TDS on property purchase: section 194-IA and Form 26QB

Check the transaction year and the seller’s residence

This guide covers deduction events in FY 2025-26, from 1 April 2025 to 31 March 2026, using section 194-IA of the Income-tax Act, 1961. Its October 2026 publication date does not mean every later payment uses the same statutory numbering or form process. For transactions crossing into a later year, check the transition law by reference to the earlier payment or credit event.

Section 194-IA applies where the transferor is resident in India. Residence for tax purposes is not established merely by an Indian passport, Aadhaar, local bank account or address on the deed. Ask for the relevant residence declaration and obtain professional advice where facts suggest the seller may be non-resident. A buyer should resolve this before releasing an advance, not only before registration.

If the seller is non-resident, examine section 195 rather than applying 1% under section 194-IA by habit. Withholding, documentation and any lower-deduction process can be materially different. A transaction can involve resident and non-resident co-sellers, requiring careful allocation. The seller’s assurance that no capital gains tax will ultimately be payable does not itself authorise the buyer to ignore withholding.

Apply the ₹50 lakh test to the whole property

No deduction is required under section 194-IA only when both the consideration and stamp duty value are below ₹50 lakh. If either reaches ₹50 lakh, the threshold condition is met. At exactly ₹50 lakh, the exemption does not apply. Where applicable, deduction is based on the higher of consideration and stamp duty value, not merely the amount above ₹50 lakh.

For example, a purchase price of ₹48 lakh with stamp duty value of ₹52 lakh can trigger the provision. The simplified total TDS is ₹52,000 at 1%, assuming the normal rate applies. A price of ₹60 lakh does not attract TDS only on ₹10 lakh; the relevant higher-value base is used. Check the final valuation information rather than assuming the agreement price is the only figure.

From 1 October 2024, the law expressly aggregates amounts paid or payable by all transferees to all transferors for the property where there are multiple parties. Thus two buyers purchasing a ₹90 lakh flat for ₹45 lakh each cannot claim that each share is below the threshold. Apply the whole-property test and then allocate compliance consistently with ownership and payments.

Need help with this? Read our guide to TDS Return Filing – 24Q, 26Q & 27Q.

Identify consideration and excluded rural agricultural land

The property provision covers immovable property other than the agricultural land excluded by its definition. The relevant exclusion concerns rural agricultural land; an agricultural description in a revenue record does not by itself settle the issue. Municipal location, population and prescribed distance tests can matter. Obtain location evidence before assuming there is no withholding obligation.

Consideration includes specified incidental charges such as club membership, car parking, electricity or water facility fees, maintenance fees, advance fees and similar charges incidental to transfer. A buyer should review the full agreement and demand schedule rather than applying 1% solely to the basic sale-price line. Separate labels do not necessarily remove an amount from the statutory base.

For a builder transaction, reconcile the agreement value, incidental charges, stamp duty value and payment demands with the professional handling deduction. Distinguish the tax-withholding calculation from GST and stamp duty questions, which have their own legal rules. A lender’s disbursement worksheet may not answer all of them. Record the assumptions used so that the final payment can be reconciled without an unexpected shortfall.

Deduct at payment or credit and plan instalments

Deduction is required at the earlier of credit to the seller’s account or payment by any mode. It is not automatically postponed until registration, possession or the last instalment. An advance payment can therefore create a deduction event when the transaction meets the statutory conditions. Inform the person arranging the bank transfer before money is released.

Assume a resident seller’s property has consideration and stamp duty value of ₹80 lakh. If the first qualifying instalment is ₹20 lakh, ordinary 1% withholding on that instalment is ₹20,000, leaving ₹19,80,000 to the seller. Later instalments must also be handled, and the total deduction should reconcile with the applicable base. If stamp value is higher, obtain advice on the appropriate allocation and final adjustment.

Where a home loan funds the purchase, coordinate buyer, bank and seller instructions. The buyer’s statutory responsibility does not disappear because the lender transfers the money directly. Build the withholding into the payment schedule and sale documentation. Paying the seller the full gross amount and then funding TDS separately can leave you trying to recover money after the transaction has closed.

File Form 26QB and issue the certificate

For FY 2025-26 section 194-IA deductions, Form 26QB is the challan-cum-statement used to deposit and report the tax. The deadline is 30 days from the end of the month in which deduction occurs. A deduction on 10 June 2025 is therefore ordinarily due by 30 July 2025. This is not the standard monthly TDS deposit timetable copied from a salary checklist.

A TAN is not required for section 194-IA; the buyer uses PAN-based compliance. Enter buyer and seller PANs, address, property details, consideration, stamp duty value, payment and deduction particulars accurately. Save the acknowledgement and payment evidence. A bank debit alone does not prove every field in the filed statement is correct or that the seller received matching credit.

Form 16B is the TDS certificate to be furnished to the seller within 15 days from the due date for Form 26QB. Follow the applicable TRACES process after the statement is processed. Share the certificate and retain proof of delivery. The seller can then reconcile the tax credit while preparing the return. A sale deed recital that tax will be paid is not a substitute for actual filing and payment.

Handle joint buyers and sellers without losing allocation

For multiple buyers or sellers, the filing workflow generally requires separate buyer-seller combinations and the appropriate allocation of payment and deduction. Keep a matrix showing ownership share, actual consideration paid, seller entitlement and TDS reported. Do not mechanically divide everything equally where the deed and payment trail show a different arrangement.

Assume two equal buyers acquire a ₹1 crore property from two equal resident sellers, with no higher stamp value. Total normal TDS is ₹1 lakh. If each buyer pays each seller equally, each of the four buyer-seller combinations corresponds to ₹25 lakh consideration and ₹25,000 TDS in the simplified allocation. Instalments can add further filing events, so prepare the schedule before submitting forms.

The aggregation rule determines whether the transaction meets the threshold; the separate forms implement reporting and allocation. Confusing those two issues can cause both missed deductions and duplicated payments. Confirm PANs and names with documentary evidence, and ask all parties to review the allocation sheet. Preserve it with the agreement so a later correction request has a clear factual basis.

Calculate delay costs and correct errors promptly

Failure to deduct and failure to deposit after deduction attract different interest rules under section 201. Broadly, delayed deduction attracts 1% per month or part from when tax was deductible to actual deduction; delayed deposit attracts 1.5% per month or part from deduction to payment. Calendar-month counting can make even a short delay costly. Use exact dates rather than an annualised interest estimate.

Section 234E can impose a late-statement fee of ₹200 per day, limited to the amount of tax deductible. Interest and possible further consequences are separate. For a ₹60,000 deduction and an assumed ten-day statement delay, the simple fee illustration is ₹2,000, before considering interest or other applicable proceedings. Do not treat the fee cap as a cap on every consequence of non-compliance.

If you used a wrong PAN, year, value or payment detail, examine the Form 26QB correction facility and any approval requirements. Do not automatically pay a second time without determining what happened to the first payment. Keep the original acknowledgement, challan, agreement and corrected allocation. Reconcile the final credit with the seller after correction, rather than assuming submission alone has resolved the issue.

Use a closing checklist and separate final tax from TDS

Before closing, confirm tax residence, PAN status, the property threshold, valuation base, payment events and any prior deductions. Failure to furnish PAN can trigger the higher rate under section 206AA, generally 20% in this context; invalid or inoperative PAN situations need current-rule checking. Verify details early enough to resolve problems without holding up registration at the last moment.

The normal 1% section 194-IA rate is not increased by surcharge or health and education cess. But it is also not a calculation of the seller’s final capital gains liability. The seller reports the transaction, computes the gain and claims the TDS credit in the return. Reinvestment relief or a small actual gain does not automatically remove the buyer’s section 194-IA duty.

LawLine connects users with independent professionals for property documentation and tax compliance. Give the adviser the agreement, stamp valuation, residence information, PAN details, payment schedule and prior Forms 26QB. Ask for a written buyer-seller allocation and deadline calendar. A correctly drafted deed, timely withholding and matched tax credit are complementary safeguards; none should be assumed to replace the others.

Frequently asked questions