TDS on Property Purchase: Section 194-IA, Form 26QB and Compliance Guide
Buying property where the sale consideration or stamp duty value is Rs 50 lakh or more? The Income Tax Act requires you, as the buyer, to deduct TDS before paying a resident seller.
WHEN DOES SECTION 194-IA APPLY
Section 194-IA applies when the sale consideration or stamp duty value of an immovable property (whichever is higher) is Rs 50 lakh or more, and the seller is a resident. It covers residential, commercial, and industrial property. Rural agricultural land is excluded. Since 1 October 2024, for transactions with multiple buyers or sellers, the aggregate consideration is used to determine the Rs 50 lakh threshold.
TDS RATE AND WHO DEDUCTS
The buyer deducts TDS at 1% of the total sale consideration (or stamp duty value, whichever is higher) at the time of each payment or credit to the seller, including instalments. No TAN is required. Both buyer and seller need a valid PAN. If the seller does not furnish PAN, the TDS rate jumps to 20% under Section 206AA. Consideration includes incidental charges such as parking, club membership, maintenance deposits, and similar fees.
FILING FORM 26QB AND ISSUING FORM 16B
After deducting TDS, the buyer must file Form 26QB and deposit the tax through the Income Tax e-Filing portal within 30 days from the end of the month of deduction. For multiple buyers or sellers, separate Form 26QB filings are required for each combination. The buyer downloads Form 16B from TRACES and issues it to the seller within 15 days from the due date of Form 26QB.
CONSEQUENCES OF NON-COMPLIANCE
If the buyer fails to deduct TDS, interest at 1% per month applies. If deducted but not deposited, interest rises to 1.5% per month. Late filing fee of Rs 200 per day under Section 234E applies for delayed Form 26QB, capped at the TDS amount. Penalty between Rs 10,000 and Rs 1,00,000 under Section 271H may apply.
NRI SELLERS: SECTION 195 APPLIES INSTEAD
When the seller is a Non-Resident, Section 194-IA does not apply. The buyer must deduct TDS under Section 195 and file Form 27Q. For long-term capital gains on transfers on or after 23 July 2024, the rate is 12.5% plus surcharge and cess.
PRACTICAL TIP
Before finalising the transaction, confirm the seller s PAN and residency status. Deduct TDS at each payment event and file Form 26QB within the prescribed deadline.
WHEN DOES SECTION 194-IA APPLY
Section 194-IA applies when the sale consideration or stamp duty value of an immovable property (whichever is higher) is Rs 50 lakh or more, and the seller is a resident. It covers residential, commercial, and industrial property. Rural agricultural land is excluded. Since 1 October 2024, for transactions with multiple buyers or sellers, the aggregate consideration is used to determine the Rs 50 lakh threshold.
TDS RATE AND WHO DEDUCTS
The buyer deducts TDS at 1% of the total sale consideration (or stamp duty value, whichever is higher) at the time of each payment or credit to the seller, including instalments. No TAN is required. Both buyer and seller need a valid PAN. If the seller does not furnish PAN, the TDS rate jumps to 20% under Section 206AA. Consideration includes incidental charges such as parking, club membership, maintenance deposits, and similar fees.
FILING FORM 26QB AND ISSUING FORM 16B
After deducting TDS, the buyer must file Form 26QB and deposit the tax through the Income Tax e-Filing portal within 30 days from the end of the month of deduction. For multiple buyers or sellers, separate Form 26QB filings are required for each combination. The buyer downloads Form 16B from TRACES and issues it to the seller within 15 days from the due date of Form 26QB.
CONSEQUENCES OF NON-COMPLIANCE
If the buyer fails to deduct TDS, interest at 1% per month applies. If deducted but not deposited, interest rises to 1.5% per month. Late filing fee of Rs 200 per day under Section 234E applies for delayed Form 26QB, capped at the TDS amount. Penalty between Rs 10,000 and Rs 1,00,000 under Section 271H may apply.
NRI SELLERS: SECTION 195 APPLIES INSTEAD
When the seller is a Non-Resident, Section 194-IA does not apply. The buyer must deduct TDS under Section 195 and file Form 27Q. For long-term capital gains on transfers on or after 23 July 2024, the rate is 12.5% plus surcharge and cess.
PRACTICAL TIP
Before finalising the transaction, confirm the seller s PAN and residency status. Deduct TDS at each payment event and file Form 26QB within the prescribed deadline.
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Disclaimer: This content is the author's personal opinion and analysis. It does not constitute professional tax or legal advice. Consult a qualified professional for specific advice on your situation.
Comments (4)
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Every SME owner needs this
The Rs 5 lakh aggregate is tricky for clients with multiple policies. Good callout.