A Sarjapur Road buyer closing a 90 lakh resale flat last year assumed the entire amount would go to the seller. His lawyer stopped him at the last moment. Under the income tax law, he was supposed to hold back 1 percent of the price, deposit it with the government as tax, and hand the seller a certificate for it. He had never heard of the rule, and getting it wrong could have cost him interest and penalties. If you are buying a property in Bengaluru worth 50 lakh or more, this responsibility falls on you, the buyer, and this guide explains exactly how it works.

The short answer. When you buy a property, other than agricultural land, for a consideration of 50 lakh rupees or more, Section 194-IA of the Income Tax Act requires you as the buyer to deduct 1 percent of the amount as TDS, deposit it using Form 26QB, and issue Form 16B to the seller. The tax is deducted on the higher of the sale consideration or the stamp duty value. The trade off to remember is that this is your legal duty, not the seller's, so missing it exposes you, the buyer, to interest and penalties even though the money was the seller's income.

What is Section 194-IA and when does it apply?

Section 194-IA requires the buyer of an immovable property to deduct tax at source when the consideration is 50 lakh rupees or more. It applies to most property, including flats and land, but it does not apply to agricultural land. The threshold is important. If the value is below 50 lakh, the section does not bite, but at 50 lakh or above, TDS applies on the whole amount, not merely on the portion above the threshold.

A common point of confusion is what the 1 percent is charged on. Following an amendment, the deduction is made on the higher of the actual sale consideration or the stamp duty value of the property. So if you negotiate a price below the government stamp duty value, the TDS is worked out on the stamp duty value, mirroring the logic used for stamp duty itself. Check both figures before you compute the tax.

There is a further wrinkle worth knowing where more than one buyer or seller is involved. The 50 lakh threshold is generally read against the total value of the property rather than each person's share, so a jointly bought flat above 50 lakh does not escape the rule simply because each co owner's slice is smaller. When several parties are on either side of the deal, the paperwork can require a separate filing for each buyer seller combination, so it is sensible to take professional help on the mechanics rather than assume the split lets you off. The principle stays the same, the total property value is what decides whether the section applies.

Who has to deduct the TDS, the buyer or the seller?

The buyer is responsible, and this catches many first time purchasers off guard. It is the buyer who must deduct the 1 percent from the payment to the seller, deposit it with the government, and provide the seller with the TDS certificate. The seller does not do this for you, and a seller who is unaware of the rule is not a defence if the tax is not deducted. The duty sits squarely with the person paying for the property, and the tax department treats the buyer as the deductor for every purpose that follows.

In practice this means the seller receives 99 percent of the consideration and the remaining 1 percent goes to the government on the seller's behalf, to be adjusted against the seller's own tax liability later. The seller uses the Form 16B you provide to claim credit for that deducted tax. Framing it this way helps, because the buyer is not paying an extra tax, only routing a slice of the seller's proceeds to the tax department as the law directs.

How do you deposit the tax and issue the certificate?

You deposit the deducted TDS using Form 26QB, which is a combined challan and statement filed online. The deposit must be made within 30 days from the end of the month in which the deduction is made, so keep track of your dates to avoid late fees. Both the buyer's and the seller's PAN details are mandatory on the form, which is why you should collect the seller's PAN before completing the transaction.

Once the tax is deposited, you generate Form 16B, the TDS certificate, from the income tax TRACES system and hand it to the seller as proof that the 1 percent was deducted and paid. The seller needs this certificate to claim credit for the tax. Doing this promptly keeps the transaction clean and spares the seller from chasing you for a document they are entitled to.

Why does the seller's PAN matter so much?

Without the seller's PAN, the deduction rate jumps sharply. The standard rate is 1 percent, but if the seller does not furnish a valid PAN, the law requires TDS to be deducted at a much higher rate, commonly cited at 20 percent. That is a punitive difference, and it is another reason to insist on the seller's PAN in writing before you pay. Collecting the correct PAN details upfront is the simplest way to avoid a large and unnecessary deduction.

This also protects you as the buyer. If you deduct at the correct rate and deposit it properly, your obligation is discharged cleanly. If PAN details are wrong or missing and the tax is under deducted, the shortfall and any consequences can come back to the buyer who was responsible for the deduction. A few minutes verifying the PAN is cheap insurance.

What happens if you miss the TDS on a property purchase?

Missing or delaying the deduction can attract interest and fees, and the liability rests with you as the buyer. If the tax is not deducted or not deposited on time, interest can apply for the period of delay, and a late filing fee can accrue for a delayed Form 26QB. Because the buyer is the deductor, these consequences follow the buyer, not the seller, even though the underlying income belonged to the seller.

The remedy is simply to build the step into your closing checklist. Treat the 1 percent TDS as a fixed part of the payment mechanics, like stamp duty and registration, rather than an afterthought. When you plan the money flow so that the seller is paid 99 percent and the 1 percent is routed to the government within the deadline, the rule becomes a routine formality rather than a risk.

It matters most in a resale purchase, where there is no builder to guide the paperwork and both parties are individuals who may be unfamiliar with the rule. In an under construction purchase from a developer, the builder's finance team often handles or prompts the 194-IA compliance, though the legal responsibility still rests with you. In a resale, no one is minding it for you. Raise the TDS explicitly during price negotiation so the seller expects to receive 99 percent, because a seller who is surprised by the deduction at the final payment can hold up the entire closing over a misunderstanding that a single upfront conversation would have prevented.

Your seven step property TDS checklist

1. Check whether the consideration is 50 lakh rupees or more, which triggers the rule.
2. Confirm the property is not agricultural land, which is exempt.
3. Compare the sale consideration with the stamp duty value and use the higher.
4. Collect the seller's valid PAN in writing before you pay.
5. Deduct 1 percent from the seller's payment and pay them the balance.
6. File Form 26QB and deposit the TDS within the deadline.
7. Download Form 16B from TRACES and hand it to the seller.

Frequently asked questions

Who deducts TDS when buying a property in Bengaluru?

The buyer deducts it, not the seller. Under Section 194-IA, when you buy a property, other than agricultural land, for 50 lakh rupees or more, you must deduct 1 percent as TDS, deposit it using Form 26QB, and give the seller Form 16B. The responsibility and any penalty for missing it rest with the buyer.

Is TDS charged on the full price or only the amount above 50 lakh?

It is charged on the full consideration once the 50 lakh threshold is met, not only the excess. So a property at 80 lakh attracts 1 percent on the whole 80 lakh. The deduction is made on the higher of the sale consideration or the stamp duty value, so check both figures before you calculate.

What if the seller does not give a PAN?

If the seller does not furnish a valid PAN, the deduction rate rises steeply, commonly cited at 20 percent instead of 1 percent. That is a large difference, so insist on the seller's PAN in writing before paying. Both parties' PAN details are mandatory on Form 26QB, which makes collecting it a necessary step, not an optional one.

What is Form 16B and why does the seller need it?

Form 16B is the TDS certificate you generate from the income tax TRACES system after depositing the tax through Form 26QB. It proves that the 1 percent was deducted and paid to the government. The seller needs it to claim credit for that tax against their own liability, so issue it promptly once the deposit is done.

For related Bengaluru reading, see our guide to GST on an under construction flat, and our explainer on how your home loan EMI is set by the repo rate. The TDS rules here come from Section 194-IA of the Income Tax Act, and the current forms, rates, and deadlines should be confirmed on the income tax e filing portal before you file.

Last updated 26 July 2026. PropNewz Team.