TDS on Sale & Purchase of Property What Buyers & Sellers Must Know
When buying property in India, TDS on sale & purchase of property is a critical compliance step often missed by individuals. Under Section 194-IA of the Income Tax Act, buyers must deduct 1% TDS if the purchase value exceeds ₹50 lakh — even for a single flat or plot.
Let’s simplify this law with official guidance, expert insights, and a clear step-by-step process.
What is TDS on Sale of Property?
- Applicable Law: Section 194-IA, Income Tax Act, 1961
- Who deducts TDS? Property buyer (not the seller)
- When is it applicable?
- When the sale consideration exceeds ₹50 lakh
- Applies to residential, commercial property or land (not agricultural land)
- TDS Rate: 1% of sale consideration
- Form to File: Form 26QB (Challan-cum-statement)
Key Conditions under Section 194-IA
| Particulars | Details |
|---|---|
| Threshold Limit | ₹50,00,000 (sale value, not stamp duty) |
| TDS Rate | 1% (on entire consideration if above ₹50L) |
| Buyer Type | Any individual or entity (even if not liable for tax audit) |
| Seller’s PAN Mandatory | Yes. If not available → TDS @ 20% |
| TAN of Buyer | Not required |
| TDS Payment Deadline | Within 30 days from end of month of deduction |
| TDS Certificate to Seller | Form 16B, to be issued within 15 days of filing 26QB |
Step-by-Step: How to File Form 26QB Online
- Visit: https://tin.tin.nsdl.com/
- Go to ‘TDS on Property (Form 26QB)’
- Enter PAN of buyer & seller, property details, value
- Choose payment option (Net banking or e-payment)
- Submit and download the acknowledgment
- Generate Form 16B from TRACES portal after 5–10 days
💡 Expert View: Always verify the seller’s PAN via https://www.incometax.gov.in before filing, as wrong PAN leads to 20% TDS and no credit for the seller.
What if Payment is Made in Installments?
TDS of 1% applies on each installment, not just the final amount. Buyers must deduct and deposit TDS with Form 26QB every time a payment is made.
Legal Angle: What If You Don’t Deduct TDS?
Non-compliance can result in:
- Interest @ 1% per month (for non-deduction)
- Interest @ 1.5% per month (for non-payment after deduction)
- Penalty up to ₹1 lakh u/s 271H
- Late Fee of ₹200 per day under Section 234E
- No credit to seller unless TDS is deposited and Form 26QB is correctly filed
Refer: CBDT Circular No. 1/2014
Expert Tip: Common Mistakes to Avoid
- Using incorrect PAN (especially of co-owners)
- Forgetting TDS on installment payments
- Delaying Form 26QB filing → late fee applies
- Not generating Form 16B → seller may face issues claiming TDS credit
👉 Pro Tip: Keep a joint undertaking if there are multiple buyers or sellers to avoid future tax mismatches.
FAQs on TDS on Property Sale
Q1. Is TDS applicable if the property is exactly ₹50 lakh?
No. TDS applies only if sale price exceeds ₹50 lakh.
Q2. Can I claim TDS in ITR if I am the seller?
Yes. TDS reflects in your Form 26AS if PAN is correctly quoted.
Q3. What if property is jointly owned?
Check if individual share exceeds ₹50 lakh. If so, TDS is applicable even if total value is split.
Q4. Does TDS apply on under-construction property?
Yes, if payment to builder exceeds ₹50 lakh. TDS applies on each installment.
Summary
TDS on sale & purchase of property applies at 1% if the consideration exceeds ₹50 lakh. Buyers must file Form 26QB within 30 days and issue Form 16B. Failing to deduct or pay TDS may lead to penalties and interest under the Income Tax Act.
Conclusion
TDS on sale and purchase of property is not optional — it’s mandatory once the ₹50 lakh threshold is crossed. Timely deduction, filing of Form 26QB, and issuing Form 16B are crucial for legal compliance and avoiding penalties.
If you’re unsure how to proceed, Efiletax can help you file Form 26QB, generate Form 16B, and ensure all PAN and installment details are correct.