When buying an immovable property in India, the buyer may have to deduct Tax Deducted at Source (TDS) from the amount payable to the seller. This requirement is commonly known as TDS under Section 194-IA.
The rule generally applies when a buyer purchases an eligible immovable property from a resident seller and the applicable consideration and stamp-duty value cross the prescribed threshold.
For transactions governed by the Income-tax Act, 1961, Section 194-IA requires TDS at 1% in applicable cases. From 1 April 2026, the Income Tax Act, 2025 applies, and the corresponding TDS provision is consolidated under Section 393(1). The Income Tax Department has stated that the TDS rates and monetary thresholds have been retained under the new Act.
Section 194-IA: Quick Overview
| Particular | Rule |
| Buyer responsible for TDS | Buyer/transferee |
| Seller covered | Resident seller |
| Property covered | Land other than excluded agricultural land, building or part of a building |
| TDS rate | 1% in applicable cases |
| Threshold | Consideration and stamp-duty value must not both be below ₹50 lakh |
| PAN required | Buyer and seller should provide valid PAN |
| TAN | Generally not required |
| Old filing form | Form 26QB |
| Current filing under Income Tax Act, 2025 | Form 141, Schedule B |
| Deduction timing | At payment or credit, whichever is earlier |
| Non-resident seller | Section 194-IA does not apply; Section 195 is generally relevant |
The Income Tax Department’s current guidance confirms the 1% rate, ₹50 lakh threshold and resident-seller requirement.
What Is Section 194-IA?
Section 194-IA of the Income-tax Act, 1961 requires a person buying certain immovable property from a resident seller to deduct tax at source from the consideration.
The provision applies to property other than the agricultural land excluded under the law.
The buyer is responsible for deducting the TDS. The seller receives the balance amount after the applicable TDS has been deducted.
For example, if the applicable TDS is ₹1 lakh on a ₹1 crore transaction, the buyer would generally pay ₹99 lakh to the seller and deposit ₹1 lakh as TDS with the government.
The TDS is not an additional 1% cost on top of the purchase price. It is generally tax deducted from the amount payable to the seller.
When Is TDS on Property Sale Applicable?
Under the Section 194-IA framework, TDS applies when the applicable threshold is crossed.
The current rule is particularly important because the threshold test considers both:
- Consideration for the transfer, and
- Stamp-duty value of the property
No deduction is required where both the consideration and stamp-duty value are less than ₹50 lakh.
Example 1: TDS Applicable
Suppose:
- Property consideration = ₹60 lakh
- Stamp-duty value = ₹60 lakh
Since the consideration is not below ₹50 lakh, TDS applies.
At 1%:
TDS = ₹60 lakh × 1% = ₹60,000
Example 2: TDS Not Applicable
Suppose:
- Property consideration = ₹45 lakh
- Stamp-duty value = ₹48 lakh
Both amounts are below ₹50 lakh.
Therefore, Section 194-IA TDS is generally not required.
Is TDS Calculated on Sale Price or Stamp-Duty Value?
This is an important point.
For the applicable Section 194-IA framework, the TDS calculation uses the higher of the consideration or stamp-duty value.
The Income Tax Department’s guidance explains that TDS is deducted at 1% of the sales consideration or stamp-duty value, whichever is higher, where the threshold is met.
Example
Suppose:
- Sale consideration = ₹75 lakh
- Stamp-duty value = ₹80 lakh
Higher value = ₹80 lakh
TDS:
₹80 lakh × 1% = ₹80,000
The buyer would therefore generally deduct ₹80,000 rather than ₹75,000.
What Is Included in Property Consideration?
The term consideration is broader than just the basic price printed on a sale agreement.
The Income Tax Department’s guidance states that consideration includes charges incidental to the transfer, such as:
- Club membership fee
- Car parking fee
- Electricity or water facility fee
- Maintenance fee
- Advance fee
- Similar charges incidental to the transfer
These amounts can therefore need to be considered when determining the applicable TDS base.
Who Has to Deduct TDS?
The buyer is responsible for deducting the TDS.
This applies even though the seller is the person whose tax is being deducted.
Buyer’s responsibility
The buyer generally has to:
- Obtain the seller’s PAN.
- Determine whether the TDS provisions apply.
- Calculate the applicable TDS.
- Deduct it at the appropriate time.
- Deposit it with the government.
- File the applicable challan-cum-statement.
- Provide the required TDS certificate/documentation to the seller.
The buyer does not generally need to obtain a TAN for this property TDS procedure.
When Should TDS Be Deducted?
TDS under the old Section 194-IA framework is deducted at the earlier of:
- The time the amount is credited to the seller’s account, or
- The time the amount is actually paid.
This means the buyer should not wait until the final registration of the property if the payment or credit event triggering deduction occurs earlier.
The Income Tax Department’s Section 194-IA guidance confirms this timing rule.
TDS on Property Purchased in Instalments
Property purchases are often paid through several instalments.
TDS can therefore arise with the relevant payments/credits rather than only at the final payment.
For transactions under the current Income Tax Act, 2025 system, the Income Tax Department’s Form 141 instructions specifically provide for:
- First instalment
- Subsequent instalment
- Last instalment
The form also asks for the previous acknowledgement number when reporting subsequent or final instalments.
Example
Suppose a property is purchased for ₹1 crore and the buyer pays:
- ₹20 lakh on agreement
- ₹30 lakh later
- ₹50 lakh at registration
The TDS compliance should be handled with the payment/credit schedule rather than simply waiting until the final ₹50 lakh payment.
What Is Form 26QB?
For transactions governed by the Income-tax Act, 1961, Form 26QB was the challan-cum-statement used for TDS on the purchase of immovable property under Section 194-IA.
The Income Tax Department confirms that Form 26QB was the relevant form for TDS on purchase of immovable property under Section 194-IA.
However, there is an important 2026 change.
What Form Is Used for Property TDS From 1 April 2026?
The Income Tax Act, 2025 came into effect from 1 April 2026.
Under the new system, Form 141 is the consolidated challan-cum-statement for several PAN-based TDS transactions that were previously reported through separate forms.
For property transactions, Schedule B of Form 141 is used for TDS on transfer of immovable property under Section 393(1). The Income Tax Department describes this as the transaction previously covered by Form 26QB.
Simple transition table
| Transaction timing | Relevant procedure |
| Event occurred on or before 31 March 2026 | Old Income-tax Act, 1961 framework; Form 26QB |
| Event occurred on or after 1 April 2026 | Income Tax Act, 2025 framework; Form 141, Schedule B |
The Income Tax Department has specifically clarified that Forms 26QB, 26QC, 26QD and 26QE continue for transactions where the credit/payment event occurred on or before 31 March 2026. For events on or after 1 April 2026, Form 141 applies under the new Act.
Is PAN Required for Property TDS?
Yes.
The buyer needs the valid PAN of the seller for the applicable property-TDS filing.
The Income Tax Department’s current payment guidance requires the seller’s PAN and other transaction details when completing the property-TDS process.
The seller should also provide the buyer with the correct PAN before the transaction is reported.
Why PAN Matters
Incorrect or unavailable PAN details can result in higher TDS or compliance problems.
Therefore, buyers should verify the PAN details rather than entering them based on an informal document or assumption.
What If the Seller Does Not Provide PAN?
A higher TDS rate can apply where the required PAN is not furnished.
The Income Tax Department’s guidance on property TDS states that where the deductee does not furnish PAN, the applicable higher-rate provisions can apply.
For a high-value property transaction, buyers should therefore obtain and verify the seller’s PAN well before making the payment.
What If the Seller Is a Non-Resident?
Section 194-IA is designed for payments to a resident seller.
If the seller is a non-resident, the buyer generally needs to consider the TDS provisions under Section 195 instead.
The Income Tax Department confirms that Form 26QB is not applicable where the seller/deductee is non-resident; the applicable reporting route is Form 27Q.
This is an important distinction because the compliance requirements can be different for a non-resident seller.
Is TDS Applicable to Agricultural Land?
Section 194-IA excludes agricultural land as defined under the applicable income-tax provisions.
However, not every piece of land described informally as “agricultural land” necessarily qualifies for the exclusion.
The law contains a specific definition, including location-based conditions. The Income Tax Department’s current Section 194-IA material explains the relevant agricultural-land definition and exclusions.
Therefore, buyers should check the legal classification of the land rather than relying solely on the description used in the sale documents.
Multiple Buyers and Multiple Sellers
Property transactions can involve:
- Two or more buyers
- Two or more sellers
- Different ownership percentages
Since October 2024, the law specifically provides that, for the threshold, consideration is aggregated where there is more than one transferor or transferee in respect of the immovable property.
The current Form 141 system also requires details of the buyers and sellers and their respective shares. The total buyer shares should add up to 100%, and seller details are entered with their respective proportions.
Example
Suppose a ₹90 lakh property is purchased jointly by two buyers.
Buyer A owns 60% and Buyer B owns 40%.
The ₹90 lakh transaction is not treated as two independent ₹45 lakh purchases merely because there are two buyers.
The aggregate consideration is relevant for determining applicability.
Is TDS 1% an Additional Tax on the Buyer?
No.
Suppose:
- Property price = ₹1 crore
- Applicable TDS = ₹1 lakh
The buyer generally pays:
₹99 lakh to the seller
and:
₹1 lakh to the government as TDS
The total consideration remains ₹1 crore.
The ₹1 lakh is tax deducted from the seller’s payment rather than an additional 1% purchase cost.
Does the Seller Get Credit for the TDS?
Yes.
The TDS is associated with the seller’s tax record. The seller can generally claim credit for the TDS against the seller’s tax liability.
The Income Tax Department states that Form 26AS contains details of TDS deducted on the sale of immovable property under Section 194-IA.
The seller should check the tax credit information and ensure that the TDS is correctly reflected.
Is TDS on Property Sale the Same as Capital Gains Tax?
No.
This is one of the most common points of confusion.
TDS
TDS is a tax deduction at the time of the property transaction.
Capital gains tax
Capital gains tax is the seller’s tax liability arising from the profit or gain on transfer of the property, calculated under the applicable capital-gains provisions.
For example, a buyer may deduct 1% TDS even though the seller ultimately has a much lower or higher capital-gains tax liability.
The TDS is therefore generally a tax credit, not necessarily the seller’s final tax liability.
Example: TDS and Capital Gains
Suppose:
- Property purchase price by seller = ₹50 lakh
- Property sold for = ₹1 crore
- Applicable TDS = ₹1 lakh
The buyer deducts ₹1 lakh as TDS and pays ₹99 lakh to the seller.
The seller may still have a separate capital-gains tax liability based on the applicable capital-gains rules.
The ₹1 lakh TDS can generally be considered as tax credit while determining the seller’s final tax position.
When Should TDS Be Deposited?
For the old Section 194-IA challan-cum-statement mechanism, the Income Tax Department specifies a 30-day timeline from the end of the month in which tax is deducted.
The Income Tax Department’s current tax-payment guidance states that this special 30-day timeline continues under the 2026 rules.
For transactions from 1 April 2026, buyers should follow the applicable Form 141 process and current Income Tax Rules.
How to Pay TDS on Property Purchase
For a current transaction under the Income Tax Act, 2025, the broad process is:
- Log in to the Income Tax e-Filing portal.
- Go to the applicable e-Pay Tax facility.
- Select Form 141.
- Choose the property-transfer schedule.
- Enter buyer and seller details.
- Enter the property details.
- Enter consideration and stamp-duty value.
- Enter the payment/instalment details.
- Calculate the applicable TDS.
- Make the payment.
- Save the challan and acknowledgement for records.
The Income Tax Department’s Form 141 guide provides the current step-by-step process for Schedule B, including property details, stamp-duty value, consideration, buyer/seller shares and instalment information.
Important Details Needed for Filing
Keep the following information ready:
| Information | Why it is required |
| Buyer’s PAN | Identifies deductor |
| Seller’s PAN | Identifies deductee |
| Seller’s residential status | Determines applicable TDS route |
| Property address | Transaction identification |
| Property type | Land/building classification |
| Agreement date | Transaction details |
| Registration date, if available | Property registration details |
| Sale consideration | TDS calculation |
| Stamp-duty value | Threshold and TDS calculation |
| Buyer ownership share | Multiple-buyer reporting |
| Seller ownership share | Multiple-seller reporting |
| Payment dates | TDS deduction details |
| Instalment details | Required where payment is staggered |
Common Mistakes in Section 194-IA
- Assuming TDS applies only above ₹50 lakh sale price
The stamp-duty value also matters. Both consideration and stamp-duty value must be below ₹50 lakh for the threshold exclusion to apply.
- Treating 1% as an additional purchase cost
TDS is generally deducted from the seller’s payment.
- Ignoring incidental charges
Certain charges connected with the transfer can form part of consideration.
- Using Form 26QB for a new 2026 transaction
For transactions falling under the Income Tax Act, 2025 from 1 April 2026, the current system uses Form 141, Schedule B.
- Treating joint buyers separately
The law aggregates consideration where there are multiple buyers or sellers for the same immovable property.
- Using 194-IA for a non-resident seller
A non-resident seller generally requires consideration under Section 195 instead.
- Forgetting to verify TDS credit
The seller should check the tax credit information after the buyer deposits the TDS.
Frequently Asked Questions
What is Section 194-IA?
Section 194-IA of the Income-tax Act, 1961 requires a buyer to deduct TDS on certain payments for transfer of immovable property to a resident seller. The applicable rate is generally 1% when the prescribed threshold is met.
What is the TDS rate on property purchase?
The applicable rate under Section 194-IA is generally 1% of the relevant amount in applicable cases.
What is the property TDS limit?
No TDS is required under Section 194-IA when both the consideration and stamp-duty value are below ₹50 lakh.
Who deducts TDS on property sale?
The buyer deducts the TDS from the amount payable to the seller.
Is Form 26QB still used for property TDS?
For transactions governed by the Income-tax Act, 1961, Form 26QB is the relevant challan-cum-statement. For transactions from 1 April 2026 governed by the Income Tax Act, 2025, the corresponding filing is through Form 141, Schedule B.
Does the buyer need a TAN?
Generally, no. Property TDS under the PAN-based challan-cum-statement system does not require the buyer to obtain a TAN.
Is TDS deducted from the seller’s money?
Yes. The buyer generally deducts the applicable TDS from the amount payable to the seller and deposits it with the government.
Is TDS on property sale the seller’s final tax?
No. TDS is generally a tax credit. The seller’s final tax liability depends on the applicable income-tax provisions, including capital-gains rules.
Does TDS apply if the property costs exactly ₹50 lakh?
The threshold wording matters. The exclusion applies where both consideration and stamp-duty value are less than ₹50 lakh. Therefore, a value of exactly ₹50 lakh does not fall within the “both below ₹50 lakh” exclusion. The applicable TDS provisions should be checked for the transaction.
Does TDS apply when there are two buyers?
The threshold is not avoided simply by dividing the property value between two buyers. Where there is more than one transferee or transferor, the consideration is aggregated for the relevant threshold.
What happens if the seller is an NRI?
Section 194-IA is for resident sellers. For a non-resident seller, the buyer generally needs to consider Section 195 and the applicable non-resident TDS requirements.
Conclusion
TDS on the sale of property is primarily the buyer’s compliance responsibility. Under the Section 194-IA framework, the buyer generally deducts 1% when purchasing eligible immovable property from a resident seller and the prescribed ₹50 lakh threshold is met.
The calculation is important because the rules consider both the property consideration and stamp-duty value, and certain incidental charges can also form part of consideration.
For transactions from 1 April 2026, the Income Tax Act, 2025 has changed the section numbering and reporting mechanism: the relevant provision is consolidated under Section 393(1) and the property-TDS reporting is handled through Form 141, Schedule B, replacing the earlier Form 26QB process for new transactions.
Before completing a property purchase, buyers should verify the seller’s PAN and residential status, calculate the TDS correctly, follow the applicable filing timeline and retain the challan and acknowledgement. Sellers should also check that the deducted amount appears correctly in their tax records.