TDS on property purchase u/s 194-IA — 1% rule for buyers above 50 lakh

Introduction

When a buyer purchases an immovable property other than agricultural land from a resident seller, TDS may be required under Section 194-IA of the Income-tax Act, 1961.

The basic rule is simple:

Buyer pays ₹50 lakh or more → TDS at 1% generally applies.

However, for FY 2026-27, there is an important legislative transition. From 1 April 2026, TDS provisions have moved into the Income-tax Act, 2025. The Income Tax Department confirms that TDS rates and monetary thresholds have broadly remained unchanged, while the new Act consolidates the provisions into Section 393.

So, for a 2026-27 transaction, the substantive 1% / ₹50 lakh rule continues, but the applicable statutory reference and reporting mechanism need to be updated.

🏠 What is Section 194-IA?

Section 194-IA applies when a buyer purchases an immovable property, other than agricultural land, from a resident seller and the consideration meets the prescribed threshold.

It can apply to:

Residential flats

Houses

Commercial properties

Land other than agricultural land

Certain other immovable properties

The buyer is responsible for deducting the tax.

💰 When Does the 1% TDS Apply?

The threshold is:

₹50 lakh or more

If the consideration for the transfer is ₹50 lakh or more, the buyer generally has to deduct TDS.

Example

Property purchase price:

₹75,00,000

TDS:

1% = ₹75,000

The buyer pays the seller:

₹74,25,000

and deposits:

₹75,000

as TDS with the Government.

⚠️ Important: Check the Consideration Correctly

For property transactions, the threshold should not be considered merely by looking at the amount of each individual instalment.

The transaction should be examined based on the consideration for the transfer and the applicable statutory provisions.

For example:

Property Value 194-IA TDS

₹40 lakh Generally ❌

₹49.99 lakh Generally ❌

₹50 lakh ✅ 1%

₹60 lakh ✅ 1%

₹1 crore ✅ 1%

₹2 crore ✅ 1%

👥 Joint Buyers and Sellers

This is an important practical issue.

If there are:

Multiple buyers, or

Multiple sellers,

the transaction needs to be reported with the relevant ownership/share details.

The Income Tax Department’s current ITR documentation specifically requires property details, including the name of buyer(s), PAN/Aadhaar, percentage share and amount, where Section 194-IA applies.

Example

Property value = ₹80 lakh

Two buyers:

Buyer A — 50%

Buyer B — 50%

Each buyer’s share = ₹40 lakh.

The transaction should not be analysed purely by looking at each individual’s ₹40 lakh share without considering the statutory treatment applicable to the property transaction.

For joint transactions, it is therefore advisable to structure and report the transaction carefully rather than assuming that the ₹50 lakh threshold can simply be divided among buyers.

📉 What is the TDS Rate?

1%

The buyer deducts:

1% of the applicable consideration

The TDS is deducted from the amount payable to the seller.

🧮 Example — ₹60 Lakh Property

Suppose:

Property consideration = ₹60,00,000

TDS @ 1%:

₹60,000

Amount payable to seller:

₹59,40,000

TDS deposited with Government:

₹60,000

🧮 Example — ₹1 Crore Property

Property value:

₹1,00,00,000

TDS @ 1%:

₹1,00,000

Seller receives:

₹99,00,000

Buyer deposits:

₹1,00,000

🏦 Who Has to Deduct TDS?

The responsibility generally falls on the buyer.

Importantly, Section 194-IA is designed so that an individual buyer can have a TDS obligation even if the buyer is not otherwise required to have a TAN for regular TDS purposes.

Therefore:

You do not need to be a company or business to have a property-purchase TDS obligation.

An individual purchasing a property can also be required to deduct TDS.

🆔 Is TAN Required?

For Section 194-IA transactions, the buyer generally does not need to obtain a TAN merely for this deduction.

Instead, the prescribed challan-cum-statement mechanism is used.

Historically this was:

Form 26QB

For transactions falling under the new Income-tax Act, 2025 from 1 April 2026, the Income Tax Department has introduced the new challan-cum-TDS statement mechanism, with Form 141 covering transactions that previously used Forms 26QB, 26QC, 26QD and 26QE.

📅 When Should TDS Be Deducted?

TDS is generally deducted at the time of:

Credit or payment, whichever is earlier.

This means the buyer should not wait until the final registration/payment if the statutory deduction event has already occurred.

For instalment-based property purchases, TDS compliance should therefore be considered at each relevant payment/credit stage.

🧾 Example — Instalment-Based Purchase

Property value:

₹80 lakh

Payment schedule:

₹20 lakh — booking

₹20 lakh — agreement stage

₹20 lakh — construction stage

₹20 lakh — registration

The buyer should not simply wait until registration and then deduct the entire TDS without considering when the statutory credit/payment events occurred.

The agreement and payment schedule should be reviewed so that TDS is deducted correctly at the relevant stages.

🏛️ Payment of TDS

Section 194-IA follows a special challan-cum-statement mechanism.

Under the old system, the buyer used Form 26QB.

For transactions governed by the new Act from 1 April 2026, the Income Tax Department states that Form 141 is used for the corresponding challan-cum-TDS statement.

⏰ Due Date for Deposit

Unlike normal monthly TDS payments, Section 194-IA has a specific timeline.

The Income Tax Department confirms that the TDS under the property-purchase provision is generally to be deposited within 30 days from the end of the month in which the tax is deducted.

Example

TDS deducted:

15 August 2026

End of month:

31 August 2026

Due date:

30 September 2026

The applicable 2026 Rules should be checked for the exact filing/payment process.

📄 TDS Certificate — Form 16B

After depositing TDS and completing the prescribed reporting process, the buyer should obtain the TDS certificate for the seller.

Under the traditional Section 194-IA mechanism, this is:

Form 16B

It serves as evidence of TDS deducted and deposited against the seller’s PAN.

The seller can use the TDS credit while computing their tax liability.

🆔 PAN of Buyer and Seller

PAN details are extremely important.

The buyer should obtain:

Buyer’s PAN

Seller’s PAN

and ensure that the details are correctly entered.

The Income Tax Department’s current forms specifically require PAN/Aadhaar details where tax has been deducted under Section 194-IA.

Incorrect PAN information can create problems in:

TDS credit

Seller’s tax return

TDS processing

Property transaction reporting

🌾 Does 194-IA Apply to Agricultural Land?

Generally, no.

Section 194-IA specifically relates to immovable property other than agricultural land.

Therefore, the classification of land is important.

A buyer should not automatically assume that every land transaction above ₹50 lakh attracts Section 194-IA.

🏗️ Property Under Construction

Section 194-IA can also become relevant when purchasing an under-construction property if the transaction falls within the statutory scope.

For example:

Flat under construction = ₹70 lakh

TDS can apply even though the buyer has not yet received the completed apartment.

The payment schedule should therefore be reviewed from the beginning.

🏢 Commercial Property

The provision is not restricted to residential property.

It can also apply to qualifying purchases of:

Shops

Offices

Commercial buildings

Other non-agricultural immovable property

Example

Office purchase price:

₹90 lakh

TDS @ 1%:

₹90,000

💸 Does GST Form Part of the TDS Base?

For under-construction property transactions where GST is separately charged, the treatment of the GST component should be determined according to the applicable TDS provisions and CBDT guidance.

As a practical matter, the buyer should ensure that the agreement/invoice clearly separates:

Property consideration + GST

and the TDS calculation is made consistently with the applicable law.

This is an area where builders and buyers should avoid making assumptions solely from the gross invoice value.

🏷️ Stamp Duty Value vs Actual Consideration

Property transactions can involve situations where:

Actual consideration is ₹60 lakh; and

Stamp-duty value is ₹70 lakh.

The buyer should examine the applicable Section 194-IA provisions and rules governing the consideration for TDS purposes rather than simply applying 1% to whichever number appears higher.

This is particularly important because property tax provisions contain separate concepts relating to stamp-duty value and capital-gains taxation.

❌ Common Mistakes in Property TDS

1. Assuming TDS Applies Only to Companies

Wrong.

Individual buyers can also have the obligation.

2. Waiting Until Registration

TDS should be considered at the relevant credit/payment event.

3. Deducting Only at Final Payment

Instalment-based transactions require careful monitoring.

4. Forgetting Joint Buyers

Joint ownership needs proper reporting and allocation.

5. Entering Wrong PAN

This can prevent the seller from receiving proper TDS credit.

6. Missing the 30-Day Timeline

Property-purchase TDS has a special deposit/reporting timeline.

7. Using Old Section References for 2026-27 Transactions

For transactions from 1 April 2026, the new Income-tax Act framework applies. The Income Tax Department has specifically warned that using old section numbers for post-1 April 2026 transactions can cause system-level validation issues.

🆕 Section 194-IA in FY 2026-27

This is particularly important for a 2026 article.

The Income-tax Act, 2025 has reorganised TDS provisions.

From 1 April 2026, the corresponding TDS rules are contained within Section 393 of the new Act rather than continuing to use Section 194-IA as the operative section reference for new transactions.

However, the Income Tax Department confirms that:

TDS rates remain broadly unchanged;

Monetary thresholds remain broadly unchanged; and

The property-purchase TDS mechanism continues under the new framework.

Therefore, the popular search phrase “TDS on property purchase under Section 194-IA” remains useful for explaining the rule, but professionals handling transactions after 1 April 2026 should use the new Act’s applicable Section 393 table reference when filing.

📊 Quick Reference

Particular Rule

Property covered Immovable property other than agricultural land

Seller Generally resident seller

Threshold ₹50 lakh or more

TDS Rate 1%

Deductor Buyer

TAN Generally not required solely for this provision

Old filing mechanism Form 26QB

FY 2026-27 new mechanism Form 141

Deduction timing Credit/payment, whichever earlier

Deposit/reporting Generally within 30 days from end of month of deduction

TDS certificate Form 16B under old mechanism

PAN Buyer & seller details important

New Act reference Section 393 framework from 1 April 2026

The Income Tax Department confirms that the rates and thresholds were retained during the transition to the Income-tax Act, 2025.

🏁 Conclusion

TDS on property purchases is an important compliance responsibility for buyers. Where a qualifying immovable property transaction reaches the ₹50 lakh threshold, the buyer generally has to deduct TDS at 1% from the applicable consideration.

The buyer—not necessarily the seller, builder or broker—is responsible for ensuring that the TDS is correctly deducted, reported and deposited.

For FY 2026-27, there is an important technical update: the Income-tax Act, 2025 has replaced the old section-number framework for transactions occurring from 1 April 2026. The Income Tax Department confirms that the rates and monetary thresholds remain broadly unchanged, but the relevant provision is now contained within the new Act’s Section 393 framework.

Buyers should therefore pay particular attention to:

The ₹50 lakh threshold

1% TDS rate

Resident status of the seller

Agricultural-land exclusion

Joint buyer/seller arrangements

Instalment payments

Correct PAN details

30-day payment/reporting timeline

Form 141 for post-1 April 2026 transactions

TDS certificate and seller’s TDS credit

Proper compliance at the time of purchase can prevent interest, late fees and difficulties in obtaining TDS credit later.

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