Understanding TDS on Property Purchase in India | 2025 Guide

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

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

Condition / Criterion	Value / Rule	Notes / Exceptions
Sale Consideration	≥ ₹50 lakh	TDS applies only if the property’s sale 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	Handled under Section 195	Higher TDS rates may apply depending on capital gains and DTAA benefits.
Form for Deposit	Form 26QB (Challan-cum-Statement)	Must be deposited within 30 days from the end of the month in which deduction is made.
TDS Certificate	Form 16B	Buyer must issue Form 16B to the seller.

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.

Form 16B: Information & Download Guide

Form 26QB is a challan-cum-statement filed by the property buyer (other than for agricultural land) to report TDS deducted on the transaction.
The buyer must deposit TDS through Form 26QB within 30 days from the end of the month in which it was deducted.
After depositing, the buyer needs to issue a TDS certificate in Form 16B to the seller (available on the TRACES portal within 10–15 days).
Mandatory details: PAN of both buyer and seller must be provided in Form 26QB.
Facility to file Form 26QB and make TDS payment is available on the NSDL website.

Steps to Download Form 16B from TRACES

Ensure the payment made via Form 26QB is reflected in Form 26AS.
Log in to the TRACES portal.
Go to the Download tab → Form 16B (for the buyer).
Enter the Seller’s PAN and the Acknowledgement Number of the property transaction.
Click Proceed → Submit Request after verifying details.
Wait a few hours, then go to Downloads tab → Requested Downloads.
Once the status shows ‘Available’, download the .zip file.
The password for the file is the Deductor’s Date of Birth (DDMMYYYY format).
Open the PDF inside and print Form 16B for issuing to the seller.

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.

Q5. Who is responsible for deducting TDS on property transactions?

Ans: The responsibility lies with the buyer of the property, not the seller. As per Section 194-IA, the buyer must deduct 1% TDS if the property value is ₹50 lakhs or more. Source: Income Tax Department

Q6. What is the applicable TDS rate and are surcharge/cess included?

Ans: The applicable TDS rate is 1% on the higher of the sale consideration or stamp duty value if it is ₹50 lakhs or more. Importantly, this rate does not attract additional surcharge or health & education cess. Source: Income Tax Department

Q7. How does the seller receive proof of TDS deduction?

Ans: The seller receives Form 16B, a TDS certificate generated by the buyer through the TRACES portal. This acts as official proof that tax was deducted and deposited. Source: Income Tax Department

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.