TDS on Property Sale – Rules, Process & Buyer Responsibilities
When purchasing real estate in India, buyers often focus on home loans, legal checks, and registration. But one equally important aspect is tax compliance — particularly TDS (Tax Deducted at Source) on property transactions. Governed by Section 194-IA of the Income Tax Act, 1961, this rule applies when a buyer purchases an immovable property (other than agricultural land) from a resident seller, and the transaction value exceeds ₹50 lakh.
What Is TDS on Property Sale?
TDS on property sale is a tax obligation placed on the buyer. If the value of the property exceeds ₹50,00,000, the buyer is required to deduct 1% of the total consideration as TDS and deposit it with the government. The deduction must be made at the time of payment or when the amount is credited to the seller — whichever is earlier. This provision helps the government track high-value transactions and ensure proper tax reporting by sellers.
Importantly, this 1% deduction is applicable on the entire property value, not just the amount exceeding ₹50 lakh. So if a flat is sold for ₹70 lakh, the buyer must deduct ₹70,000 as TDS and pay ₹69,30,000 to the seller.
How to File TDS on Property (Form 26QB)
After deducting TDS, the buyer must deposit it using Form 26QB, which is an online challan-cum-statement available on the TIN-NSDL website. This form must be submitted within 30 days from the end of the month in which the deduction is made. It’s important to note that no TAN is required for this — only PAN numbers of the buyer and seller are needed.
Once the TDS is deposited, the buyer must generate Form 16B (TDS certificate) from the TRACES portal and provide it to the seller within 15 days of filing Form 26QB. This certificate serves as proof of TDS deduction and is essential for the seller to claim credit while filing their income tax return.
Key Points Buyers Must Keep in Mind
While the overall process seems simple, there are several technical points that buyers often miss:
- TDS applies to all payments, even when made in installments. Deduct TDS with each installment.
- TDS must be paid on total value, not just the portion above ₹50 lakh.
- If the seller doesn’t furnish a valid PAN, TDS must be deducted at 20%, not 1%.
- In case of multiple buyers or sellers, each combination requires a separate Form 26QB.
- Form 26QB must be filed individually by each buyer for their share of the transaction.
Consequences of Non-Compliance
Failure to deduct or deposit TDS on time can result in serious consequences. The Income Tax Department may levy:
- Interest at 1% per month for late deduction, and 1.5% per month for late payment
- Late filing fee of ₹200 per day under Section 234E
- Penalty up to the TDS amount under Section 271H
- In rare cases, prosecution may also be initiated
These penalties make it crucial for buyers to understand and comply with TDS requirements from the beginning of the transaction.
Conclusion
TDS on property sale is not just a technicality — it’s a legal obligation that can’t be ignored. If you’re buying a property worth more than ₹50 lakh from a resident Indian, deducting and depositing 1% TDS is your responsibility. By filing Form 26QB on time and issuing Form 16B to the seller, you avoid legal trouble and ensure your transaction is compliant with tax regulations. If you're unsure about the process, it's always better to consult a tax professional or use a reliable service to handle the filing accurately.
FAQ's About TDS on Property Sale
1. What is TDS on property sale?
TDS on property sale refers to the 1% tax that the buyer must deduct from the sale amount when purchasing an immovable property (excluding agricultural land) for ₹50 lakh or more. It is deducted under Section 194-IA of the Income Tax Act and paid to the government.
2. Who is required to deduct TDS – the buyer or the seller?
The buyer is responsible for deducting TDS at the time of payment to the seller and depositing it with the Income Tax Department.
3. Is TDS applicable if the property price is exactly ₹50 lakh?
No, TDS under Section 194-IA is applicable only if the total sale consideration exceeds ₹50 lakh. If the property is priced at exactly ₹50,00,000 or less, TDS is not required.
4. How much TDS should be deducted on property purchase?
The buyer must deduct 1% of the total transaction value as TDS if the seller is a resident Indian. If the seller's PAN is not available, TDS must be deducted at 20%.
5. Do I need a TAN to file TDS on property?
No, buyers are not required to obtain a TAN. TDS can be paid using Form 26QB by simply providing the PAN of both buyer and seller.