The 1% TDS Step Most Bengaluru Buyers Get Wrong, A Plain Guide to Form 26QB

Somewhere between agreeing a price and collecting the keys, a lot of Bengaluru buyers trip over a single line of tax law. If the home costs Rs 50 lakh or more, the buyer must deduct 1 percent tax at source and file Form 26QB, and with the city's Q1 2026 average around Rs 9,785 per square foot, most flats now clear that bar. Get it wrong and the penalty lands on you, not the seller.

The short answer. Buyers of property worth Rs 50 lakh or more in India must deduct 1 percent TDS and file Form 26QB, depositing it with the government and issuing Form 16B to the seller. In Bengaluru, with prices around Rs 9,785 per square foot, most apartments cross the threshold. The honest trap: the 1 percent is on the full consideration, including each under-construction instalment, and if the seller is an NRI, TDS is governed by Section 195 at much higher rates, not the standard 1 percent. The buyer bears any penalty.

When does the 1 percent TDS apply in Bengaluru?

The rule applies whenever the sale consideration for a property, other than agricultural land, is Rs 50 lakh or more, in which case the buyer must deduct 1 percent of the consideration as TDS and deposit it using Form 26QB. With Bengaluru's average price around Rs 9,785 per square foot in Q1 2026, as reported on RealtynMore, even a modest two-bedroom flat typically exceeds Rs 50 lakh, so this is not a niche concern for high-end buyers but a routine obligation for the majority. Verify the current threshold and rate on the Income Tax Department portal before you transact.

How do I file Form 26QB step by step?

Form 26QB is filed online through the Income Tax Department's portal. In outline, the buyer fills in the buyer and seller PAN details, the property particulars, the consideration and the date of payment, then pays the 1 percent TDS through the linked payment options. After the payment is processed, the buyer can download Form 16B and hand it to the seller as proof of the tax deducted. The exact screens and timelines should be confirmed on the official portal, since procedures are updated from time to time.

Do I deduct on each instalment for under-construction?

Yes. When you buy an under-construction home and pay in instalments, the 1 percent is deducted on each payment as it is made, and a Form 26QB is filed for each instalment, rather than deducting the whole amount once. The TDS is calculated on the full sale consideration, distributed across the schedule of payments. A buyer who deducts only on the first payment, or who waits until the end, risks short deduction and the interest and penalties that follow, so align the TDS with the payment plan.

What changes if the seller is an NRI?

Everything about the mechanism changes. If the seller is a non-resident, the 1 percent Form 26QB route does not apply at all; instead, TDS is governed by Section 195, at rates that are substantially higher and that depend on whether the gain is long or short term, plus applicable surcharge and cess. Applying the standard 1 percent to an NRI seller is one of the most common and most expensive errors a buyer can make, because the shortfall, with interest, becomes the buyer's liability. Confirm the seller's residential status before anything else.

What are the penalties for getting it wrong?

The consequences fall on the buyer. Failing to deduct, deducting too little, or not depositing the TDS on time can attract interest and penalties, and late filing of Form 26QB carries its own fee. Because the obligation and the liability both sit with the buyer, not the seller, a mistake here is not a paperwork inconvenience but a real financial exposure. This is why confirming the rules, the rate and the seller's status on the official portal before registration is time well spent.

Who issues Form 16B and when?

After the TDS is deducted and deposited via Form 26QB, it is the buyer who issues Form 16B to the seller, as the certificate evidencing the tax deducted and paid on the seller's behalf. The seller relies on this to claim credit for the TDS against their own tax. A buyer should generate and hand over Form 16B promptly after each relevant payment, and retain the challans and acknowledgements, since clean documentation protects both sides and smooths the seller's tax filing.

What should I verify before registration?

Confirm the seller's residential status first, since it determines the entire TDS treatment. Compute the 1 percent on the full consideration, deduct at each payment for under-construction purchases, and file Form 26QB within the prescribed time. Issue Form 16B to the seller, keep all challans, and reconcile the TDS clause in the sale agreement. Verify the current threshold, rate and timelines on incometax.gov.in, because these details, not assumptions, are what keep the transaction compliant.

A 7-point checklist for TDS on a Bengaluru purchase

1. Confirm whether the seller is resident or NRI.
2. Compute 1 percent on the full consideration for a resident seller.
3. Deduct at each payment for under-construction homes.
4. File Form 26QB within the prescribed deadline.
5. Issue Form 16B to the seller.
6. Keep all challans and acknowledgements.
7. Reconcile the TDS clause in the sale agreement.

Frequently asked questions

When does the 1 percent TDS apply in Bengaluru?

The 1 percent TDS applies when the property's sale consideration is Rs 50 lakh or more, and you file it using Form 26QB. Given Bengaluru's Q1 2026 average of about Rs 9,785 per sq ft, most apartment purchases now cross that threshold, so the obligation applies to a large share of buyers.

Do I deduct on each instalment for under-construction?

Yes. For an under-construction property paid in instalments, you deduct 1 percent on each payment as it is made, not once at the end, and file a Form 26QB for each instalment. The TDS is computed on the full sale consideration spread across those payments, so every instalment is covered.

What changes if the seller is an NRI?

Everything. If the seller is an NRI, the 1 percent Form 26QB route does not apply; TDS falls under Section 195 at substantially higher rates that depend on the gain and holding period. Treating an NRI seller's sale as a standard 1 percent deduction is a serious and costly compliance error.

What are the penalties for getting it wrong?

Missing or short deduction triggers interest and penalties, and the liability falls on you, the buyer, not the seller. You may also face fees for late filing of Form 26QB. Because the buyer carries the consequence, confirm the deduction, deposit and filing are done correctly and on time.

Last updated 2 June 2026. PropNewz Team.