TDS on property purchase under Section 194IA

Section 194IA requires the buyer of immovable property (other than agricultural land) to deduct TDS at 1% where the consideration or the stamp-duty value is Rs.50 lakh or more. The buyer pays it using Form 26QB within 30 days, without needing a TAN.

The rule

On purchase of immovable property (land or building, other than rural agricultural land) where the consideration or stamp-duty value is Rs.50 lakh or more, the buyer deducts 1% TDS on the higher of the two values, at the time of payment or credit. No TAN is required; the buyer uses Form 26QB (a challan-cum-statement) and issues Form 16B to the seller.

Joint buyers and sellers

Where there are multiple buyers or sellers, the Rs.50 lakh threshold is judged on the total consideration of the property, not each person's share. Each buyer files a 26QB for their portion. For a non-resident seller, TDS is governed by Section 195 (not 194IA), usually at a higher rate.

Process

1. Deduct 1% at each payment/instalment.
2. File Form 26QB within 30 days of the end of the month of deduction.
3. Download Form 16B and give it to the seller.
4. Ensure the seller's PAN is correct (else 20% under 206AA).

Common errors

• Not deducting because each instalment is below Rs.50 lakh — the threshold is the property value, not the instalment.
• Deducting 1% when the seller is a non-resident — that case is Section 195.
• Missing the stamp-value comparison.
• Late 26QB — attracts 234E fee and 201(1A) interest.

Worked example and the aggregation trap

A buyer purchases a flat for Rs.75,00,000. TDS under Section 194-IA is 1% of the consideration = Rs.75,000, deducted at credit or payment (whichever is earlier), deposited within 30 days from the month-end through Form 26QB, with Form 16B issued to the seller.

The Finance (No. 2) Act 2024 closed the splitting loophole: where there are multiple buyers or sellers, the Rs.50 lakh threshold now tests the aggregate consideration for the property, not each person's share. Two buyers paying Rs.30 lakh each for a Rs.60 lakh flat must both deduct — each files a separate 26QB for their share. The stamp-duty value also matters: TDS applies to the higher of consideration or stamp-duty value where they differ (aligning 194-IA with Section 50C/43CA).

The NRI-seller misstep

The most expensive error in this area: treating an NRI seller as resident and deducting 1%. Section 195 requires deduction on a non-resident seller at the capital-gains rates (12.5% long-term plus surcharge and cess) — and the buyer, as deductor, carries the shortfall, interest and penalty exposure. Always collect a residency declaration and check for the seller's lower-deduction certificate under Section 197, which most advised NRI sellers obtain. Payment through the NRI's Indian bank account does not change the analysis.

Builder purchases and instalment payments

• Deduct 1% on each instalment, not once at registration — the deduction event is each credit/payment.
• GST on under-construction property is excluded from the TDS base where separately shown (CBDT Circular No. 23/2017 logic applied to 194-IA by the 2019 clarification for 194-I; for 26QB, deduct on the consideration excluding GST where separately stated).
• Buyer-side hygiene: download Form 16B from TRACES for every instalment and hand the bundle to the seller at possession; sellers should reconcile the credits in 26AS against the sale deed before filing.
• Late 26QB attracts Rs.200/day under 234E plus interest; the notice arrives automatically from CPC-TDS matched against the SRO registration data, so non-compliance surfaces quickly.

From 1 April 2026 the provision operates within Section 393 of the Income-tax Act 2025 with the same mechanics. Verify thresholds at incometax.gov.in.

Buyer's step-by-step 26QB workflow

• Step 1 — Before payment: collect the seller's PAN and verify it on the e-filing portal (an inoperative PAN — not linked to Aadhaar — triggers 20% deduction, a brutal surprise on a Rs.75 lakh deal: Rs.15,00,000 instead of Rs.75,000).
• Step 2 — At each payment: compute 1% on the higher of consideration or stamp-duty value, pay the seller the net amount.
• Step 3 — Within 30 days of month-end: file Form 26QB on the e-filing portal (one 26QB per buyer-seller pair) and pay the TDS.
• Step 4 — Within 15 days of 26QB: download Form 16B from TRACES and deliver it to the seller.
• Step 5 — Keep the trail: sale agreement, payment schedule, challans and 16Bs — home-loan disbursements by banks count as your payments, and the bank will not deduct for you.

Where the deal spans a financial year boundary, each instalment stands alone — there is no annual reconciliation return for 26QB, which is why per-instalment discipline matters. If the purchase is funded jointly with a spouse for a property in one name, deduct according to the payment flows and align the 26QB filings with who actually pays — mismatches between 26QB, the registered deed and bank statements are what the CPC-TDS matching engine now catches automatically.