When you buy a property in India, the transaction is not limited to just paying the seller. As a buyer, you also have the legal responsibility to deduct TDS (Tax Deducted at Source) on the sale amount under Section 194-IA of the Income Tax Act. Failing to do so can lead to penalties and interest.
This guide will explain the rules, deduction rate, process, and buyer responsibilities related to TDS on property sale, especially for transactions above ₹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.
