A Bengaluru buyer closing on a 95 lakh flat in Devanahalli assumed TDS was the seller's problem, something to do with the seller's taxes and none of his concern. He was wrong in a way that could have cost him. Under the law, it is the buyer, not the seller, who must deduct tax at source on a property purchase above the threshold and deposit it with the government. Miss it, and the buyer, not the seller, faces the interest and penalties. This is one of the few tax duties in a home purchase that lands squarely on you as the buyer rather than the seller, and it is easy to get right once you actually know the rules.

The short answer. When you buy immovable property valued at fifty lakh or more, section 194-IA of the income tax law requires you, the buyer, to deduct one percent as tax at source and deposit it using Form 26QB. The deduction is on the higher of the sale consideration or the stamp duty value. The trade off is simple: a small, mechanical compliance step now versus interest and penalties later if you skip it. Importantly, this rule works differently if the seller is a non resident, so identifying the seller's status matters.

Who has to deduct TDS on a property purchase?

The obligation sits with the buyer, which surprises many first time purchasers. When you buy immovable property, other than agricultural land, for fifty lakh or more, you are required to deduct one percent of the amount as tax at source and pay it to the government on the seller's behalf. You do not need a separate tax deduction account number for this; your PAN and the seller's PAN are what the process uses.

Because the duty is yours, so is the consequence of getting it wrong. If you fail to deduct or deposit, the interest and penalties attach to you, not the seller. That is why this deserves a place on your closing checklist rather than being left to assumption or to the seller's word.

The logic behind putting the duty on the buyer is that the government wants the tax collected at the point of payment, when the money is moving, rather than relying on the seller to declare the gain later. For you that means the mechanics are simple but the timing is real: the deduction happens as you pay, and the deposit follows within a set window. Build it into how you structure the final payments rather than discovering it after the sale deed is signed.

How much is deducted, and on what value?

The rate is one percent, and the value it applies to is the higher of the sale consideration or the stamp duty value of the property. This mirrors the same higher of logic that governs stamp duty, so if the stamp duty value exceeds your agreed price, the TDS is computed on that higher figure. On a property at or above the fifty lakh threshold, the one percent applies to the whole consideration, not merely the amount above fifty lakh.

One important exception protects you from over deducting: if the seller does not provide a valid PAN, the rate is not one percent but a much steeper twenty percent. That alone is reason to insist on the seller's correct PAN before you deduct, so the right amount is withheld and correctly credited.

A common point of confusion is instalment purchases of under construction flats. Where the price is paid in stages, the TDS is generally deducted on each instalment once the total value crosses the fifty lakh threshold, rather than in one lump at the end. If your payment plan runs over many instalments, map out when and how much TDS to deduct at each stage so nothing is missed and the totals reconcile.

What is Form 26QB and when is it due?

Form 26QB is the challan cum statement through which you deposit the deducted TDS with the government. The deadline is tight: it must be filed and the tax deposited within thirty days from the end of the month in which the deduction was made. Missing this window triggers interest and a late fee, so treat the Form 26QB filing as part of the transaction, timed to your payment, not an afterthought weeks later.

After you deposit the TDS, you issue the seller a certificate, Form 16B, generated through the tax department's TRACES facility, which evidences the tax deducted on their behalf. Keeping this trail clean matters because the seller will expect the credit to reflect against their PAN, and you will want proof that you met your obligation.

Where a property has more than one buyer or more than one seller, the Form 26QB process is filed for each buyer and seller combination, so joint purchases need a little extra care to get the shares right. If your purchase involves co owners, confirm how the deduction and the forms are to be split before you file, so each PAN reflects the correct amount and no one is left with a mismatched record.

What are the key rules, side by side?

The table below summarises the essentials so you can see the whole obligation at a glance.

What changes if the seller is a non resident?

This is the point where buyers most often make a costly error. Section 194-IA applies when the seller is a resident. If the seller is a non resident, this section does not apply, and instead the buyer must deduct tax under a different provision, section 195, which typically involves higher rates and a different process. Treating an NRI seller as if the simple one percent rule applies is a serious mistake that can leave you exposed.

So before you deduct anything, establish the seller's residential status clearly and in writing. If the seller is a non resident, take professional advice on the correct deduction under section 195 rather than defaulting to the one percent path. This single check protects you from a large and avoidable liability.

The difference is not a technicality. Deductions on a purchase from a non resident can be substantially higher and follow their own filing route, and getting it wrong can leave you personally answerable for the shortfall. Because a seller may not volunteer their non resident status, ask the question directly and record the answer as part of your documentation.

How does TDS fit with my other purchase costs?

TDS is not an extra cost to you in the way stamp duty is; it is a part of the price that you route to the government instead of paying entirely to the seller. In effect, on a fifty lakh plus purchase you pay ninety nine percent to the seller and one percent to the tax department on the seller's behalf. That said, it is one more compliance step to line up alongside your stamp duty, registration and, for under construction flats, GST. Our guides on Bengaluru stamp duty and registration and on GST on under construction flats complete the picture of what you pay and to whom.

For a purchase in a project such as Arvind The Park in Devanahalli, or any home above fifty lakh, plan the TDS deduction and the Form 26QB filing into your payment timeline from the outset so nothing slips through the cracks at closing.

A seven step TDS checklist for property buyers

Run these carefully when your purchase crosses the fifty lakh threshold.

1. Confirm the property value is fifty lakh or more so the TDS rule applies.
2. Establish whether the seller is a resident or a non resident.
3. If the seller is a non resident, take advice on deduction under section 195 instead.
4. Collect the seller's valid PAN to avoid the twenty percent rate.
5. Deduct one percent on the higher of consideration or stamp duty value.
6. File Form 26QB and deposit the deducted tax within thirty days of the month end.
7. Issue Form 16B to the seller through the TRACES facility and keep the full trail with your records.

Frequently asked questions

Who deducts TDS when buying a property, the buyer or the seller?

The buyer deducts the TDS. Under section 194-IA, when you buy immovable property for fifty lakh or more, you must deduct one percent and deposit it with the government on the seller's behalf. The responsibility and any penalty for failing to deduct or deposit fall on the buyer, so treat it as your own compliance step at closing.

Is TDS calculated on my price or the stamp duty value?

TDS under section 194-IA is calculated on the higher of the sale consideration or the stamp duty value. If the stamp duty value exceeds your agreed price, the one percent applies to that higher figure. On a purchase at or above fifty lakh, the one percent applies to the whole value, not only the portion above the threshold.

What if I am buying from an NRI seller?

Section 194-IA applies only when the seller is a resident. If the seller is a non resident, this section does not apply, and you must deduct under section 195, which usually involves higher rates and a different process. Establish the seller's residential status in writing before deducting, and take professional advice for an NRI seller to avoid a large liability.

When must I deposit the TDS and issue the certificate?

You deposit the deducted TDS using Form 26QB within thirty days from the end of the month in which you made the deduction. After depositing, you issue Form 16B to the seller through the TRACES facility as proof. Filing late triggers interest and a fee, so align the filing with your payment to the seller.

Last updated 2026-08-17. PropNewz Team.