TDS on Property Purchase in India: Section 194-IA, Form 26QB, Form 16B Step-by-Step Guide

TDS on Property Purchase in India: Section 194-IA and Form 26QB

If you are buying a flat, an apartment, an independent house, a plot of urban land, or a commercial unit in India for Rs 50 lakh or more, the law assigns a tax compliance task to you, the buyer. You must deduct 1% of the consideration as TDS, deposit it with the government using Form 26QB, and issue a TDS certificate (Form 16B) to the seller. This is one of the most commonly missed compliance items for first-time home buyers because most people assume the registrar's office, the builder, or the seller is handling it. They are not.

This guide walks through Section 194-IA end to end: who must deduct, how to compute the TDS, how to file Form 26QB on the TIN/TRACES portal, how to generate Form 16B, what changed in Budget 2024, how to handle joint buyer and joint seller cases, what to do when the seller is an NRI, and the penalties for getting it wrong.

What Section 194-IA Says

Section 194-IA of the Income Tax Act 1961 was introduced in 2013 and has been refined several times since. The current rule has four moving parts:

1. Triggering transaction: transfer of any immovable property (other than agricultural land) by a resident transferor.
2. Threshold: total consideration of Rs 50 lakh or more.
3. Rate: 1% of the consideration (or stamp duty value, whichever is higher; see Budget 2024 change below).
4. Deductor: the buyer (transferee), regardless of whether the buyer is an individual, HUF, partnership, company, or otherwise.

The buyer must deduct TDS at the time of credit or payment, whichever is earlier. For most property deals this means at the time you make a payment to the seller (booking amount, instalment, or final balance).

Importantly, Section 194-IA does not require the buyer to have a TAN. The buyer's PAN is sufficient. This is unique among TDS sections and was deliberately designed to keep the compliance burden manageable for individual home buyers.

Who Is Responsible: The Buyer, Not the Seller

A common misconception is that the seller pays the TDS, the registrar deducts it, or the builder takes care of it. None of that is correct under Section 194-IA.

The legal responsibility sits squarely with the buyer:

• The buyer must compute and deduct 1% from each payment to the seller.
• The buyer must file Form 26QB and deposit the TDS with the government.
• The buyer must download Form 16B from TRACES and give it to the seller.
• If the buyer fails on any of these, the buyer (not the seller) faces interest under Section 201 and penalty under Section 271C.

The seller's only role is to provide a valid PAN. If the seller does not provide a PAN, TDS must be deducted at 20% under Section 206AA, instead of 1%.

What Is the "Consideration" for the 1% TDS

The Rs 50 lakh threshold and the 1% rate apply to the total consideration for the transfer of the property. This includes:

• The base sale price (the price agreed in the sale agreement)
• Club membership fees, parking charges, advance maintenance, electricity and water connection charges, and any other amounts paid to the builder or seller in connection with the property
• Floor rise charges, preferred location charges (PLC), and similar add-ons
• All instalments under a construction-linked or possession-linked plan

It does not include GST charged separately on the sale (where applicable, for under-construction property).

A CBDT clarification through Finance Act amendments confirmed that the consideration for Section 194-IA is the all-in payable amount, not just the base price.

Budget 2024 Change: Stamp Duty Value Now Counts

Before October 1, 2024, the 1% TDS was computed on the agreement value. The Finance (No. 2) Act 2024 amended Section 194-IA(2) to align it with Section 50C and Section 56(2)(x): the TDS is now computed on the higher of:

• The total consideration (agreement value plus all add-ons), or
• The stamp duty value of the property (the value adopted by the state government for stamp duty purposes, also called circle rate or guidance value).

This change is effective October 1, 2024. If the stamp duty value is higher than the agreement value, you must compute 1% on the stamp duty value, even though the actual money paid is the agreement value. This closes a workaround where buyers under-reported the agreement value to escape the threshold.

A practical example:

• Agreement value: Rs 48 lakh
• Stamp duty value: Rs 55 lakh
• Earlier rule: no TDS (agreement value below Rs 50 lakh threshold)
• Post-October 1, 2024 rule: TDS at 1% on Rs 55 lakh = Rs 55,000

How the Rs 50 Lakh Threshold Works

The Rs 50 lakh is judged on the total transaction value, not on each instalment or each buyer's or seller's share. The most common scenarios:

Single buyer, single seller, full payment upfront: Straightforward. If the consideration is Rs 50 lakh or more, deduct 1% on the full amount and file one Form 26QB.

Single buyer, single seller, instalments (under-construction property): The threshold is judged once on the total consideration. If the total agreement value is Rs 80 lakh, every single instalment (even an early Rs 5 lakh booking amount) is subject to TDS at 1%. Each instalment requires a separate Form 26QB filed within 30 days of the end of the month of that instalment. You cannot batch them into one filing.

Joint buyers (e.g., husband and wife purchasing together): Each buyer must file a separate Form 26QB for the share they pay to the seller. If a Rs 80 lakh property is bought 50:50 by two co-owners, each of them files Form 26QB for Rs 40 lakh and deducts Rs 40,000. The Rs 50 lakh threshold is checked on the total Rs 80 lakh, not on the per-buyer Rs 40 lakh, so TDS is mandatory even though each buyer's share is below Rs 50 lakh.

Joint sellers (e.g., siblings inheriting a property): For each seller, the buyer must file a separate Form 26QB. Two sellers means two Form 26QBs. The TDS is the seller's pro-rata share of the consideration.

Both joint buyers and joint sellers: The number of Form 26QBs is the product of buyers and sellers. Two buyers and two sellers means four Form 26QBs (each buyer files one for each seller). Each filing reflects that buyer's payment to that seller.

This per-pair filing rule is procedurally heavy, but it is what the form structure on the portal enforces. Each Form 26QB allows only one buyer PAN and one seller PAN.

How to File Form 26QB: Step by Step

Form 26QB is a combined challan-cum-statement. Filing it deposits the TDS with the government and also reports the deduction to the Income Tax Department in one workflow. Here is the full procedure.

Step 1: Gather the Information

You will need:

• Buyer details: PAN, full name, complete address, mobile, email
• Seller details: PAN, full name, complete address. If joint sellers, all sellers' PANs and the share each is receiving
• Property details: full address, type (land, building, both), date of agreement, date of payment
• Financial details: total consideration, stamp duty value, amount paid in this instalment, TDS amount (1% of the relevant base)
• Date of payment and date of deduction (these can be the same)

Step 2: Log In to the TIN Protean / e-Filing Portal

There are two routes for filing Form 26QB:

Route 1 (older route, still active): TIN-NSDL/Protean Portal

1. Go to tin-nsdl.com (now also accessible via Protean's TIN portal).
2. Click Services > TDS on sale of property.
3. Select Online form for furnishing TDS on property (Form 26QB).

Route 2 (newer, recommended): Income Tax e-Filing Portal

1. Log in to incometax.gov.in using the buyer's PAN.
2. Go to e-File > e-Pay Tax > New Payment.
3. Select 26QB (TDS on Sale of Property).

Step 3: Fill In the Form

The form has four sections:

1. Buyer details: PAN, name, address, contact. The portal autofills name and address from the PAN database; correct it if needed.
2. Seller details: PAN and name. The portal validates the PAN and pulls the registered name. Mismatches will block submission.
3. Property details: address, type, date of agreement, date of payment.
4. Tax details: total consideration, stamp duty value, amount paid in this instalment, rate (1%), TDS amount, interest (if any), fee (if any).

The portal calculates the TDS automatically once you enter the consideration and confirm the rate. Cross-verify the figure before proceeding.

Step 4: Pay the TDS

After submitting Form 26QB, choose the payment mode:

• Net banking (most authorised banks)
• Debit card (selected banks)
• Pay at the bank counter (visit an authorised branch with the printed challan and a cheque)
• UPI (available on the e-filing portal)

On successful payment, the portal generates a challan with a Challan Identification Number (CIN), Bank Reference Number (BRN), and a token. Save the challan as PDF.

Step 5: Wait for TRACES to Process

After you pay, TRACES processes the Form 26QB within 5 to 7 working days. Once processed, the deduction reflects in the seller's Form 26AS, AIS, and TIS, and Form 16B becomes available for download by the buyer.

Step 6: Download and Issue Form 16B

1. Log in to tdscpc.gov.in (TRACES) as a taxpayer using the buyer's PAN.
2. Go to Downloads > Form 16B (For Buyer).
3. Enter the assessment year, the seller's PAN, and the acknowledgement number from Form 26QB.
4. Submit the request. TRACES processes it and makes the certificate available under Downloads > Requested Downloads within a few hours.
5. Download Form 16B as PDF and email or hand it over to the seller.

The deadline to issue Form 16B is within 15 days from the due date of filing Form 26QB. For example, if you paid the seller in May 2026, Form 26QB is due by June 30, 2026, and Form 16B must reach the seller by July 15, 2026.

Due Dates Summary

A worked example:

• Payment to seller on April 15, 2026 → TDS deducted on April 15
• Form 26QB due by May 30, 2026 (30 days from end of April)
• Form 16B due by June 14, 2026

For instalment payments, this clock restarts for each instalment.

When the Seller Is an NRI: Section 195, Not Section 194-IA

Section 194-IA applies only when the seller is a resident of India. If the seller is a Non-Resident Indian (NRI) or a foreign national selling Indian property, Section 195 applies instead. The differences are significant:

For an NRI seller, the buyer often pays TDS on the full consideration unless the NRI seller obtains a Lower Deduction Certificate (LDC) under Section 197 from the Assessing Officer specifying the actual capital gains and a lower TDS amount. Filing Form 27Q is procedurally heavier than Form 26QB and usually requires a tax consultant.

If you are not certain whether the seller is a resident or an NRI, ask for the seller's residential status declaration in writing and verify the seller's PAN. A wrongly chosen route (filing 26QB when 195 applies, or vice versa) leaves the buyer exposed to short-deduction interest and penalty.

Penalties: What Happens If You Miss the TDS

The Income Tax Act treats failures under Section 194-IA seriously, and the buyer carries the full liability.

Section 201(1A): Interest on Late Deduction or Late Deposit

• 1% per month (or part of a month) if TDS is not deducted, from the date it should have been deducted to the date of actual deduction.
• 1.5% per month (or part of a month) if TDS is deducted but not deposited on time, from the date of deduction to the date of deposit.

Section 234E: Late Filing Fee for Form 26QB

If Form 26QB is filed after the 30-day window, a fee of Rs 200 per day of delay applies, capped at the TDS amount. This is in addition to Section 201 interest.

Section 271C: Penalty for Failure to Deduct

If you fail to deduct TDS at all, the Assessing Officer can levy a penalty under Section 271C equal to the amount of TDS not deducted. On a Rs 80 lakh purchase where Rs 80,000 should have been deducted, the penalty alone is Rs 80,000, on top of the original TDS still being payable plus interest.

Section 271H: Penalty for Late or Incorrect Filing

If Form 26QB is not filed within one year of the due date, an additional penalty of Rs 10,000 to Rs 1,00,000 can be levied under Section 271H. It also applies to incorrect filings (wrong PAN, wrong amount, wrong section code).

Practical Risk: Ongoing Liability Until Cured

Importantly, Section 201 keeps the interest clock running until the TDS is actually deposited. A buyer who realises five years later that Form 26QB was missed will pay 1% per month interest for the entire period, plus the original TDS, plus a possible 271C penalty. The faster you cure a missed deduction, the smaller the liability.

Common Mistakes to Avoid

Treating the threshold as per-buyer or per-seller: The Rs 50 lakh threshold is on the total consideration. Joint buyers cannot escape TDS by splitting the purchase below Rs 50 lakh per head.

Forgetting instalment payments: Each instalment is a separate trigger. Buyers under construction-linked plans often deduct TDS only on the final payment and miss the booking amount and intermediate instalments. Each missed instalment attracts its own interest under Section 201.

Wrong PAN for the seller: A non-resident seller's PAN does not automatically mean Section 194-IA. The 1% rate applies only if the seller is a tax resident of India for the year of transfer. Always verify residential status in writing.

Missing the stamp duty value comparison: Post-October 1, 2024, you must compare the agreement value with the stamp duty value and apply 1% on the higher. Many buyers continue to compute TDS on the agreement value alone, which understates the deduction.

Single Form 26QB for joint sellers: Each seller requires a separate Form 26QB. The portal does not allow multiple seller PANs in a single filing.

Late Form 16B issuance: The seller cannot claim the TDS credit cleanly until Form 16B is in hand. Sellers often delay registration of the property or insist on the 1% being held in escrow until Form 16B is received. Issuing Form 16B promptly is good practice and a contractual obligation in many sale deeds.

Assuming the builder or registrar handles it: They do not. Sub-registrars verify stamp duty payment, not TDS. Builders may help the buyer with the procedure as a service, but the legal liability stays with the buyer.

Quick Compliance Checklist for the Buyer

1. Confirm the seller's residential status (resident vs NRI) and PAN.
2. Compare the agreement value with the stamp duty value; pick the higher as the TDS base.
3. Check whether the threshold of Rs 50 lakh on total consideration is met.
4. Compute 1% TDS on the relevant base for each payment to each seller.
5. Pay the TDS and file Form 26QB within 30 days from the end of the month of deduction.
6. Save the challan PDF.
7. Wait 5 to 7 working days, then download Form 16B from TRACES.
8. Hand Form 16B to the seller within 15 days of the Form 26QB due date.
9. Repeat for every instalment and every seller.

Tax Garden Handles Form 26QB End to End

Tax Garden's tax compliance services cover Form 26QB filing for property buyers. We confirm the seller's residential status, compare the agreement value against the stamp duty value, file separate Form 26QBs for joint buyers and joint sellers, deposit the TDS within the 30-day window, download Form 16B from TRACES, and hand it to the seller. For NRI sellers, we also handle the TAN application and Form 27Q under Section 195.

For related compliance, see our guides on the TDS rate chart for FY 2026-27, TDS and TCS changes for FY 2026-27, TDS and TCS section mapping under the new Act, TDS return filing on Form 24Q and 26Q, and our income from house property guide for what happens after you take possession.

Frequently Asked Questions

Do I need a TAN to file Form 26QB?

No. Section 194-IA is the only TDS section where the deductor (buyer) does not need a TAN. The buyer's PAN is enough. This was a deliberate design choice so individual home buyers do not have to register a TAN for a one-off property purchase.

Is TDS applicable if my property purchase is exactly Rs 50 lakh?

Yes. The threshold is 'Rs 50 lakh or more', so a purchase of exactly Rs 50 lakh attracts 1% TDS = Rs 50,000. The threshold is judged on the total consideration including parking, club fees, PLC, and similar add-ons (excluding GST).

What if my agreement value is Rs 48 lakh but the stamp duty value is Rs 55 lakh?

Post-October 1, 2024 (Budget 2024 amendment), TDS is computed on the higher of the agreement value or the stamp duty value. Since the stamp duty value of Rs 55 lakh is above the Rs 50 lakh threshold and is higher than the agreement value, you must deduct 1% on Rs 55 lakh = Rs 55,000.

I am buying a Rs 80 lakh flat jointly with my spouse, 50:50. Do we each need to file Form 26QB?

Yes. Each co-buyer files a separate Form 26QB for their share (Rs 40 lakh each) and deducts Rs 40,000 each. The Rs 50 lakh threshold is judged on the total Rs 80 lakh, not on each buyer's Rs 40 lakh share, so TDS is mandatory even though each share is below Rs 50 lakh individually.

The seller is an NRI. Can I still use Form 26QB?

No. For NRI sellers, Section 195 applies, not Section 194-IA. You must obtain a TAN, deduct TDS at the long-term or short-term capital gains rate (12.5% for LTCG on transfers on or after July 23, 2024, or slab rates for STCG, plus surcharge and cess), and file Form 27Q quarterly. The seller can apply for a Lower Deduction Certificate under Section 197 to reduce the TDS to the actual capital gains amount.

I missed deducting TDS on a property I bought two years ago. What do I do now?

File Form 26QB immediately and pay the TDS along with interest under Section 201(1A) at 1% per month for late deduction and 1.5% per month for late deposit, calculated from the original deduction date. Filing now also avoids escalation to a Section 271C penalty equal to 100% of the TDS amount. Section 271H may add another Rs 10,000 to Rs 1,00,000 if more than one year has passed. The longer you wait, the higher the interest. A tax professional can help you compute the cumulative liability and file the correction.

When does the seller get credit for the TDS in their Form 26AS?

After Form 26QB is processed by TRACES (typically 5 to 7 working days from payment), the deduction reflects in the seller's Form 26AS, AIS, and TIS. The seller can then claim the TDS credit when filing their ITR for that financial year. Form 16B, which the buyer downloads and issues, is the formal certificate evidencing the deduction.

Are agricultural lands covered by Section 194-IA?

No. Section 194-IA explicitly excludes agricultural land, regardless of value. However, only rural agricultural land is fully exempt under capital gains as well; urban agricultural land is treated as a capital asset and may attract capital gains tax for the seller, but Section 194-IA TDS still does not apply. The exclusion is based on the land's classification, not the use.

Sources

This guide is verified against Section 194-IA, Section 195, Section 197, Section 201, Section 206AA, Section 234E, Section 271C, and Section 271H of the Income Tax Act 1961, Rule 30 and Rule 31A of the Income Tax Rules, the Form 26QB and Form 16B procedure documented on the TRACES (tdscpc.gov.in) and TIN Protean (tin-nsdl.com) portals, and the Finance (No. 2) Act 2024 amendment to Section 194-IA(2) effective October 1, 2024, that introduced the higher-of-consideration-or-stamp-duty-value rule. Cross-checked against ClearTax, Tax2win, BajajFinserv, IndiaFilings, and TDSMAN coverage as of May 2026. Rates, thresholds, and section references should be confirmed against incometaxindia.gov.in and the latest Finance Act before filing any specific transaction.