TDS on Property Purchase in Bengaluru: The 1 Percent Every Buyer Above Rs 50 Lakh Must Deduct

A Bengaluru buyer wired the final instalment for a 85 lakh rupee resale flat in HSR Layout, registered the deed, and considered the transaction closed. Eight months later a notice arrived, not for the seller, for him. He had never deducted the 1 percent tax the law required him to withhold from the seller's payments, and the Income Tax Department holds the buyer, not the seller, responsible for that deduction. With interest and late filing fees, a 85,000 rupee compliance step had grown teeth. Nothing about the deal was dishonest; he simply did not know that buying a flat above 50 lakh rupees makes you, briefly, a tax deductor.

The short answer. If you buy property in India and the consideration or the stamp duty value is 50 lakh rupees or more, Section 194-IA of the Income Tax Act requires you, the buyer, to deduct 1 percent of the payment as TDS, deposit it, and file Form 26QB within 30 days from the end of the month of deduction, then give the seller Form 16B. No TAN is needed. The trade-off: it is genuinely simple once you know it exists, but the obligation, the interest and the penalties all sit on the buyer, and the rules change entirely if your seller is an NRI, so identifying your seller's residential status is part of your due diligence, not the seller's problem.

Who has to deduct, and when does the section apply?

The statute, summarised on the Income Tax Department's own page, places the duty on the transferee, the buyer, paying a resident seller for any immovable property other than agricultural land. The exemption is narrow and worded precisely: no deduction is required only where the consideration and the stamp duty value are both below 50 lakh rupees. If either number touches 50 lakh rupees, the section applies, and it applies to the entire amount, not just the portion above the threshold. A 50 lakh rupee flat means 50,000 rupees of TDS, not zero. In Bengaluru's market, where the guidance value revisions have pushed official values up in many localities, a flat negotiated at 48 lakh rupees can still cross the threshold on stamp duty value alone, so check both numbers before assuming you are exempt.

How much do you deduct, and on what?

The rate is 1 percent of the sum paid to a resident seller. Taxwink's guide adds a detail buyers miss: consideration for this purpose includes charges of the nature of club membership fees, car parking fees, electricity or water facility fees, maintenance fees and advances, so on a builder purchase the base is the all-in figure, not the bare flat price. Where the stamp duty value of the property is higher than your negotiated price, take professional advice on the computation base before filing, because the section has been tightened over the years to align tax with the higher official value, and underdeducting by computing on the lower figure is the buyer's liability. If you pay in instalments, as almost every under-construction buyer does, you deduct 1 percent from every single instalment, not once at the end.

What is Form 26QB, and how do you actually file it?

Form 26QB is a challan-cum-statement filed electronically on the income tax portal: it identifies the buyer, the seller, the property and the payment, and carries the deposit of the deducted tax in one step. You do not need a TAN; the department's summary states plainly that the usual deductor registration provisions do not apply to this section, which is the legislature's acknowledgement that ordinary home buyers are doing this once in their lives. You need your PAN, the seller's PAN, the property details and the payment schedule. After filing and payment, you download Form 16B, the TDS certificate, from the TDS reconciliation portal and hand it to the seller, who uses it to claim credit for the tax you deducted. One filing per buyer-seller pair is required, so a couple buying jointly from a couple selling jointly is four filings, a detail that surprises everyone the first time.

What are the deadlines, and what does missing them cost?

The timeline is short and the meter on mistakes runs by the month.

The official department page confirms the structural deadlines, the 30 day filing window and the 15 day certificate window; the interest and penalty figures above come from Taxwink's guide and are worth reconfirming on the portal when you file, since rates and fees are periodically revised.

What if the seller has no PAN, or is not a resident at all?

Two traps live here, one mild and one severe. The mild one: if the seller cannot furnish a PAN, the deduction rate jumps from 1 percent to 20 percent, which usually motivates sellers to find their PAN quickly. The severe one: Section 194-IA applies only when the seller is a resident. If your seller is an NRI, the entire framework changes, TDS falls under a different section at substantially higher effective rates on the gains or the consideration, a TAN is generally required, and the paperwork is heavier. Buyers who file a casual 26QB against an NRI seller have deducted under the wrong section, which does not discharge the real obligation. Residential status is a tax question, not a passport question, so where there is any doubt, ask for documentation and involve a chartered accountant before the first rupee moves. We will treat the NRI-seller purchase in detail in a separate guide.

A note on what the deduction is not. TDS under this section is not an extra cost of buying; it is part of the price you already agreed, redirected to the government against the seller's tax liability. The seller receives 99 percent from you and a Form 16B for the remaining 1 percent, and claims that credit in their own return. Sellers occasionally push back and ask to be paid in full, especially in resale deals where the habit is cash flow, and a buyer who obliges is volunteering to bear the tax twice, once to the seller and once when the department asks the buyer for the undeducted amount. The correct answer to that negotiation is a polite no, and the section's design backs you.

Which mistakes do Bengaluru buyers actually make?

Four recur. Buyers of under-construction flats deduct only on the final instalment instead of every payment, accruing month-by-month interest on each missed deduction. Joint buyers file one 26QB instead of one per buyer-seller pair, leaving the form mismatched against the deed. Buyers compute 1 percent on the bare flat price and ignore the parking and clubhouse charges that the law counts as consideration on builder purchases. And resale buyers forget the exercise entirely because nobody at the table reminds them: the bank disburses, the deed registers, and the obligation quietly defaults. The fix for all four is the same: treat the TDS filing as a registration-day checklist item with its own deadline, the way we treat the agreement and deed sequence and the resale purchase checklist.

How should a buyer run the TDS step, start to finish?

1. Before the agreement, confirm whether the consideration or the stamp duty value crosses 50 lakh rupees, testing both numbers, not just your price.
2. Confirm the seller's residential status in writing and collect the seller's PAN; if the seller is an NRI, stop and take professional advice on the correct section.
3. On a builder purchase, list every charge that counts as consideration, parking, club, utilities, advances, and compute 1 percent on the full base.
4. Deduct 1 percent from every payment or instalment at the time you pay it, and keep a simple ledger of date, amount and deduction.
5. File Form 26QB and deposit the tax within 30 days from the end of each month in which you deducted, one filing per buyer-seller pair.
6. Download Form 16B and deliver it to the seller within 15 days of the filing due date, and keep copies with your purchase file.
7. Before possession or final settlement, reconcile your ledger against the filed forms so no instalment is missing a deduction or a filing.

When does the buyer have to deduct TDS on a property purchase?

Whenever the consideration or the stamp duty value of the property is 50 lakh rupees or more and the seller is a resident. The buyer deducts 1 percent of each payment, deposits it with Form 26QB within 30 days of the month end, and gives the seller Form 16B.

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

No. Section 194-IA specifically exempts buyers from the TAN requirement that applies to regular deductors. You file Form 26QB with your PAN and the seller's PAN on the income tax portal, and download Form 16B from the TRACES portal after the payment is processed.

What happens if I forget to deduct or file?

The liability is the buyer's. Interest accrues monthly on amounts not deducted or not deposited, a daily late filing fee applies to a delayed Form 26QB, and continued default can attract a larger penalty. The sums grow with time, so a missed filing is worth fixing immediately, not at the next tax season.

Does Section 194-IA apply if my seller is an NRI?

No. Section 194-IA covers payments to resident sellers only. An NRI seller brings a different section with higher effective deduction, a TAN requirement and heavier paperwork. Verify the seller's residential status in writing before paying, and involve a chartered accountant if the seller is or may be a non-resident.

Last updated 2026-06-12. PropNewz Team.