Ravi had budgeted every rupee for his flat in Kokapet. The price was settled at 78 lakh rupees, the home loan was approved, and the registration date was fixed for a Friday in July 2026. Then, three days before signing, his lawyer asked a simple question that stopped him cold. Had he set aside the 1 percent tax he was supposed to deduct from the seller and pay to the government himself. Ravi had not. Like many first time buyers in Hyderabad, he assumed the seller handled every tax that touched the deal. He did not realise that on this one, the law makes the buyer responsible, and it makes the buyer pay the price for getting it wrong.

The short answer. If you buy any property other than agricultural land and the deal value is 50 lakh rupees or more, you as the buyer must deduct 1 percent of the payment as tax, deposit it with the government using Form 26QB within 30 days from the end of the month in which you deducted it, and then give the seller a certificate in Form 16B. The trade off is real. Handling this correctly costs you a little paperwork and some cash flow timing, but skipping it can bring interest, a late filing fee, and a penalty that lands on you, the buyer, not the seller.

This tax is set out in Section 194-IA of the Income Tax Act, and the rules are published by the Income Tax Department. Below is a plain guide for Hyderabad buyers on when it applies, how much to deduct, and the exact steps to stay on the right side of the law.

Why does the buyer, not the seller, deduct this tax?

The buyer deducts and deposits the tax because Section 194-IA places the duty squarely on the person making the payment. When you pay the seller for an immovable property, the law treats you as responsible for holding back 1 percent and routing it to the government on the seller's behalf. The seller then claims credit for that amount when filing their own income tax return. This is why the paperwork, the deposit, and the certificate are all your job as the buyer. If the deduction is missed or the deposit is late, the tax office looks to you first, which is exactly why Ravi's lawyer raised the flag before signing.

There is no income condition on the buyer for this rule to apply. It does not matter whether you are a salaried employee, a business owner, or a retiree. If you are buying an eligible property at or above the threshold, the duty to deduct applies to you.

When exactly does the 1 percent TDS apply?

It applies when you buy any immovable property other than agricultural land and both the price and the stamp duty value are 50 lakh rupees or more. The Income Tax Department is specific here. No deduction is required when the consideration for the transfer and the stamp duty value of the property are both less than 50 lakh rupees. In practice that means you look at two figures, the price written in your agreement and the government assessed value used for stamp duty, and you check whether either reaches 50 lakh rupees.

Agricultural land is left out of this section. So are deals that sit fully below the 50 lakh mark on both figures. For most apartments and plots in and around Hyderabad that clear that value, though, the rule is in play, and a buyer should assume it applies until a tax advisor confirms otherwise.

How much do you deduct, and what if there is no PAN?

You deduct 1 percent of the payment, calculated on the higher of the price or the stamp duty value. That is the standard rate for a resident seller who gives you a valid PAN. The deduction is made when you make the payment, so on a single payment deal you hold back 1 percent at that point and pass on the remaining 99 percent to the seller.

The number changes sharply if the seller does not give a PAN. Under Section 206AA, a missing PAN pushes the deduction to 20 percent instead of 1 percent. On a 78 lakh rupee deal that is the difference between holding back 78,000 rupees and holding back more than 15 lakh rupees, so collecting a valid seller PAN in writing before you release any money is not a formality, it is protection for your own cash flow.

How do you actually pay it: Form 26QB and Form 16B

You pay it using Form 26QB, a combined challan and statement, and then issue Form 16B to the seller. Form 26QB must be filed and the tax deposited within 30 days from the end of the month in which you made the deduction. If you deduct in July, the clock runs to the end of August. Once the deposit is done, you download Form 16B, which is the certificate proving the tax was paid, and hand it to the seller within 15 days of the Form 26QB due date.

Keep both the challan and Form 16B with your sale deed papers. Years later, when you sell the same home, a clean file of these documents makes your own due diligence and your buyer's checks far smoother. The table below sums up the situations a Hyderabad buyer runs into.

What happens if you buy under construction or in installments?

You deduct 1 percent on each payment rather than once at the end. Under construction purchases in Hyderabad are often paid in stages linked to construction milestones, and the deduction follows each payment. So every time you release an installment to the builder, you hold back 1 percent of that installment and deposit it through a Form 26QB for that payment, within 30 days from the end of that month. It is more paperwork than a single shot deal, but the logic is identical each time.

The 50 lakh rupee test still looks at the total value of the property, not the size of one installment. A flat priced at 90 lakh rupees paid in six installments is still above the threshold, so each installment attracts the 1 percent deduction even though no single payment reaches 50 lakh rupees on its own.

What does this mean for your Hyderabad home budget?

It means the 1 percent is not an extra cost to you, but it is a cash flow and compliance step you must plan for. The money you deduct belongs to the tax on the seller's gain, so it reduces what you pay the seller rather than adding to your total. What you are budgeting is the effort and timing, filing Form 26QB on schedule and getting Form 16B into the seller's hands. Treat it as part of the same closing checklist that already includes your stamp duty and registration fees, which in Telangana are paid separately to the state and confirmed on the state registration portal for your exact sub registrar office.

Good buyers fold this into their wider due diligence. Before you reach the payment stage, it is worth reading our Adibatla buyer guide for how budgets come together on a real Hyderabad deal, and our explainer on how a project's RERA status affects buyers so the legal side is as clean as the tax side. If you are comparing specific launches, a project such as Raghava Nova in Nanakramguda shows the kind of ticket size where this 1 percent step almost always applies.

What should you check before you pay the seller?

Run through these seven steps in order before you release any money, so the deduction and the filing are never an afterthought.

1. Confirm the deal value is 50 lakh rupees or more by checking both the agreement price and the stamp duty value.
2. Collect the seller's PAN and your own PAN in writing before any payment.
3. Deduct 1 percent at the time of each payment, or 20 percent if the seller has no PAN.
4. Deposit the tax using Form 26QB within 30 days from the end of the month of deduction.
5. Download Form 16B after the deposit is processed.
6. Give Form 16B to the seller within 15 days of the Form 26QB due date.
7. File the challan and Form 16B with your sale deed papers for future reference.

Who deducts the TDS, the buyer or the seller?

The buyer deducts the TDS. Under Section 194-IA, the buyer of any immovable property other than agricultural land must deduct 1 percent of the payment when the deal value is 50 lakh rupees or more, deposit it with the government, and then hand the seller a certificate. The seller later claims credit for that amount.

What if the seller does not give a PAN?

If the seller does not provide a PAN, Section 206AA requires you to deduct at 20 percent instead of 1 percent. That is a large jump on a big purchase, so always collect the seller PAN in writing before you release any payment and confirm that it is valid and active.

Does the 50 lakh limit look at the price or the stamp duty value?

It looks at both. TDS under Section 194-IA applies when the consideration and the stamp duty value of the property are each 50 lakh rupees or more. If both of those figures stay below 50 lakh rupees, then no TDS is required under this particular section.

How do I actually pay the TDS to the government?

You deposit it using Form 26QB, a combined challan and statement, within 30 days from the end of the month in which you deducted the amount. After that, download Form 16B and give it to the seller within 15 days of the Form 26QB due date, then keep both with your records.

Last updated 2026-07-20. PropNewz Team.