TDS on Property Sale: Section 194-IA & Form 26QB Guide
Whenever an immovable property changes hands in India for Rs 50 lakh or more, the buyer — not the seller — has a legal duty to withhold tax at source. This is governed by Section 194-IA, one of the most commonly missed compliances in real estate deals because it falls on the buyer rather than a business or employer. Missing it can mean interest, penalty, and a delayed registration process. Here's exactly how it works, from the 1% deduction to filing Form 26QB and issuing Form 16B.
What is Section 194-IA?
Section 194-IA of the Income Tax Act requires any person purchasing immovable property (other than agricultural land) to deduct tax at source if the sale consideration, or the stamp duty value of the property, is Rs 50 lakh or more. The provision applies to residential, commercial, and land transactions alike, and covers both resident and NRI sellers (though a separate, higher-rate TDS regime under Section 195 applies specifically to NRI sellers).
TDS rate and when it applies
| Particular | Rule |
|---|---|
| TDS rate | 1% of the sale consideration or stamp duty value, whichever is higher |
| Threshold | Applies if consideration or stamp duty value is Rs 50 lakh or more |
| Property covered | Any immovable property except agricultural land |
| PAN not available | TDS rate rises to 20% if the seller's PAN is not furnished |
| TAN requirement | Not required — buyer uses PAN to file Form 26QB |
Note that the 1% is deducted on the full consideration once the Rs 50 lakh threshold is crossed — it is not a slab-based deduction only on the amount above Rs 50 lakh.
Who deducts and pays — it's the buyer's job
Unlike most TDS provisions where an employer or business deducts tax on payments they make, here the buyer of the property is the deductor, even if they are a salaried individual with no other TDS obligations. The seller receives the net amount (consideration minus 1% TDS), and the buyer is responsible for depositing that 1% with the government and reporting it correctly. If the buyer fails to deduct or deposit the TDS, they — not the seller — are treated as an "assessee in default" and face interest and penalty.
How to pay TDS via Form 26QB — step by step
- Visit the income tax e-filing portal or TIN-NSDL's e-Payment section and select Form 26QB (TDS on sale of property).
- Enter PAN details of both buyer and seller, property address, date of agreement, total consideration, and date of payment/credit.
- The system computes 1% TDS automatically; choose to pay via net banking, debit card, or at an authorised bank branch.
- Generate and save the acknowledgement/challan — this becomes your proof of deduction and deposit.
- File Form 26QB within 30 days from the end of the month in which the deduction was made (for example, a deduction made on 10 August must be reported and paid by 30 September).
For payments made in instalments, each instalment attracts its own 1% TDS and a separate Form 26QB must be filed for each within the 30-day window measured from that instalment's month-end.
Form 16B — the TDS certificate for the seller
Once Form 26QB is filed and the tax deposited, the buyer must download Form 16B from the TRACES portal and issue it to the seller. This certificate is the seller's proof that TDS was deducted and deposited against their PAN, and it is what allows the seller to claim credit for that TDS while filing their own income tax return. Form 16B should typically be issued within 15 days from the due date of filing Form 26QB.
Joint buyers and joint sellers
When a property has more than one buyer or seller, TDS is applied proportionately to each buyer's share of the payment, and a separate Form 26QB is required for every buyer-seller pair. Two buyers purchasing jointly from one seller, for instance, would mean two 26QB filings — one from each buyer against the same seller — each reflecting that buyer's share of the consideration.
Penalty and interest for late deduction or payment
| Default | Consequence |
|---|---|
| Late deduction of TDS | Interest at 1% per month (or part of a month) from the date it was deductible to the date actually deducted |
| Late deposit of TDS | Interest at 1.5% per month (or part of a month) from the date of deduction to the date of deposit |
| Late filing of Form 26QB | Fee under Section 234E of Rs 200 per day of delay, capped at the TDS amount |
| Non-filing despite notice | Additional penalty under Section 271H, up to Rs 1 lakh, may be levied |
Buying or selling property and unsure how much TDS to deduct or deposit?
Check your TDS obligation on KyaTax →Frequently asked questions
Does the buyer need a TAN to deduct TDS under Section 194-IA?
No. Section 194-IA is one of the few TDS provisions where the deductor (buyer) does not need a TAN. The buyer simply uses their own PAN and the seller's PAN while filing Form 26QB online.
What if there are two buyers or two sellers in the transaction?
When there are multiple buyers or sellers, TDS is deducted proportionate to each buyer's share in the property, and a separate Form 26QB must be filed for every buyer-seller combination. For example, two buyers and one seller would require two separate 26QB filings, one per buyer.
Is TDS under 194-IA applicable if the property value is exactly Rs 50 lakh?
Yes. The threshold is "Rs 50 lakh or more", so a transaction valued at exactly Rs 50 lakh, or where either the sale consideration or the stamp duty value is Rs 50 lakh or above, attracts 1% TDS.
Related: All tools · More guides