Understanding TDS on Purchase of Property in India: Complete Guide 2025

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 2025, so you don’t get caught unaware.

Table of Contents

1. What Is TDS on Purchase of Property? 
2. When Does It Apply & Which Properties Are Covered 
3. Important Legal Provisions & Recent Updates (FY 2025-26) 
4. How to Calculate TDS Amount 
5. Step-by-Step Guide to Deduct & Pay TDS 
6. Forms & Documentation Required 
7. Special Cases: NRIs, Instalments, Joint Ownership 
8. Common Mistakes & Penalties for Non-Compliance 
9. FAQs

1. What Is TDS on Purchase of Property? 

• 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 when making payment to the seller. It ensures tax transparency in high-value property transactions. 
   

 2. When Does It Apply & Which Properties Are Covered

   3. Important Legal Provisions & Recent Updates (FY 2025-26) 

• The government has clarified that the TDS must be deducted on the higher of the sale consideration or the stamp duty value (SDV).
• As of April 2025, the provisions under Section 206AB (which imposes higher TDS for non-filers) are not applicable to property transactions under Section 194-IA.
• PAN-Aadhaar linking: Sellers must have correct PAN details; absence of valid PAN can lead to higher withholding/deduction rates.

 4.  How to Calculate TDS Amount 

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 = 1% of ₹80,00,000 = ₹80,000.

5. Step-by-Step Guide to Deduct & Pay TDS

• Verify seller’s PAN & property details.
• Fill out Form 26QB (online) with buyer & seller PANs, address, sale consideration, etc. 
• Deduct 1% TDS at the time of payment or credit, whichever is earlier.
• Deposit TDS using Form 26QB (electronically via NSDL / TIN-NSDL) within 30 days from the end of the month in which deduction was made. 
• Obtain Form 16B (TDS certificate) and issue it to the seller. 

 6. Forms & Documentation Required

• Valid PAN of both buyer & seller. 
• Complete address & legal details of property. 
• Sale agreement showing date, value, advance payments (if any). 
• Challan or proof of TDS payment. 
• Form 26QB (challan-cum-statement) and acknowledgment. 
• Form 16B (for seller). 

7. Special Cases: NRIs, Joint Ownership, Instalments

• NRI Sellers: Transactions involving Non-Resident Indians are governed by Section 195, which may require different withholding rates (often higher).
• Joint Ownership: If there are multiple buyers/sellers, each share’s TDS may need separate entry in the forms.
• Instalment Payments: TDS must be deducted on each instalment where payment happens.

8. Common Mistakes & Penalties for Non-Compliance 

Mistakes to Avoid: 

• Using sale value only when Stamp Duty Value is higher misses legal requirement. 
• Failing to issue Form 16B to the seller. 
• Delay in depositing TDS or late filing of Form 26QB. 
• Incorrect PAN details for buyer or seller. 

Penalties & Consequences:

• Interest for delayed deduction or late payment. 
• Penalties under income tax laws for non-compliance. 
• Possible legal liabilities, complications in seller’s tax returns. 

9. FAQs

Q1. Is agricultural land covered under TDS Section 194-IA?

Ans: No. Agricultural land transactions are excluded from TDS under Section 194-IA. 

Q2. What if the seller doesn’t provide a PAN? 

Ans: If valid PAN is not provided, a higher rate of TDS may apply. The buyer must also take care to collect a valid PAN to avoid issues later.

Q3. What is the deadline to deposit TDS?

Ans: : TDS must be deposited within 30 days from the end of the month in which the deduction was made. 

Q4. How can I claim TDS deduction in my Income Tax Return (ITR)?

Ans: Ensure the TDS shows up in your Form 26AS, have Form 16B from the buyer, and report the transaction correctly in your ITR form. Any mismatch in PANs or details may cause issues.

Conclusion

TDS on property purchase in India is a legal requirement designed to ensure transparency, proper tax reporting, and timely revenue collection. For any property deal over ₹50 lakh (excluding agricultural land), the buyer must deduct 1% TDS under Section 194-IA, file Form 26QB, issue Form 16B, and ensure all PAN details are correct. 

Staying updated with latest amendments, avoiding common mistakes, and having proper documentation will help make your property transaction smooth, compliant, and hassle-free.

Disclaimer: 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.