Menu
TDS_on_Property_Purchase_When_and_How_to_Deduct_1%_TDS

TDS on Property Purchase: When and How to Deduct 1% TDS

Buying a property in India is a major financial decision—but did you know that as a property buyer, you may have a legal obligation to deduct TDS (Tax Deducted at Source) before making the payment to the seller?
As per the Income Tax Act, Section 194-IA, buyers are required to deduct 1% TDS on the sale consideration of immovable property (other than agricultural land) if the transaction value exceeds ₹50 lakh. Failing to do so can attract penalties, interest, and even scrutiny from the Income Tax Department.
Here’s a complete step-by-step guide to understand when, how, and why TDS must be deducted when purchasing property in India.

🏡 Applicability of TDS on Property Purchase

When is TDS required?
TDS is applicable under Section 194-IA of the Income Tax Act if:
  • The sale value (not the stamp duty value) of the property is ₹50 lakh or more.
  • The property is immovable (includes flats, plots, commercial property, and buildings).
  • The property is not agricultural land.
Who is liable to deduct?
  • The buyer (transferee) is responsible for deducting TDS.
  • It applies even if the buyer is purchasing from an individual (not just from builders or developers).
  • TDS applies even if payment is made in instalments.
Example:
If you are buying an apartment for ₹70 lakh, you must deduct ₹70,000 (1%) as TDS and pay only ₹69.3 lakh to the seller.

🧾 Documents and Details Required

Before proceeding with the TDS deduction, the buyer needs the following:
  • PAN of buyer and seller
  • Property address and details
  • Agreement value
  • Date of transaction/payment
  • Mode of payment
Note: PAN of the seller is mandatory to avoid deduction at a higher rate (20%).

📝 Step-by-Step Guide to Deduct and Deposit TDS

You do not need a TAN (Tax Deduction and Collection Account Number) to deduct TDS on property. Here’s how you can do it:
Step 1: Visit the TIN NSDL Website
Go to https://www.tin-nsdl.com → Select “TDS on Sale of Property (Form 26QB)” under e-payment.
Step 2: Fill in Form 26QB
Complete the online form with:
  • Property and transaction details
  • Buyer and seller details
  • PAN numbers
  • Payment details (whether full or instalment)
Step 3: Make the Payment
You can pay TDS online using:
  • Net banking
  • Debit card (for select banks)
You’ll receive an acknowledgement number and Form 26QB once the payment is completed.
Step 4: Generate and Issue TDS Certificate (Form 16B)
After 3–5 working days:
  1. Register on https://www.traces.gov.in
  2. Download Form 16B (TDS certificate) and issue it to the seller within 15 days of filing Form 26QB.

🛑 Consequences of Non-Compliance

Failure to deduct or deposit TDS can result in:
  • Interest: 1% per month for late deduction, and 1.5% per month for late deposit.
  • Penalty: ₹200 per day for delay in filing Form 26QB.
  • Prosecution: In extreme cases, under Section 271H and 276B.

🔄 Multiple Buyers or Sellers? Here’s What to Do

If there are multiple buyers or sellers, TDS is calculated individually based on the share of each party.
Example:
  • Buyer A and B jointly buy a property for ₹80 lakh.
  • Share of each buyer: ₹40 lakh (below ₹50 lakh)
  • Technically, TDS may not be applicable if each buyer pays less than ₹50 lakh and transaction is structured accordingly. However, the Income Tax Department may still raise queries in such cases. Legal and tax advice is highly recommended.

🏢 RealtyLegal's Role in Your Transaction

Many buyers are unaware of their obligation to deduct TDS during property purchases. At RealtyLegal, we assist clients with:
  • TDS compliance and filing of Form 26QB
  • Verification of seller’s PAN and documents
  • Legal vetting of sale agreement and sale deed
  • Coordination with CA or financial advisors to ensure smooth, penalty-free transactions
What to Look For:
  • Valid RERA registration number
  • Approved plan and land status
  • Developer credentials and complaints (if any)
📝 Tip: If the project is not RERA registered, it is illegal to advertise or sell units before completion.
If the landowner is named as co-promoter under RERA, the agreement must clearly indemnify them from construction and marketing liabilities.

✅ Quick Checklist Before Deducting TDS

  • Is the property value ₹50 lakh or more?
  • Do you have the seller’s PAN?
  • Have you filled Form 26QB correctly?
  • Have you downloaded and issued Form 16B?
  • Have you kept payment proofs and certificates for future reference?

🧠 Final Thoughts

TDS on property purchases is a small but critical legal step that ensures compliance with income tax laws. While the process is relatively straightforward, incorrect deductions or missed filings can create legal headaches down the line.
If you’re unsure how to proceed, consult a professional or let RealtyLegal handle it for you — so your dream home doesn’t come with tax troubles.
📲 Reach out via www.realtylegal.in to ensure your property transaction is legally secure and fully compliant.

You May Like