Guide to TDS on Property Transactions for Buyers & Sellers

Introduction

Buying or selling property in India? Then you need to be aware of TDS on property transactions as per Section 194-IA of the Income Tax Act. Whether you’re an investor, homeowner, or first-time buyer, failing to comply can result in penalties, interest, and even disallowance of deductions.

This 2025 guide by Makwana Sweta & Associates, leading Chartered Accountants in Mumbai, explains the TDS implications on property transactions, filing requirements, timelines, and penalties in simple language.

What is TDS on Property Transactions?

TDS stands for Tax Deducted at Source. As per Section 194-IA, if you are buying an immovable property (land or building) worth more than Rs. 50 lakh, you must deduct 1% TDS on the sale value and deposit it with the government.

Example: If you’re buying a flat worth Rs. 80 lakh, you must deduct Rs. 80,000 (1%) and pay only Rs. 79.2 lakh to the seller.

Applicability of Section 194-IA

Applies to all buyers (resident or NRI) purchasing immovable property (excluding agricultural land).
Property value must exceed Rs. 50 lakh.
The buyer is responsible for deducting and depositing TDS.
TDS must be deposited even if the payment is made in installments.
No TAN (Tax Deduction Account Number) is required for the buyer.

How to Pay TDS on Property (Form 26QB)

Visit TIN NSDL.
Click on “TDS on Property (Form 26QB)”.
Enter buyer/seller PAN, property details, amount, and payment mode.
Pay using net banking/debit card or generate challan for bank payment.
Download the acknowledgment.

TDS must be paid within 30 days from the end of the month in which payment to the seller is made.

TDS Certificate (Form 16B)

After payment:

The buyer must download Form 16B from the TRACES website.
Provide it to the seller as proof of TDS deduction.

Penalties for Non-Compliance

Interest: 1% per month (for delay in deduction) or 1.5% (for delay in payment)
Penalty: Rs. 200/day for delay in filing Form 26QB
Prosecution: In extreme cases, imprisonment may apply

Note: TDS is still required even if stamp duty value is below Rs. 50 lakh but agreement value exceeds it.

Key Points for Sellers

Report the TDS in your ITR to claim credit.
Match the TDS entries with your Form 26AS.
Ensure the buyer gives you Form 16B.

Special Cases

Joint Buyers/Sellers: TDS must be deducted proportionately.
Under Construction Property: TDS applies on each installment paid.
NRI Seller: TDS @20% or more (Section 195), not Section 194-IA

Final Words

Compliance with TDS on property transactions is not optional. Missing a step can cost you penalties and tax scrutiny. Whether you’re a buyer or seller, it is best to consult a CA in Mumbai like Makwana Sweta & Associates to ensure proper compliance and documentation.

Need Help?

Our expert team assists with:

TDS Form 26QB filing
Form 16B generation
NRI transactions & TDS at higher rates

Visit Our Site for Tax Consultancy Services

Outbound: TIN NSDL Portal