TDS on Buying Property in Hyderabad: the 1 Percent Section 194-IA Rule

On a Tuesday morning at a Sub Registrar office near Kokapet, a first time buyer signed for a two bedroom flat priced at 82 lakh rupees, handed over the last cheque, and walked out believing the money side was finished. Three months later a notice from the income tax department told him it was not. He had forgotten one quiet duty that sits on the buyer, not the builder or the seller: deducting 1 percent tax at source before paying, and filing it. It is one of the few tax jobs in a home purchase that the law hands directly to the person writing the cheque, and it is the one buyers most often discover too late. This guide explains that duty in plain terms for anyone buying in Hyderabad, so the tax part of your purchase closes as cleanly as the registration does.

The short answer. If you buy a property in Hyderabad for 50 lakh rupees or more, you must deduct 1 percent of the price as tax at source, deposit it with the government using Form 26QB within 30 days from the end of the month of payment, and give the seller a Form 16B certificate. The trade off is simple: it costs you nothing extra because the 1 percent comes out of the seller's money, but if you skip it the interest and late fees land on you, the buyer, not the seller.

What is Section 194-IA and why does it apply to me?

Section 194-IA makes the buyer responsible for deducting tax when buying an immovable property other than agricultural land. The official income tax guidance states that any person paying consideration for transfer of an immovable property, other than agricultural land, must deduct tax at the time of credit or payment, whichever is earlier. In Hyderabad this catches most apartment and villa purchases in corridors like the Financial District, Gachibowli, Kokapet and Tellapur, where prices routinely cross the threshold. The rule is national, so it applies the same way whether you buy in Hyderabad, Chennai or Bengaluru. What makes it easy to miss is that nobody in the transaction is incentivised to remind you. The seller loses 1 percent of their receipt, so they rarely raise it, and the builder or broker is not a party to the deduction. That leaves the buyer to know the rule and act on it.

What is the price threshold and the rate?

The duty starts at 50 lakh rupees and the rate is 1 percent. The official guidance is explicit that no tax is required where both the consideration and the stamp duty value of the property are less than fifty lakh rupees, and the TRACES portal confirms the deduction rate as 1 percent of the property value. Two points trip buyers up. First, the 1 percent is on the whole amount, not only the slice above 50 lakh, so an 82 lakh flat means 82,000 rupees deducted, not a fraction of the excess. Second, the tax is worked out on the higher of the sale consideration or the stamp duty value, which is the government market value used at registration. If your agreement value sits below that market value, the higher figure drives the calculation, a detail the TRACES computation examples make clear. Work out your number on the higher of the two before you release the final payment.

Buying jointly or from more than one seller

If you are buying with a co owner, or from more than one seller, the arithmetic stays the same but the paperwork multiplies. Form 26QB is built around a buyer and seller pair, so a purchase with two buyers, or two sellers, can require a separate filing for each combination. Before you pay, check the current 26QB process for multiple parties on the income tax portal, and make sure every buyer and seller PAN is ready, because a missing PAN is the most common reason these filings stall.

When do I deduct and how do I deposit it?

You deduct at the moment you pay and deposit through Form 26QB. The official rule says the deducted sum must reach the central government within 30 days from the end of the month in which the deduction is made, accompanied by a challan cum statement in Form 26QB. So if you pay in September, the tax is due by 30 October. Form 26QB is filed online and works on your PAN and the seller's PAN, which means an ordinary resident buyer does not need a separate TAN to comply. You can read the government process on the TRACES Form 26QB guidance. Save the acknowledgement number the moment you file, because you will need it to download the certificate. For under construction homes bought in instalments, the tax is deducted on each instalment as you pay it, and Form 26QB is filed for each payment, so keep a running record from the first demand letter.

What certificate do I give the seller?

You give the seller Form 16B, the proof that the 1 percent reached the government. The official guidance requires the buyer to furnish the certificate of deduction in Form 16B to the seller within fifteen days from the due date for furnishing the challan cum statement, and Form 16B is downloaded from the TRACES portal a few days after the 26QB is processed. This certificate matters to the seller because it lets them claim the credit against their own tax, so a delay here often becomes the seller's complaint even though the paperwork is yours. Treat it as part of the closing file, alongside the registered sale deed and the encumbrance certificate, so you are not hunting for it months later.

What happens if I forget or file it late?

Late action creates interest and fees that fall on the buyer. The TRACES guidance describes late deduction interest when the tax is not deducted on the date of payment, and late payment interest when the deposit is made after the challan due date. On top of that, filing the 26QB statement after the due date attracts a fee under section 234E of the income tax law. None of these are charged to the seller, which is why the opening story ends with the buyer holding a notice. Because the interest runs by the month and the late filing fee accrues by the day, a filing that slips by a few weeks can grow faster than buyers expect. The fix is boring but effective: deduct on the day you pay, and file within the same window as your registration.

How does this fit the rest of my Hyderabad purchase?

Think of 194-IA as one line in a wider closing checklist. It sits next to stamp duty and registration fees, which you settle around the same time and which we cover in our guide to stamp duty and registration charges in Hyderabad. It also connects to how your agreement is written, because the consideration in your agreement of sale and sale deed is the figure the 1 percent is measured against. If you are buying an under construction home such as Sattva Lago in Kokapet, plan the 26QB filings against your instalment schedule from the first payment. Always confirm the current process and any seller PAN issue on the income tax portal before you register, because if the seller cannot give a valid PAN, tax is deducted at a higher rate under the law.

The buyer's 194-IA checklist

Run through these seven steps before and after you pay, so nothing is left to memory.

1. Confirm the price or stamp duty value is 50 lakh rupees or more, using the higher figure.
2. Collect the seller's PAN and your own PAN before making any payment.
3. Deduct 1 percent from the payment rather than paying the full amount and chasing it later.
4. File Form 26QB and deposit the tax within 30 days from the end of the payment month.
5. For instalment purchases, repeat the 26QB filing for every instalment you pay.
6. Download Form 16B from TRACES and hand it to the seller within the required window.
7. Keep the challan, the 26QB acknowledgement and Form 16B in your registration file.

Getting it right versus getting it wrong

Frequently asked questions

Is the 1 percent TDS an extra cost on top of the price?

No, it is not an extra cost to you. The 1 percent is deducted from the amount payable to the seller and deposited with the government on the seller's behalf, so your total outgo stays the same. The seller later claims it as credit against their own tax using the Form 16B you provide.

Does Section 194-IA apply if I buy below 50 lakh rupees?

No. The official guidance says no tax is required where both the consideration and the stamp duty value are below fifty lakh rupees. If either figure reaches 50 lakh, the duty applies, and the 1 percent is then calculated on the higher of the sale consideration or the stamp duty value, not on the amount above the threshold.

Do I need a TAN to deduct TDS on my flat?

No, an ordinary resident buyer does not need a TAN. Form 26QB is filed online using your PAN and the seller's PAN, which is what makes the process manageable for individual buyers. Keep both PANs and the property details ready before you file, and note the acknowledgement number to download Form 16B later.

What if I buy an under construction flat in instalments?

You deduct 1 percent from each instalment as you pay it, and file a separate Form 26QB for every payment. Start from the first demand letter and keep a running record against your payment schedule, so the deductions and the filings stay in step with the builder's collection stages right through to possession.

Last updated 2026-09-22. PropNewz Team.