What is TDS on property purchase under Section 194-IA?

By the India Law Simplified editorial team · Verified against the bare Acts & official portals · Updated 2026-08-18 · ~8 min read

⚡ Quick answer

When you buy immovable property (other than agricultural land) worth ₹50 lakh or more, you — the buyer — must deduct 1% TDS on the sale consideration under Section 194-IA, deposit it to the government using Form 26QB within 30 days from the end of the month of payment, and give the seller a Form 16B certificate. Importantly, the 1% applies to the entire amount, not just the part above ₹50 lakh, and you don't need a TAN — your PAN is enough.

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Buying a home or plot worth ₹50 lakh or more comes with a tax responsibility many buyers don't expect: you have to deduct TDS from the payment to the seller and deposit it with the government. Get it wrong and you face interest and penalties. This guide explains exactly how property TDS under Section 194-IA works, the forms and deadlines, and the common mistakes to avoid — in plain language.

1When property TDS applies

Section 194-IA applies when you buy any immovable property — a flat, house, building or land (other than agricultural land) — for ₹50 lakh or more. The duty to deduct and deposit the TDS is on the buyer, not the seller.

⚠️ ImportantThe 1% is on the full sale consideration, not just the excess over ₹50 lakh. So on a ₹70 lakh flat, you deduct 1% of ₹70 lakh = ₹70,000, not 1% of ₹20 lakh.

2How to deduct and deposit it

The process is simpler than most TDS because you don't need a TAN:

At the time of payment, deduct 1% of the total consideration and pay the seller the balance.
Deposit the deducted TDS using Form 26QB (a combined challan-cum-statement) on the income-tax/TIN portal.
Do this within 30 days from the end of the month in which you made the payment.
After depositing, download Form 16B from the TRACES portal and give it to the seller as their TDS certificate.

3Special cases

A few situations change the amount or process:

Seller has no PAN: TDS is 20% instead of 1% — always collect the seller's PAN.
Seller is an NRI: this section doesn't apply; NRI property sales fall under Section 195 with higher TDS at capital-gains rates.
Multiple buyers or sellers: each buyer files a separate Form 26QB for their share.
Home loan / instalments: deduct TDS on each instalment as it's paid.

💡 ExampleRohit buys a ₹80 lakh flat from a resident seller, paying in two instalments. On each payment he deducts 1% (₹40,000 each, ₹80,000 total), pays the seller the rest, files Form 26QB within 30 days of each month-end, and hands the seller two Form 16B certificates. No TAN needed — just his PAN and the seller's.

4Deadlines and penalties

Miss the deadlines and it gets expensive:

Late deduction or deposit attracts interest at 1% / 1.5% per month under Section 201.
Late filing of Form 26QB attracts a fee of ₹200 per day under Section 234E (capped at the TDS amount).
Failure to deduct can make the buyer liable for the tax itself, plus penalty.

5Joint buyers and sellers: the rule changed on 1 October 2024

This is the change most likely to catch a reader, because the old position was widely relied on and is still repeated online.

The ₹50 lakh threshold used to be argued on a per-person basis. Two co-buyers purchasing a ₹90 lakh flat would each say their share was ₹45 lakh and conclude that no TDS applied. The point was litigated repeatedly.

With effect from 1 October 2024 the threshold is tested on the aggregate consideration payable by all transferees to all transferors. A ₹90 lakh property with two buyers and one seller now attracts TDS, and each buyer deducts on their proportionate share.

⚠️ ImportantThe amendment is prospective. Transactions completed before 1 October 2024 continue to be governed by the earlier position, which tribunals have confirmed.

6Form 26QB, and why no TAN is needed

Section 194-IA is deliberately built so that an ordinary individual buyer can comply without becoming a formal deductor.

You do not need a TAN. The deduction is reported on Form 26QB, a challan-cum-statement filed using PAN alone, and it must be filed within 30 days from the end of the month in which the deduction was made.

Where there are two buyers and one seller, two separate Form 26QB filings are required; two buyers and two sellers require four. Each combination of buyer and seller is a separate filing, which is the part people get wrong on joint purchases.

✅ TipAfter filing, download Form 16B from TRACES and give it to the seller. They cannot claim the credit cleanly without it, and it is your obligation to provide it.

7What it costs to get wrong

The buyer is the deductor, so the consequences of failure fall on the buyer, not the seller.

Interest at 1% per month for failing to deduct, and 1.5% per month for deducting but not depositing
A late-filing fee under section 234E of ₹200 per day for a late Form 26QB, capped at the amount of TDS
Disallowance risk and, in serious cases, penalty proceedings
Where the seller is a non-resident, section 194-IA does not apply at all — section 195 does, at much higher rates, and it does require a TAN

⚠️ ImportantThe non-resident point is the single most expensive error in this area. Confirm the seller's residential status before assuming a 1% deduction is sufficient.

8What counts toward the ₹50 lakh, and what the TDS is charged on

Two questions decide the arithmetic, and they have different answers.

The threshold is tested on the higher of the consideration and the stamp duty value of the property. So a flat bought for ₹48 lakh with a stamp duty value of ₹52 lakh is within the section even though the price is below ₹50 lakh.

Once the section applies, TDS at 1% is deducted on the whole amount, not merely the excess over ₹50 lakh. And the consideration includes charges incidental to the transfer — club membership, car parking, electricity and water connection, maintenance and similar payments to the seller — not only the headline price.

⚠️ ImportantAgricultural land is outside the section entirely, and the section applies only where the seller is a resident.

Key takeaways

Buying property worth ₹50 lakh+ (non-agricultural): the buyer deducts 1% TDS under Section 194-IA.
The 1% is on the entire consideration, not just the amount above ₹50 lakh.
No TAN needed — deposit via Form 26QB within 30 days of the month-end using your PAN.
Give the seller Form 16B (downloaded from TRACES) as their TDS certificate.
Seller without PAN → 20% TDS; NRI seller → Section 195 (not 194-IA), at higher rates.

Frequently asked questions

Is TDS on property 1% of the whole amount or only above ₹50 lakh?

It's 1% of the entire sale consideration once the value is ₹50 lakh or more — not just the portion above ₹50 lakh.

Do I need a TAN to deduct TDS on property?

No — Section 194-IA is an exception. You deposit the TDS using Form 26QB with your PAN; no TAN is required, which keeps it simple for individual buyers.

What if I'm buying from an NRI?

Section 194-IA doesn't apply to NRI sellers. Instead, TDS is deducted under Section 195 at the applicable capital-gains rate (much higher than 1%), and you do need a TAN. Get professional help for NRI property purchases.

When do I have to deposit the property TDS?

Within 30 days from the end of the month in which you made the payment (or credited the seller). Deposit it via Form 26QB; late deposit attracts interest and a Section 234E fee.

We are two buyers — is the ₹50 lakh limit tested per person?

Not any more. From 1 October 2024 the threshold is tested on the aggregate consideration payable by all buyers to all sellers. Two buyers of a ₹90 lakh flat are within the section and each deducts on their proportionate share. Transactions before that date follow the earlier per-person position.

How many Form 26QB filings do I need?

One for each buyer-seller combination. Two buyers and one seller means two filings; two buyers and two sellers means four. This is the part most often got wrong on joint purchases.

What is Form 16B and do I have to give it to the seller?

Form 16B is the TDS certificate for a property purchase. After Form 26QB is processed you download it from the TRACES portal and hand it to the seller. It is the buyer's obligation, and without it the seller cannot cleanly claim credit for the tax you deducted from their money — which is the most common cause of a dispute after an otherwise complete transaction.

I am paying in instalments for an under-construction flat — when do I deduct?

On every instalment, at the time of payment or credit, whichever is earlier — not once at the end. The ₹50 lakh threshold is tested on the total consideration for the property, so once the property crosses it, TDS applies to each instalment including those already below the limit individually. A separate Form 26QB is filed for each payment.

Is the ₹50 lakh tested on the price or the stamp duty value?

On the higher of the two. A flat bought for ₹48 lakh with a stamp duty value of ₹52 lakh is within the section. Once it applies, the 1% is deducted on the whole amount, not only the part above ₹50 lakh, and the consideration includes incidental charges such as parking, club membership and utility connections paid to the seller.