Last reviewed: 25 September 2026. The moment you buy property in India worth ₹50 lakh or more, you stop being just a buyer — the law makes you a tax deductor. Section 194-IA requires you to hold back 1% of the price, deposit it with the government through Form 26QB, and hand the seller a TDS certificate. Property season brings a steady stream of queries that begin with "the registrar told us about some TDS…". This guide covers the rule, the filing, the deadlines, the cost of getting it wrong, and the one situation — an NRI seller — where following this section is itself the mistake.
When does Section 194-IA apply?
Every buyer of immovable property — land or building, residential or commercial, ready or under construction — must deduct TDS at 1% where the transaction crosses the threshold, whether or not the buyer has a business, an audit, or any other tax footprint. The deduction happens at the time of payment or credit to the seller, whichever is earlier, and on every instalment if you are paying a builder in stages.
Three boundaries matter:
- Rural agricultural land is outside the section — it is not a capital asset for this purpose, so no TDS however large the price.
- The seller must be a resident. If the seller is an NRI, Section 195 applies instead — different rate, different form. More on this below, because it is where buyers lose real money.
- "Consideration" is wider than the flat price. Since September 2019 it includes club membership fees, car parking, electricity and water facility charges, maintenance and advance fees — any charge incidental to the transfer. Builders often bill these separately; the TDS net covers them anyway.
The ₹50 lakh test — and the joint-buyer trap closed from 1 October 2024
TDS is not required only where both the agreed consideration and the stamp duty value are below ₹50 lakh. Cross the line on either measure and 1% applies to the whole amount — the threshold is a cliff, not a slab.
For years, joint buyers argued that if each person's share was under ₹50 lakh, no TDS arose — a view some Tribunal rulings supported. The Finance (No. 2) Act, 2024 closed that road: for payments from 1 October 2024, the test applies to the aggregate consideration for the property. Two buyers splitting an ₹80 lakh flat 50:50 must each deduct 1% on their ₹40 lakh share and file their own Form 26QB. The old per-share argument now helps only in legacy disputes for earlier years.
How much to deduct — the stamp duty value comparison
Since April 2022 the deduction base is the higher of the sale consideration or the stamp duty value (SDV) — the same anti-undervaluation logic the capital gains rules use. The comparison changes real outcomes:
| Scenario | Agreement value | Stamp duty value | TDS position |
|---|---|---|---|
| Standard purchase | ₹85,00,000 | ₹82,00,000 | 1% of ₹85,00,000 = ₹85,000 |
| SDV higher than price | ₹85,00,000 | ₹92,00,000 | 1% of ₹92,00,000 = ₹92,000 |
| Price below ₹50 lakh, SDV above | ₹48,00,000 | ₹53,00,000 | TDS applies — 1% of ₹53,00,000 = ₹53,000 |
| Both below ₹50 lakh | ₹46,00,000 | ₹47,50,000 | No TDS |
Where a builder charges GST separately on an under-construction unit, the widely followed practice is to deduct on the consideration excluding the separately shown GST — keep the agreement wording clean and take advice if the invoice mixes the two. Paying in instalments? Deduct 1% from every payment, from the booking amount onwards, and file within each deduction's own 30-day window.
Filing Form 26QB — the actual steps
- Log in to the e-filing portal (incometax.gov.in) → e-Pay Tax → New Payment → 26QB (TDS on Sale of Property). No TAN, no TRACES deductor registration — your PAN drives the filing.
- Fill one form per buyer-seller pair. Two buyers and two sellers means four 26QB forms, each with the proportionate consideration and TDS.
- Enter the property, consideration, SDV and payment details — the form computes the 1% and validates the date of deduction against the due date.
- Pay online (net banking, UPI or over-the-counter challan). The deadline is 30 days from the end of the month in which you deducted — deduct on 10 March, file by 30 April.
- Register on TRACES as a taxpayer and download Form 16B once the filing is processed; issue it to the seller within 15 days of the 26QB due date. Sellers should insist on it — it is their proof of credit.
From FY 2026-27 the Income-tax Act, 2025 relocates the deduction rule to Section 393(1), Table S.No. 3(i) (old 194-IA) — same 1%, same ₹50 lakh line — and renumbers the paperwork: the 26QB family consolidates into Form 141, and the certificate moves to Form 132 (old 16B). The portal keeps the familiar labels through the transition, so match whatever the e-filing screen currently calls the form rather than assuming.
What a missed 26QB actually costs
| Default | What it costs | Provision (FY 2025-26 and earlier) | Provision (FY 2026-27 onward) |
|---|---|---|---|
| Did not deduct on time | Interest at 1% per month (part months count in full) from the date the tax was deductible to the date deducted | Section 201(1A) | Section 398(3)(a) |
| Deducted but deposited late | Interest at 1.5% per month from the date of deduction to the date of deposit | Section 201(1A) | Section 398(3)(a) |
| Filed 26QB late | ₹200 per day of delay, capped at the TDS amount | Section 234E | Section 427 |
| Longer failures | Penalty of ₹10,000 to ₹1,00,000 — generally spared if tax, interest and fee are paid and the statement is filed within one year of the due date | Section 271H | Section 461 |
Buying from an NRI? Stop — different section entirely
Section 194-IA applies only when the seller is a resident. With an NRI seller, Section 195 (Section 393(2) for payments from 1 April 2026) takes over at any price: the buyer must deduct at rates linked to the seller's capital gains — long-term gains attract 12.5% plus surcharge and cess. By default the deduction runs on the entire sale value, not the gain, unless the seller obtains a lower-deduction certificate under Section 197 (Section 395(1)(a) from FY 2026-27). We have covered the mechanics, and the certificate route that fixes the cash-flow pain, in our guides on lower TDS certificates for NRI property sales and the NRI seller’s complete checklist. Deducting 1% under 26QB against an NRI seller does not discharge the buyer's obligation — the department treats it as a short deduction with the buyer liable for the difference.
The TAN requirement is going. Until now the buyer had to obtain a TAN and file a quarterly statement (Form 27Q; Form 144 for FY 2026-27 payments). From 1 October 2026, resident individual and HUF buyers can deduct and deposit TDS on a purchase from a non-resident through the PAN-based challan-cum-statement in Form 141, without a TAN. The rates stay those that apply to the non-resident's capital gains. For payments before 1 October 2026 the TAN route applies, and it is worth confirming that the option is live on the e-filing portal before you pay.
Common mistakes we see in 26QB work
| Mistake | Consequence |
|---|---|
| Deducting on the agreement value when the SDV is higher | Short-deduction demand with interest on the gap |
| One 26QB for a joint purchase | Defective filing; credit mismatches for the seller; correction is manual and slow |
| Skipping TDS on booking and early builder instalments | Interest builds silently on every missed instalment date |
| Ignoring parking, club and maintenance charges billed separately | Consideration understated — short deduction on the add-ons |
| Treating an NRI seller as resident and filing 26QB | Liability for the full Section 195 / Section 393(2) shortfall, plus interest |
| Not downloading Form 16B | Seller-side disputes at ITR time; avoidable back-and-forth at registration of the next transaction |
Seller-side readers: the 1% deducted from you is only an advance — your actual tax depends on the capital gains computation. Our guide to capital gains on property — 12.5% vs 20% with indexation walks through that choice. The AY 2026-27 due date for ITR-2, the form most sellers with capital gains use, was 31 July 2026; belated returns run to 31 December 2026, so reconcile the credit in your AIS before you file. Renting rather than buying? The parallel rules are in our TDS on rent guide (194-I vs 194-IB).
Frequently asked questions
Is TDS required if the property costs exactly ₹50 lakh?
Yes. Section 194-IA exempts a purchase only where both the sale consideration and the stamp duty value are below ₹50 lakh. At exactly ₹50 lakh the exemption is lost, and TDS at 1% applies on the full amount, not just the portion above ₹50 lakh.
Do I need a TAN to file Form 26QB?
No. Form 26QB (Form 141 from FY 2026-27) is a PAN-based challan-cum-statement, so an ordinary home buyer does not need a TAN. You need your PAN and the seller’s PAN. Buying from an NRI seller falls under Section 195 (Section 393(2) from FY 2026-27). For those purchases the buyer has needed a TAN and Form 27Q (Form 144 for FY 2026-27 payments); from 1 October 2026, resident individual and HUF buyers can instead deduct and deposit the TDS through the PAN-based Form 141 without a TAN. Confirm the option on the e-filing portal when you pay.
We are two buyers and each of us is paying under ₹50 lakh. Is TDS still required?
Usually yes. For transactions from 1 October 2024, the ₹50 lakh test applies to the aggregate consideration for the property, not each buyer’s individual share. If the property is worth ₹80 lakh and two buyers pay ₹40 lakh each, both must deduct 1% on their own share and each must file a separate Form 26QB.
I forgot to deduct or file Form 26QB. How do I fix it now?
File Form 26QB now with the TDS, interest at 1% or 1.5% per month, and the ₹200-per-day late fee under Section 234E (Section 427 for FY 2026-27 deductions), capped at the TDS amount. The department matches property registrations reported by sub-registrars against 26QB filings and issues notices for gaps, so filing before a notice arrives is always the cheaper path. If the seller has already declared the sale and paid tax in their return, the deemed-default exposure can be softened through a CA certificate in Form 26A, though interest still applies.
Is TDS deducted on the home-loan portion too?
Yes. TDS applies to the full consideration regardless of how it is funded. In practice, you instruct your bank to remit the disbursement net of TDS or you deposit the TDS from your own funds — either way, the legal obligation to deduct and file stays with the buyer, not the bank.
Does anything change under the Income-tax Act 2025 from FY 2026-27?
The substance is unchanged — 1% on property of ₹50 lakh or more continues, relocated to Section 393(1), Table S.No. 3(i) of the Income-tax Act, 2025 (old 194-IA). The paperwork is renumbered: the Form 26QB family consolidates into Form 141 and the TDS certificate moves to Form 132 (old 16B). The portal continues to use the familiar labels during the transition, so confirm the current form name on the e-filing portal or TRACES when you file.
What if the seller is an NRI?
Section 194-IA does not apply at all — the purchase falls under Section 195 (Section 393(2) for FY 2026-27 payments), whatever the price. The buyer deducts tax linked to the seller’s capital gains (long-term gains are taxed at 12.5% plus surcharge and cess), and the deduction runs on the full sale value unless the seller obtains a lower-deduction certificate under Section 197 (Section 395(1)(a) from FY 2026-27). The buyer has needed a TAN and Form 27Q (Form 144 for FY 2026-27); from 1 October 2026, resident individual and HUF buyers can deposit the TDS through the PAN-based Form 141 without a TAN, at the same rates. Getting this wrong is the single most expensive TDS mistake a property buyer can make.
We prepare and file Form 26QB with the stamp-duty-value check done properly, handle late-filing regularisation and 26QB default notices, handle TDS on purchases from NRIs (through a TAN or the new PAN-based route) and lower-deduction certificates under Section 395(1)(a) (old 197), and reconcile TDS credits before your return is filed.
TDS Return Filing NRI Lower TDS Certificate Talk to usThis article is general information for FY 2025-26 and FY 2026-27, based on the law as on 25 September 2026, including the Finance (No. 2) Act 2024 amendments and the Income-tax Act, 2025 effective 1 April 2026. Thresholds, form numbers and portal workflows change; confirm the current position or speak to a professional before acting on a specific transaction.