TDS on a Property Purchase: What a Bengaluru Buyer Must Deduct

A Bengaluru buyer paying for a flat in Sarjapur Road in September 2026 nearly made an expensive mistake. He was about to transfer the full agreed amount to the seller, unaware that the law required him, the buyer, to hold back one percent and pay it to the government instead. A quick check saved him from a tax demand and a penalty later, because on a property of fifty lakh rupees or more, the buyer is the one the Income Tax Act makes responsible for deducting tax at source. Getting this one step right is entirely in the buyer's hands.

The short answer. Under Section 194-IA of the Income Tax Act, when you buy a property, other than agricultural land, where the consideration or the stamp duty value is fifty lakh rupees or more, you must deduct one percent as tax at source from the payment to a resident seller, and deposit it using Form 26QB within thirty days from the end of the month of deduction. The one percent applies to the higher of the agreement value or the stamp duty value, and on the whole amount once the threshold is crossed. The trade-off is a little paperwork, but skipping it exposes you, the buyer, to interest and penalties, not the seller.

What is TDS on a property purchase?

TDS on a property purchase is tax that the buyer deducts from the payment to the seller and deposits directly with the government. Section 194-IA of the Income Tax Act puts the duty on the buyer, which surprises many first time purchasers who assume tax is always the seller's concern. The idea is simple. On a sizeable property sale, the government collects a small slice up front through the buyer, and the seller later adjusts it against their own tax. For the buyer, it is not an extra cost, it is a part of the price that goes to the tax department instead of to the seller.

Because the obligation sits on the buyer, the consequences of getting it wrong also sit on the buyer. Interest for late deduction or late payment, and a fee for filing the statement late, all land on the purchaser, and none of it can be recovered from the seller after the event. That is why this is worth understanding before you make the final payment, rather than after, when the money has already left your hands and the leverage to fix it is gone.

When does the one percent apply?

The one percent applies when you buy immovable property, other than agricultural land, and the consideration or the stamp duty value is fifty lakh rupees or more. Two details matter here. First, once the value reaches or crosses fifty lakh, the one percent is charged on the entire amount, not only on the part above fifty lakh, so a property at fifty lakh attracts tax on the full fifty lakh. Second, since a change effective from 1 October 2024, the one percent is calculated on the higher of the agreement value or the stamp duty value, so you cannot escape it by writing a low figure in the agreement while the stamp duty value is higher.

Agricultural land is outside this section. For most Bengaluru apartment and plot purchases at current prices, though, the fifty lakh threshold is easily crossed, so the buyer should assume Section 194-IA applies and plan for it from the start. Where a property is bought jointly, or sold by more than one owner, the fifty lakh test is read against the property as a whole rather than each person's share, so joint buyers cannot sidestep the rule by splitting the payment between them.

How does a buyer deduct and deposit the TDS?

Deduct one percent at the time of payment, and deposit it using Form 26QB, the challan cum statement for this tax. You do not need a TAN, the tax deduction account number that businesses use, because Section 194-IA lets an ordinary buyer deposit using their PAN. Form 26QB must be filed and the tax paid within thirty days from the end of the month in which the deduction was made. After paying, you download Form 16B, the TDS certificate, from the TRACES portal and give it to the seller as proof that the tax was deducted and deposited on their behalf.

Where there is a home loan, coordinate the timing so the one percent is handled correctly on each payment. The table below sets out the core rules and the buyer action for each.

What happens if the seller has no PAN, or is an NRI?

If the seller does not provide a PAN, the tax to be deducted rises from one percent to twenty percent, so always collect and verify the seller's PAN before you pay. This is a large jump, and it exists to make sure the seller's identity is on record with the tax department. Insisting on the PAN is not rudeness, it is protecting yourself from a much larger deduction obligation.

Section 194-IA covers payments to resident sellers. If your seller is a non resident, a different provision applies and the tax treatment is different and usually heavier, so do not simply deduct one percent. Buying from a non resident is governed by Section 195 rather than Section 194-IA, and it needs its own care, so confirm the seller's residential status in writing before you structure the payment. When in doubt, treat the seller as a non resident until proven otherwise and take advice, because a wrong assumption here is one of the costlier mistakes a buyer can make.

How does TDS work when I pay the builder in installments?

When you pay for an under construction property in installments, the one percent is deducted on each payment rather than only once at the end. The threshold is judged by the total value of the property, so once that total is fifty lakh rupees or more, every installment carries the one percent deduction, and each deduction is deposited through its own Form 26QB within thirty days from the end of that month. This trips up buyers who expect a single lump sum deduction, and it is worth building into your payment plan so that each demand from the builder is settled net of the one percent, with the tax paid separately to the government.

Keep a simple record of each installment, the date, the amount, the one percent deducted, and the Form 26QB and Form 16B for it. A clean trail makes it far easier to answer any later query and to give the seller or builder the certificates they are entitled to for every payment.

How does the TDS fit with the rest of my purchase costs?

The one percent TDS is part of the price you pay, redirected to the tax department, and it sits alongside the stamp duty and registration charges that are a genuine additional cost. It helps to keep the two separate in your budget. The TDS is deducted from what you owe the seller, so it does not increase your total outlay, while stamp duty and registration are over and above the price. For how those charges work in Karnataka, see our guide to Karnataka stamp duty and registration charges, and for how the loan side is timed, our note on the home loan EMI and repo rate math. A buyer booking a project such as Prestige Eaton Park in Sarjapur would plan all three from the outset.

A seven step TDS checklist for buyers

Use this whenever the property value reaches fifty lakh rupees or more.

1. Confirm the value crosses fifty lakh on the higher of agreement or stamp duty value.
2. Collect and verify the seller's PAN before making any payment.
3. Confirm the seller is a resident, not a non resident, for Section 194-IA to apply.
4. Deduct one percent from the payment to the seller.
5. File Form 26QB and pay the tax within thirty days from the end of the month.
6. Download Form 16B from TRACES and hand it to the seller.
7. Keep the challan and certificate with your purchase file for future reference.

Frequently asked questions

Who deducts TDS on a property purchase, the buyer or the seller? The buyer. Under Section 194-IA of the Income Tax Act, the buyer must deduct one percent from the payment to a resident seller when the property value is fifty lakh rupees or more, and deposit it with the government. It surprises many first time buyers, but the responsibility and the consequences of getting it wrong sit with the purchaser.

Is the one percent charged only on the amount above fifty lakh? No. Once the value reaches or crosses fifty lakh rupees, the one percent applies to the entire consideration, not just the portion above the threshold, so a property valued at exactly fifty lakh attracts one percent on the full amount. Since October 2024 the tax is calculated on the higher of the agreement value or the stamp duty value.

Do I need a TAN to deposit property TDS? No. Section 194-IA lets an ordinary buyer deposit the tax using their PAN through Form 26QB, without the tax deduction account number that businesses need. You pay within thirty days from the end of the month, then download Form 16B from the TRACES portal and give it to the seller as proof that the tax was deducted and paid.

What if the seller does not give a PAN? Then the tax you must deduct rises from one percent to twenty percent. This large jump is why you should collect and verify the seller's PAN before making any payment. Getting the PAN on record is a simple step that keeps your deduction at one percent and avoids both a heavier deduction and later trouble with the tax department.

Last updated 2026-09-19. PropNewz Team.