The Income-tax Act 2025 replaced the Income-tax Act 1961 with effect from 1 April 2026. The property TDS rule everyone knows as Section 194-IA now sits at Section 393(1) of the new Act — same 1% rate, same ₹50 lakh threshold — but the forms were renumbered. If a broker or a 2024 blog tells you to file Form 26QB, they are describing the right step under the old name.
Do you have to deduct TDS when buying a property in India?
Yes. If the consideration or the stamp duty value is ₹50 lakh or more, the buyer — not the seller — must deduct TDS from the payment and deposit it with the government. The obligation and the liability both sit with the buyer.
This is the single most misunderstood point in an Indian property transaction. People assume that because the seller earns the money and pays the capital gains tax, the seller must handle the tax paperwork. The law does the opposite. It makes the person paying the money responsible for withholding a part of it and routing it to the government.
So on a ₹80 lakh flat, you do not pay ₹80 lakh to the seller. You pay the seller ₹79.2 lakh and pay ₹80,000 to the government on the seller's behalf. The seller has still received the full ₹80 lakh in the eyes of the law — part of it was simply paid as tax in their name.
The rule applies to immovable property generally — a flat, a plot, a house, a commercial unit — with a carve-out for certain agricultural land. It is not limited to builders or big deals. A resale flat bought from an individual is squarely covered.
Joint buyers each carry the obligation for their share, and the challan-cum-statement is filed for each buyer–seller combination. Two buyers and two sellers means four filings, not one. Check the exact requirement on the e-filing portal before you pay, or have your CA do the filings.
What is the TDS rate on property purchase?
1% of the consideration or the stamp duty value, whichever is higher, where the seller is a resident. This is the old Section 194-IA rule, now carried into Section 393(1) of the Income-tax Act 2025 at the same rate and the same ₹50 lakh threshold.
Two numbers matter and they are often different. The consideration is what you agreed to pay. The stamp duty value is the circle-rate or ready-reckoner value the state uses to compute stamp duty. The law tells you to deduct 1% on whichever of the two is higher, so a below-circle-rate deal does not shrink the TDS.
| Situation | What the buyer deducts |
|---|---|
| Resident seller, consideration and stamp duty value both under ₹50 lakh | Nothing under this section |
| Resident seller, either figure ₹50 lakh or more | 1% of the higher of the two, on the whole amount |
| Seller is a non-resident (NRI) | This section does not apply — see the NRI section below |
| Seller has not given a PAN | A higher rate applies to a deductee without PAN — confirm the current rate before you deduct |
The deduction happens at the time of credit or payment, whichever is earlier. In a staged or loan-funded purchase that means each instalment carries its own 1% — you do not deduct the whole amount at registration. If your bank disburses directly to the seller, tell the bank and the seller in advance how the TDS is being handled, in writing.
"I'll pay you the full amount and you deal with the tax" is not an option. If the tax was not deducted and deposited by you, the default is yours regardless of what the seller promised. Put the deduction in the sale agreement itself so nobody is surprised at the registrar's office.
Not sure what you must deduct?
Ask Legal Setu — free, no account needed.What is Form 26QB and how do you file it?
Form 26QB was the challan-cum-statement the buyer filed to pay property TDS. From 1 April 2026 it is replaced by Form 141, filed on the e-filing portal using your PAN — no TAN is needed. The seller's certificate is now Form 132.
A challan-cum-statement is exactly what it sounds like: one form that both pays the tax and reports the transaction, so you are not filing a separate quarterly TDS return for a one-off property purchase. Form 141 merges the old Forms 26QB, 26QC, 26QD and 26QE into a single form with separate schedules; the schedule for transfer of immovable property is the one you want.
The relief here is the no-TAN rule. Ordinary deductors need a Tax Deduction and Collection Account Number. A person deducting on a property purchase does not — the statement is filed against your PAN. That is what makes it possible for an individual buyer to do this without registering as a deductor.
What is the TDS rate when buying property from an NRI?
Section 194-IA does not apply to a non-resident seller. Tax is deducted under the non-resident provisions instead, at rates that are substantially higher and driven by the capital gain, plus surcharge and cess. The buyer generally needs a TAN.
This is the trap, and it is expensive. The 1% rule is written for payments to a resident seller. The moment the seller is a non-resident, you leave that provision entirely and land in the non-resident withholding regime — what everyone still calls Section 195, now sitting within the non-resident sub-section of Section 393 in the 2025 Act.
Three things change at once:
- The rate is not 1%. Deduction is linked to the seller's capital gain rather than a flat slice of the price, at rates that are several multiples of 1%, with surcharge and cess added on top. Whether the gain is long-term or short-term changes the answer. Do not assume a number — get it computed for the specific deal.
- There is no ₹50 lakh threshold. The exemption for smaller deals belongs to the resident-seller provision. A modest purchase from an NRI can still carry a large deduction.
- You generally need a TAN. The PAN-based, one-form convenience is a feature of the resident-seller route. TDS on payments to non-residents is reported on a TAN-based quarterly statement, which means applying for a TAN before you pay anything.
The lower-deduction certificate is the seller's job to obtain
An NRI seller who believes their actual gain is small can apply to the Assessing Officer for a certificate authorising deduction at a lower rate or no deduction, under Section 395 of the Income-tax Act 2025 (the successor to the old Section 197 / 195(2) route), using Form 128 — which replaced Form 13. Both residents and non-residents can apply.
If the seller produces a valid certificate, you deduct at the rate stated in it and keep a copy. If they do not, you deduct at the full rate. A seller telling you "my gain is small, just deduct 1%" is asking you to take their tax risk onto your own head. The certificate is the only safe version of that conversation.
If you deduct 1% from an NRI seller and the correct deduction was far higher, the seller has already been paid and left. The department recovers the shortfall from you, with interest and penalty, and you are left suing a person who may no longer be in the country. This is the single most common way an ordinary buyer ends up with a seven-figure tax problem.
How do you know if the seller is a non-resident?
You ask, in writing, and you keep the answer. Residential status is a tax concept based on days of presence in India — it is not decided by citizenship, by holding an Indian passport, or by having an Indian address on the sale deed. A seller can hold an Indian passport, own the flat since childhood, and still be a non-resident for the year. Take a signed declaration of residential status as part of the sale documentation, and treat any hesitation as a reason to get a CA involved before you pay a rupee.
An NRI-seller deal is easy to get wrong and costly to fix.
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What happens if you don't deduct TDS on a property purchase?
The buyer is treated as an assessee in default. You can be asked to pay the tax you failed to deduct, plus interest for the delay and a penalty, and there are late-filing consequences for the statement. The seller's tax being paid does not automatically clear you.
"Assessee in default" is the phrase that matters. It means the law stops treating the unpaid tax as the seller's problem and starts treating it as yours. In practice a buyer who skipped or under-deducted can face a demand for the tax itself, interest running from the date the deduction should have been made, a penalty, and a separate late-fee exposure for filing the statement late.
There is a relief route where the seller has already declared the income and paid tax on it, usually needing a certificate from the seller's accountant — but it depends on the seller cooperating after they have your money, which is exactly the situation you were trying to avoid. Interest for the period of delay typically survives even then.
Two practical notes. First, these notices often arrive one to three years later, long after the deal feels finished. Second, they arrive at your PAN, because the statement was filed — or should have been — in your name.
Is TDS applicable on a property below ₹50 lakh?
No, where the seller is a resident and both the consideration and the stamp duty value are under ₹50 lakh. If either figure reaches ₹50 lakh, TDS applies on the whole amount, not just the excess. The threshold does not apply to a non-resident seller.
The threshold is a cliff, not a slab. On a ₹50 lakh purchase you deduct 1% of ₹50 lakh — not 1% of nothing, and not 1% of some amount above a free limit. That is a very different outcome from the way income tax slabs work, and it is why deals get structured just under the line.
Three things to watch:
- Stamp duty value can push you over. A ₹48 lakh agreed price against a ₹52 lakh circle-rate valuation is over the threshold, because the test looks at the higher figure.
- Instalments do not split the deal. The threshold is tested on the transaction, not on each payment. A ₹70 lakh flat paid in seven instalments is a ₹70 lakh transaction.
- Multiple buyers or sellers do not split it either. The consideration for the property is the aggregate of what all the transferees pay all the transferors — splitting a deal across two names does not put each half under the line.
Who deposits the TDS — buyer or seller?
The buyer deducts it from the payment and deposits it with the government. The seller receives that much less in cash and gets credit for the tax against their own liability, using the certificate the buyer issues after filing.
Think of it as the seller's tax, paid early, by your hand. The money is the seller's — it comes out of their sale proceeds. The duty to move it is yours. The seller is not out of pocket in the end: the deposited amount shows against their PAN and is set off when they compute their capital gains tax, and they get a refund if it exceeds what they owe.
Which is why sellers rarely resist the deduction once it is explained, and why they care intensely about two things: that you use the correct PAN, and that you hand over the certificate. Both are on you.
The buyer's TDS checklist
Run this before you release any money, not after.
- Get the seller's residential status in writing. A signed declaration, not a verbal assurance. This single line decides which regime applies and how much you deduct.
- Collect PAN for every buyer and every seller. Verify the spelling against the PAN itself, not against the sale deed draft.
- Compare consideration against stamp duty value. Deduct on the higher figure and record which one you used.
- Ask an NRI seller for a lower-deduction certificate. No certificate means full-rate deduction. Apply for a TAN early — it is not instant.
- Write the TDS into the sale agreement. Amount, timing, who files, when the certificate is handed over.
- Deposit and file within the deadline. Within 30 days from the end of the month of deduction, for the resident-seller route.
- Issue the certificate. Download it from TRACES and give it to the seller — within 15 days of the statement's due date.
- File the whole set with your title documents. You will need it when you sell.
Rates, thresholds, form numbers and due dates change — and the Income-tax Act 2025 changed several of them at once from 1 April 2026. Confirm the position for your actual transaction with a chartered accountant before you pay, and treat an NRI-seller deal as a "get professional advice first" situation, not a DIY one.
Official sources
- Income Tax Department — Government of India (e-filing portal)
- Income Tax Department — TDS on purchase of immovable property
- Section 393, Income-tax Act 2025 — deduction of tax at source
- Form 141 — challan-cum-statement under section 393(1) (replaces Form 26QB)
- Form 132 FAQs — TDS certificate (replaces Form 16B)
- Section 395, Income-tax Act 2025 — lower or nil deduction certificate