A buyer closing an eighty lakh flat off Sarjapur Road in 2025 paid the full amount to the seller, registered the property, and thought he was done. Eight months later a notice from the income tax department told him otherwise. He was the one who should have deducted one percent as tax at source and deposited it with the government, and because he had not, the interest and penalty were now his to pay, not the seller's. The rule had always applied to him, and no one at the closing had flagged it.

Tax deducted at source on a property purchase is one of the few tax duties that falls on the buyer rather than the seller, and missing it is expensive. This guide explains when the one percent applies, how a Bengaluru buyer deducts and deposits it, and the traps around NRI sellers and missing PANs.

The short answer. When you buy a property of 50 lakh rupees or more, you must deduct 1 percent as tax at source and deposit it using Form 26QB, a rule the income tax guidance sets out under Section 194-IA. It is charged on the higher of the sale consideration or the stamp duty value, on the full amount once you cross 50 lakh, and the buyer is responsible, not the seller or the builder. The trade-off to remember: it is not an extra cost, it is part of the price paid to the government instead of the seller, but if you skip it the interest and penalty come out of your own pocket.

When does TDS on property apply?

The one percent applies whenever you buy an immovable property, other than agricultural land, for 50 lakh rupees or more. Below that threshold there is no deduction at all, but at or above it the buyer must deduct one percent. Crucially, once the value crosses 50 lakh, the one percent is charged on the entire amount, not just the portion above the threshold, so an eighty lakh flat attracts tax on the full eighty lakh.

The amount is computed on the higher of the sale consideration or the stamp duty value of the property. If the guidance value used for stamp duty is higher than the price you are paying, the one percent is worked out on that higher figure. For most Bengaluru apartments, which comfortably clear the fifty lakh mark, this deduction is a routine part of closing rather than an edge case, and it should be planned into the payment schedule from the start.

One point worth noting is how the rule handles under construction flats bought in instalments. Where you pay the builder in stages, you deduct the one percent on each instalment rather than all at once, and each deduction has its own Form 26QB and its own deposit deadline. The threshold is judged on the total value of the property, so a flat priced above fifty lakh brings every instalment into the net, even the early ones that are individually small.

Who is responsible for deducting it?

The buyer is responsible for deducting and depositing the tax, not the seller, the builder, or the sub-registrar. This is what trips people up, because in most other situations tax is the seller's concern. Here the law places the duty squarely on the person paying for the property, and if the deduction is missed, it is the buyer who faces the interest and penalty, even though the money ultimately relates to the seller's gains.

In practice this means you do not hand over the full amount to the seller. You pay the seller ninety nine percent and route the remaining one percent to the government on the seller's behalf. The seller then claims credit for that one percent when filing their own return, so they are not out of pocket either. Explaining this to the seller early avoids friction at the closing table, because an unprepared seller can mistake the deduction for you shortchanging them.

Where more than one buyer or seller is on the deed, the duty is shared but not diluted. Each buyer deducts on their share of the payment and files a separate Form 26QB for each seller, so a flat bought jointly by a couple from two co owners can involve several filings. The fifty lakh threshold is still judged on the whole property value, not on each person's slice, so joint ownership does not take a high value flat out of the net.

How do I deposit the TDS and issue the certificate?

You deposit the deducted amount using Form 26QB, and then issue Form 16B to the seller as proof. Form 26QB is a combined challan and return, and you do not need a TAN to file it; your PAN and the seller's PAN are enough. The deposit must reach the government within thirty days from the end of the month in which you made the deduction, so a deduction in March must be deposited by the end of April.

Once the payment is processed, Form 16B, the tax deduction certificate, becomes available through the TRACES portal a couple of weeks later, and you download it and give it to the seller. Keeping this whole trail clean matters, because Form 16B is the seller's evidence that the one percent was paid on their behalf. Miss the deposit deadline and interest runs from the date of deduction, along with a late filing fee, all of which land on you.

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

If the seller is a non-resident, Section 194-IA does not apply and a different, heavier rule takes its place. For an NRI seller the buyer deducts under Section 195, files Form 27Q rather than Form 26QB, and the rate is far higher, typically around twenty percent on the gains rather than one percent of the price. Getting this wrong is a serious and common mistake, so the seller's residential status is one of the first things to confirm.

A missing PAN is the other trap. If the seller does not provide a valid PAN, the deduction jumps to twenty percent instead of one percent, and the seller loses the ability to claim credit for it in their return. So collect and verify the seller's PAN early, confirm whether they are resident or non-resident, and never assume the one percent rule applies until you have checked both. These two questions decide whether you are dealing with a simple one percent or a much larger obligation.

What does the deduction look like at different values?

The table below shows when the one percent applies and what it comes to, assuming a resident seller with a valid PAN and that the value shown is the higher of price or stamp duty value.

Notice the cliff at fifty lakh. A property at forty five lakh attracts nothing, while one at fifty lakh attracts the one percent on the whole value. That is why a price sitting just above the threshold should never be a surprise at closing; the deduction is entirely predictable once you know the value.

What is the step by step for a Bengaluru buyer?

Work through this order as you approach registration:

1. Confirm the property value, taking the higher of the price or the stamp duty value.
2. Check whether it is 50 lakh or more, which is the point the one percent begins.
3. Confirm the seller is resident and collect a valid PAN for the seller and yourself.
4. Deduct one percent from the seller's payment rather than paying the full amount.
5. Deposit it using Form 26QB within thirty days from the end of the month of deduction.
6. Download Form 16B from the TRACES portal and hand it to the seller.
7. Keep the challan and certificate with your purchase file for future reference.

This tax is one line in the full cost of buying in Bengaluru. Plan the government charges alongside it using our guide to Karnataka stamp duty and registration charges, and size the loan behind the purchase with our home loan EMI guide. If you are pricing a specific project such as Amberstone Vectra on Sarjapur Road, remember that any unit above fifty lakh brings this one percent deduction into play.

Frequently asked questions

When is TDS applicable on a property purchase in India?

TDS at one percent applies when you buy an immovable property, other than agricultural land, for 50 lakh rupees or more. Below that value there is no deduction. Once the value crosses 50 lakh, the one percent is charged on the entire amount, computed on the higher of the sale consideration or the stamp duty value.

Who deducts TDS on property, the buyer or the seller?

The buyer is responsible for deducting and depositing the one percent, not the seller, builder, or sub-registrar. The buyer pays the seller ninety nine percent and routes the remaining one percent to the government using Form 26QB. The seller later claims credit for it in their tax return. If the buyer fails to deduct, the interest and penalty fall on the buyer.

How do I deposit property TDS and give the seller a certificate?

Deposit the deducted amount using Form 26QB, which needs your PAN and the seller's PAN but no TAN, within thirty days from the end of the month of deduction. After the payment is processed, download Form 16B from the TRACES portal and issue it to the seller as proof. Missing the deadline triggers interest from the deduction date plus a late fee.

What if the seller is an NRI?

If the seller is a non-resident, Section 194-IA does not apply. The buyer instead deducts under Section 195 and files Form 27Q rather than Form 26QB, at a much higher rate, typically around twenty percent on the gains rather than one percent of the price. Confirm the seller's residential status early.

Last updated 2026-08-23. PropNewz Team.