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The 2-Minute Summary
When you buy immovable property worth Rs. 50 lakh or more, you are required to deduct TDS at 1% from the payment to the seller before completing the transaction. This is the buyer’s obligation, not the seller’s.
The TDS is 1% of whichever is higher: the actual consideration paid or the stamp duty value of the property. You do not need a TAN. You use Form 26QB to deposit the TDS.
Example: Sunita buys a flat for Rs. 70 lakh from a builder. She also pays Rs. 3 lakh for car parking and Rs. 2 lakh as maintenance deposit. Total consideration = Rs. 75 lakh. TDS = 1% of Rs. 75 lakh = Rs. 75,000. Sunita deducts Rs. 75,000 from her final payment to the builder and deposits it via Form 26QB.
Under Income Tax Act 1961: Section 194IA of the Income Tax Act 1961. Now Section 393(1) Sl. No. 3(i) of the Income Tax Act 2025. Rate and threshold unchanged.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 3(i) of Income Tax Act 2025 |
| Old Act Reference | Section 194IA of Income Tax Act 1961 |
| Who Deducts | The buyer (transferee) of the immovable property |
| Rate | 1% of consideration or stamp duty value, whichever is higher |
| Threshold | Rs. 50 lakh (TDS applies where consideration or stamp duty value equals or exceeds Rs. 50 lakh) |
| Excludes | Agricultural land (as defined under Section 2(22)(iii)) |
| TAN Required | No. Use PAN. |
| Form to Deposit TDS | Form 26QB (online) |
| TDS Certificate to Seller | Form 16B (download from TRACES) |
| Due Date for Deposit | Within 30 days from end of month of payment |
What is Included in Consideration
Section 402(9) of the Act defines consideration for transfer of immovable property comprehensively. It includes all amounts paid or payable by all transferees to the transferor or all transferors. Specifically, consideration includes:
- Club membership fees
- Car parking charges
- Electricity or water facility charges
- Maintenance charges
- Advance or security deposit (if not refundable)
- Any other charges of a similar nature incidental to the transfer
This is a significant expansion from what many buyers assume. If you buy a flat at Rs. 60 lakh and separately pay Rs. 5 lakh for parking and Rs. 2 lakh for power backup, the total consideration for TDS purposes is Rs. 67 lakh, not Rs. 60 lakh.
Example: Vikram buys an apartment for Rs. 62 lakh. The builder charges Rs. 4 lakh for preferential location, Rs. 3 lakh for car parking, and Rs. 1 lakh as maintenance deposit. Total consideration = Rs. 70 lakh. TDS = 1% on Rs. 70 lakh = Rs. 70,000. Vikram deducts this from his last instalment to the builder.
Stamp Duty Value Comparison
TDS under Sl. 3(i) is on 1% of whichever is higher: actual consideration or stamp duty value. The stamp duty value (also called circle rate or ready reckoner rate) is determined by the State Government for registration purposes.
If the property is undervalued in the sale agreement compared to the circle rate, TDS applies on the stamp duty value even though less money is actually changing hands.
Example: Rahul buys a property for Rs. 55 lakh. The stamp duty value is Rs. 65 lakh (higher, because the property is priced below circle rate). TDS = 1% of Rs. 65 lakh = Rs. 65,000. Not 1% of Rs. 55 lakh.
The Threshold Rule: Note 3 to Sl. 3(i)
Note 3 to Sl. 3(i) clarifies the threshold. TDS is deducted where the consideration for transfer or the stamp duty value, whichever is higher, equals or exceeds Rs. 50 lakh. This means:
- If consideration is Rs. 48 lakh but stamp duty value is Rs. 52 lakh, TDS applies because stamp duty value exceeds Rs. 50 lakh.
- If consideration is Rs. 52 lakh but stamp duty value is Rs. 47 lakh, TDS applies because consideration exceeds Rs. 50 lakh.
- If both are below Rs. 50 lakh, TDS does not apply.
Multiple Buyers or Sellers
Note 1 to Sl. 3(i) states that consideration is the aggregate of amounts paid by all transferees to all transferors for the transfer of the property. This prevents splitting a single property transaction across multiple agreements to escape the Rs. 50 lakh threshold.
Example: A property worth Rs. 80 lakh is purchased jointly by two brothers who each pay Rs. 40 lakh. Each individual payment is below Rs. 50 lakh. However, the aggregate consideration for the property is Rs. 80 lakh. Both buyers must deduct TDS of 1% on their respective shares: Rs. 40,000 each.
Agricultural Land Exclusion
Section 402(19) defines immovable property for this purpose as any land (other than agricultural land) or any building or part of a building. Therefore, TDS under Sl. 3(i) does not apply to the purchase of agricultural land.
Agricultural land is land that is not situated in a notified urban area (as per Section 2(22)(iii)). Rural agricultural land purchases are completely outside this TDS provision.
When JDA Also Applies
Note 2 to Sl. 3 states: where consideration on which both Sl. 3(i) and Sl. 3(ii) (JDA cash consideration) provisions apply, TDS is deducted only under Sl. 3(ii). This prevents double deduction where a Joint Development Agreement is involved.
How to File Form 26QB
Form 26QB is filed online. The steps are:
- Go to the income tax portal (incometax.gov.in) or TIN-NSDL website.
- Fill Form 26QB with PAN of buyer and seller, property address, consideration amount, and TDS amount.
- Pay TDS online using net banking or challan.
- Download Form 16B from the TRACES portal and provide it to the seller.
Due date: 30 days from the end of the month in which TDS was deducted. For a payment made in February 2027, TDS must be deposited by 31st March 2027.
Practical Compliance Checklist
- Before making any instalment payment on property above Rs. 50 lakh: compute 1% on total consideration including parking, club fees, and all charges. Deduct this from each instalment proportionately.
- Always use total consideration (all charges combined) as the base for TDS. Under-computing TDS by excluding parking or other charges is a common error.
- File Form 26QB within 30 days of each payment instalment where TDS is deducted.
- Download Form 16B from TRACES within 15 days of filing Form 26QB and hand it to the seller.
- If the stamp duty value is higher than the consideration: compute TDS on stamp duty value.
Property TDS is one of the most commonly missed obligations in India. Buyers often assume the builder or seller handles it. They do not. It is entirely the buyer’s obligation. Missing it results in interest at 1% per month from the date TDS was deductible, plus a 30% disallowance of the purchase cost as a business expense for business buyers.
