply the total consideration by 1%. That is what you withhold. On a property bought for ₹80 lakhs, you deduct ₹80,000 and pay the seller ₹79,20,000.
Paying in installments does not defer the deduction. You must deduct 1% from every installment as it is paid, and each installment produces its own filing. Keep a running record from the first payment.
The withheld amount goes to the government electronically through the income tax portal, using net banking with an authorized bank. The portal returns an acknowledgment number and a challan carrying a unique identification string. Save both.
Filing the Return: Form 26QB or Form 141
For payments or credits made on or before 31 March 2026, the return is Form 26QB, the combined challan and TDS statement for property purchases.4Income Tax Department. TDS Compliance From 1 April 2026 onwards, Form 26QB is consolidated into a new Form 141, with property purchases covered under its Schedule B.5Income Tax Department. Form No. 141 – Frequently Asked Questions
The deadline is the same either way: within 30 days from the end of the month in which the tax was deducted.5Income Tax Department. Form No. 141 – Frequently Asked Questions Deduct on 15 July 2026, and the filing plus payment must be done by 30 August 2026.
To complete the form, you will need:
- Your PAN and the PAN of every seller named on the sale deed. A missing or incorrect seller PAN triggers TDS at a higher rate.
- The full property address, including plot, flat, or apartment number.
- The date of the sale agreement and the date of each payment.
- The total consideration as documented in the sale deed.
Corrections to a submitted form are possible but slow. Check every field against the deed before submitting.
Issuing Form 16B to the Seller
Once the return is processed, download Form 16B from the TRACES portal and give it to the seller. This certificate proves you deducted and deposited the TDS, and the seller uses it to claim credit against their own tax.6Income Tax Department. Form 16B Form 16B becomes available on TRACES after the statement is processed.7TRACES. Download Form 16B
You have 15 days from the due date of the TDS statement to furnish Form 16B to the seller. This is a separate compliance step with its own consequences, so set a reminder once the return is filed.
Penalties for Missing the Rules
The charges stack on top of each other:
- Interest for failure to deduct: 1% per month, or part of a month, from the date the tax was deductible to the date it was actually deducted.4Income Tax Department. TDS Compliance
- Interest for failure to deposit: 1.5% per month from the date of deduction to the date the amount reaches the government.4Income Tax Department. TDS Compliance
- Penalty under Section 271C: equal to the full amount of tax that should have been deducted. On an ₹80 lakh property, an ₹80,000 penalty in addition to the ₹80,000 TDS itself.4Income Tax Department. TDS Compliance
A late fee also applies for delayed filing of the TDS statement: ₹200 per day until it is filed, capped at the total TDS amount. The income tax department can treat a non-compliant buyer as an “assessee in default” and recover the TDS, interest, and penalty directly from you.
Buying Below Stamp Duty Value
A second tax risk sits alongside TDS. If you buy property for less than its stamp duty value, the gap can be taxed as your income under Section 56(2)(x). The law treats the discount as a financial benefit received by the buyer.
A tolerance band exists. The difference becomes taxable only when it exceeds the higher of ₹50,000 or 10% of the consideration paid.8Income Tax Department. Income Tax Act 1961 – Section 56 Buy for ₹70 lakhs where the stamp duty value is ₹75 lakhs, and the ₹5 lakh gap of about 7.1% stays within the tolerance. If the stamp duty value were ₹80 lakhs instead, the ₹10 lakh gap of 14.3% breaches the tolerance, and the full ₹10 lakh becomes taxable, not just the portion above 10%.
When the tolerance is breached, the excess is classified as “income from other sources” and taxed at your applicable slab rate.9Income Tax Department. Salaried Individuals for AY 2026-27 Check the stamp duty value before agreeing a price. If the gap is wide, either negotiate up, seek a reassessment of the stamp duty value, or budget for the tax. Keep a copy of the stamp duty valuation certificate from the time of purchase in case of an audit.
If the Seller Is an NRI or Foreign National
The 1% rate under Section 194-IA does not apply when the seller is a non-resident. The transaction falls under Section 195, and the TDS rate on capital gains from property sold by a non-resident is 12.5% plus applicable surcharge and health and education cess, calculated on the capital gain rather than the full sale price.
The paperwork changes too. Instead of Form 26QB, the buyer files Form 27Q for TDS on payments to non-residents, following the standard quarterly TDS schedule. Deducting at 1% when the correct rate was 12.5% plus surcharge leaves you personally liable for the shortfall along with interest and penalties.
A non-resident seller can apply under Section 197 for a lower or nil TDS certificate by filing Form 13. If the department issues one, deduct at whatever rate the certificate specifies. Ask for the certificate before closing.
Agricultural Land: Narrower Than It Sounds
Section 194-IA excludes agricultural land from TDS.1Income Tax Department. Income Tax Act 1961 – Section 194IA The definition is narrower than most buyers expect. Land inside a municipality or cantonment board area with a population of 10,000 or more does not qualify. For smaller municipalities, an exclusion zone extends outward:2Income Tax Department. TDS – Purchase of Immovable Property
- Population 10,000 to 1 lakh: land within 2 km of the municipal limit is not agricultural.
- Population 1 lakh to 10 lakhs: the zone extends to 6 km.
- Population above 10 lakhs: land within 8 km of the municipal limit loses agricultural status.
Farmland near a growing city can easily fall inside one of these zones. Verify the position before assuming the deal is exempt.
Joint Buyers and Joint Sellers
Every buyer-seller combination is a separate filing. Two buyers purchasing a flat from two co-owners produces four forms: each buyer files one for each seller, based on their proportionate share of the consideration. Each form has its own acknowledgment number and its own Form 16B.
The ₹50 lakh threshold is measured against the total transaction value, not the individual share. A ₹70 lakh property crosses the threshold even if each of two buyers is only paying ₹35 lakhs. This is where joint purchases most often go wrong, with one buyer assuming their share is below the threshold and skipping the filing.
Every party on the sale deed needs a valid PAN and must file their portion independently. A single missed filing among multiple buyers holds up Form 16B for the sellers and can create complications at property registration.