TDS on Property Purchase Under Section 194-IA: The Buyer's Complete Checklist

A buyer who has just agreed on a price for a flat, arranged the home loan, and is ready to pay usually assumes the only people involved in moving the money are themselves, the seller, and the bank. Then a lawyer or the seller's chartered accountant mentions Section 194-IA, and the buyer realises they're expected to hold back 1% of the payment, deposit it with the government themselves, and hand the seller a certificate for it, all before the sale can close cleanly. Missing this step doesn't just create paperwork trouble later. It can hold up registration, delay a home loan disbursement, and leave the buyer personally on the hook for tax that was never actually theirs to begin with.

The 1% Rate and the Rs 50 Lakh Threshold

Section 194-IA applies whenever a resident buyer purchases immovable property, residential, commercial, or a plot, other than agricultural land, from a resident seller. Once the transaction value reaches Rs 50 lakh, the buyer must deduct tax at 1% of the amount paid or credited to the seller and deposit it with the government instead of handing over the full sum. The threshold isn't a slab: there's no lower deduction on the first Rs 50 lakh and a higher one above it. Cross the threshold, and 1% applies to the entire consideration from the first rupee. At exactly Rs 50 lakh, TDS already applies, since the exemption only covers a value genuinely less than that figure, which is why buyers who assume Rs 50 lakh itself is still safe usually find out otherwise from their registrar or bank.

Why the Stamp Duty Value Can Matter More Than the Agreement Price

For years, some buyers and sellers understated the agreement value on paper while the property's stamp duty value, the figure state authorities use to charge registration duty, told a different story. An amendment effective 1 April 2022 closed that gap for TDS purposes specifically: the buyer must now compare the actual sale consideration with the property's stamp duty value and deduct 1% on whichever figure is higher. If a flat is sold for Rs 48 lakh on paper but carries a stamp duty value of Rs 55 lakh, TDS is computed on Rs 55 lakh, not the lower agreement figure, and the exemption for values under Rs 50 lakh only applies if both the consideration and the stamp duty value fall below that mark. A buyer relying purely on the agreement price to decide whether TDS applies at all, or how much, is checking the wrong number.

What the Buyer Actually Has to Do

Unlike most other TDS obligations, a property buyer doesn't need a Tax Deduction Account Number for this specific deduction. The law lets an individual buyer use their own PAN, along with the seller's PAN, directly on Form 26QB, a combined challan and statement filed online through the income tax portal. This has to be done within 30 days from the end of the month in which the payment or credit to the seller happened, not the usual 7th-of-the-next-month rule that applies to routine TDS deposits. A payment made in June, for instance, gives the buyer until 30 July to file Form 26QB and deposit the tax. Once that's done, there's one more obligation: downloading Form 16B from TRACES and handing it to the seller within 15 days of the Form 26QB due date, so the seller has proof of the credit when they file their own return. For a property paid in installments, such as an under-construction flat, this entire cycle, deduction, Form 26QB, Form 16B, repeats for every installment paid, not just the final one.

Common Mistakes Buyers Make

A handful of mistakes account for most of the trouble buyers run into with this section, and nearly all of them are avoidable with a bit of planning before the sale deed is signed.

• Assuming multiple buyers or sellers split the Rs 50 lakh threshold: for years this was a genuine grey area, with some rulings accepting that each co-buyer's individual share could be tested separately against the limit. That reading has since been closed by an aggregation rule, effective from 1 October 2024, that looks at the total consideration payable across all buyers and sellers on the transaction, not any one person's slice of it. Structuring a joint purchase around the older interpretation is no longer a safe bet.
• Missing the 30-day Form 26QB deadline by confusing it with the standard monthly TDS deposit rule: property TDS runs on its own 30-days-from-month-end clock, and treating it like a routine 7th-of-next-month deposit is one of the most common timing errors.
• Deducting only on the agreement value when the stamp duty value is higher, instead of comparing the two and using the larger figure.
• Believing the bank handles this automatically because the purchase involves a home loan: the bank disburses funds toward the purchase, but the obligation to deduct and deposit TDS on the full consideration still sits with the buyer, not the lender.
• Treating the seller's TDS credit as their final tax bill on the sale: it's only an advance credit toward whatever capital gains tax the seller actually owes, adjusted when they file their return, and it can fall well short of, or exceed, the real liability.
• Not checking the seller's residential status before applying this section: if the seller is a non-resident, Section 194-IA doesn't apply at all. Section 195 does instead, with no threshold and a materially different rate, so getting the seller's status wrong at the outset throws off the entire deduction.

What Non-Compliance Actually Costs

Getting this wrong lands on the buyer, not the seller. Failing to deduct at all draws interest of 1% a month from the date TDS should have been deducted, and failing to deposit tax already deducted draws a steeper 1.5% a month until it's actually paid. Filing Form 26QB late brings its own automatic fee, Rs 200 for every day of delay, capped at the TDS amount itself, the same mechanism that applies to routine quarterly TDS returns. Beyond a year of default, a discretionary penalty of Rs 10,000 to Rs 1,00,000 can also apply. None of these are risks reserved for large defaulters. Registrars and housing finance companies increasingly ask for proof of Form 26QB filing before completing registration or releasing the final loan tranche, so a buyer who treats this as an afterthought can find it holding up their own transaction, not just inviting a notice months later.

None of this requires a tax background to get right. Confirm the higher of the sale price or stamp duty value before deciding whether the Rs 50 lakh threshold is crossed, treat the 30-day Form 26QB window as seriously as the registration date itself, and hand over Form 16B without being chased for it. Buyers who build these three habits into the transaction timeline rarely hear from the tax department about this section again.