Buying property in India isn't just about choosing the right location. There are legal and tax rules to follow, especially when it comes to TDS (Tax Deducted at Source) on property purchase. This guide will walk you through what, when, how, and where of TDS compliance in 2026, so you don’t get caught unaware.
Under Section 194-IA of the Income Tax Act, the buyer of immovable property (other than agricultural land) must deduct 1% TDS if the total sale consideration exceeds ₹50 lakh.
The TDS amount is paid by the buyer before or at the time of making payment to the seller. It ensures tax transparency in high-value property transactions.
| Condition / Criterion | Value / Rule | Notes / Exceptions |
|---|---|---|
| Sale Consideration | ≥ ₹50 lakh | TDS applies only if the property value is ₹50 lakh or more |
| Type of Property | Residential or Commercial | Agricultural land is excluded |
| Applicable TDS Rate | 1% of Sale Consideration | Deducted by buyer at the time of payment |
| Seller’s Status | Resident (Indian) | Covered under Section 194-IA |
| Non-Resident Seller | Covered under Section 195 | Higher TDS rates may apply depending on capital gains and DTAA |
| Form for Deposit | Form 26QB | Must be deposited within 30 days from end of month of deduction |
| TDS Certificate | Form 16B | Buyer must issue to seller |
Formula:
TDS amount = 1% × Sale Consideration (or SDV, whichever is higher)
If payments are made in instalments, TDS must be deducted proportionately on each instalment.
Example:
If property is sold for ₹80 lakh, TDS = ₹80,000
Verify seller’s PAN and property details
PAN of buyer and seller
NRI Sellers: Covered under Section 195 with different and often higher TDS rates
Mistakes to Avoid:
Penalties:
Form 26QB is a challan-cum-statement filed by the property buyer to report TDS deducted.
Q1. Is agricultural land covered?
Ans: No, it is excluded under Section 194-IA
Q2. What if seller does not provide PAN?
Ans: Higher TDS may apply. Always collect valid PAN
Q3. What is the deadline?
Ans: Within 30 days from end of the month of deduction
Q4. How to claim TDS in ITR?
Ans: Ensure it reflects in Form 26AS and use Form 16B
Q5. Who deducts TDS?
Ans: Buyer is responsible
Q6. What is the TDS rate?
Ans: 1% without surcharge or cess
Q7. Proof of deduction?
Ans: Form 16B issued to seller
TDS on property purchase in India is a legal requirement that ensures transparency and proper tax compliance. For any property transaction above ₹50 lakh, the buyer must deduct 1% TDS under Section 194-IA, file Form 26QB, and issue Form 16B.
Staying updated with latest rules in 2026, avoiding errors, and maintaining proper documentation will help ensure a smooth and compliant property transaction.
This blog has been written exclusively for educational purposes. The information mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
