Income Tax
TDS on Property Purchase (Section 194-IA): 1% Rule, Form 26QB & Penalties
Buying a property worth ₹50 lakh or more comes with a tax duty most buyers don't expect: you, the buyer, must deduct 1% TDS and deposit it with the government — not the seller. Miss it and the penalty can dwarf the tax. Here's the complete Section 194-IA playbook.
The 1% rule in one line
If you buy an immovable property (other than agricultural land) for ₹50 lakh or more, you must deduct 1% TDS on the total sale consideration and deposit it using Form 26QB.
Key points buyers miss
- Threshold is on value, not gain: the 1% is on the full sale price, regardless of the seller's profit.
- ₹50 lakh is the trigger, but TDS is on the whole amount — not just the portion above ₹50 lakh.
- Stamp duty value counts: TDS applies on the higher of sale price or stamp duty value.
- Installments: deduct 1% on each payment if you pay in parts.
- No TAN needed: the buyer uses their PAN, not a TAN, for 26QB.
Joint buyers and joint sellers
With multiple buyers or sellers, file a separate Form 26QB for each buyer-seller combination, splitting the consideration accordingly. This is the single most common 26QB error.
How to file Form 26QB and issue 16B
- Within 30 days from the end of the month of payment, file Form 26QB online and pay the 1% TDS.
- Download Form 16B (the TDS certificate) from TRACES and hand it to the seller.
- The TDS then reflects in the seller's Form 26AS as credit against their tax.
Penalties for non-compliance
- Late deduction/deposit: interest of 1%–1.5% per month.
- Late filing of 26QB: ₹200 per day under Section 234E until filed.
- Failure to deduct: the buyer can be treated as an assessee-in-default and pay the tax themselves.
If the seller is an NRI, the rules change entirely (TDS under Section 195 at much higher rates) — get advice first. Our tax team handles 26QB filing and Form 16B issuance so your registry goes through clean.