TDS on Property Purchase in Bengaluru: Section 194-IA and Form 26QB

When Karthik agreed to buy a 78 lakh rupee flat off Sarjapur Road in Bengaluru, he paid the seller in full, took the keys, and assumed the tax office had nothing to do with his purchase. Six months later a notice arrived. As the buyer, he was the one responsible for deducting 1 percent of the price as tax and depositing it with the government, and because he had not, he now faced interest and a penalty on tax he had never withheld. The money was not large in the scheme of an 78 lakh flat, but the mistake was avoidable, and it is one of the most common a first-time buyer makes.

The short answer. If you buy a property in India for 50 lakh rupees or more, you as the buyer must deduct 1 percent of the value as tax at source under Section 194-IA, deposit it using Form 26QB within 30 days from the end of the month, and give the seller a Form 16B certificate. You do not need a TAN for this. The trade-off to understand is that this duty sits on the buyer, not the seller, so forgetting it exposes you, not them, to interest and penalty. Plan the deduction into how you pay, especially the final instalment.

When does 1 percent TDS apply on a property purchase?

TDS at 1 percent applies when you buy an immovable property valued at 50 lakh rupees or more. As the guides from ClearTax and HomeFirst explain, Section 194-IA requires the buyer to deduct 1 percent of the sale consideration or the stamp duty value, whichever is higher, once the value reaches the 50 lakh threshold. Below that figure no TDS is required under this section. It covers residential and commercial property, but rural agricultural land is exempt. The key point for a Bengaluru buyer is simple: on almost any city flat or plot crossing 50 lakh, this deduction is your legal responsibility.

A point that trips up buyers of under construction homes is how instalments are treated. Where you pay the seller or builder in stages, the deduction is made on each payment rather than only at the end, so 1 percent comes off every instalment once the property crosses the 50 lakh mark. It is easy to remember the deduction on the first big payment and forget it on later ones, which then have to be corrected. Setting a simple reminder tied to each instalment keeps the paperwork clean across a purchase that may stretch over two or three years.

Is the tax on the price I pay or the stamp duty value?

The 1 percent is calculated on the higher of your sale consideration or the stamp duty value. This mirrors the way stamp duty itself is charged, and it means you cannot reduce the TDS by writing a lower figure in the agreement. ClearTax states the rule plainly, that TDS is 1 percent of the sale consideration or stamp duty value, whichever is higher. For most straightforward Bengaluru purchases the two figures are close, but where the guidance value of an area has risen sharply, the stamp duty value can be the higher of the two, so check both before you compute the amount to deduct.

How do I deposit the TDS and issue Form 16B?

You deposit the deducted amount using Form 26QB and then issue Form 16B to the seller. According to both guides, Form 26QB is filed online through the Income Tax portal, and importantly you do not need a TAN to do this; your PAN and the seller's PAN are enough. The deposit must be made within 30 days from the end of the month in which you deducted the tax. After the payment is processed, you register on the TRACES portal and download Form 16B, the TDS certificate, to hand to the seller. HomeFirst notes this certificate should reach the seller within about 15 days of filing.

What if the seller does not have a PAN?

If the seller cannot provide a valid PAN, the rate jumps sharply. HomeFirst notes that where the seller's PAN is unavailable, TDS is deducted at 20 percent rather than 1 percent. That is a twenty fold increase, so always collect and verify the seller's PAN before you make payment. This is also why the deduction is worth handling calmly and early rather than in a rush at closing, since a missing PAN discovered on the day can force an uncomfortable choice between delaying the deal and deducting a much larger sum.

What changes if the seller is an NRI?

If the seller is a non-resident, Section 194-IA does not apply and the rules are quite different. HomeFirst explains that in this case Section 195 governs the transaction: the buyer needs a TAN, deducts TDS at the applicable capital gains rates, which it puts at 20 percent for long term and 30 percent for short term gains, and files Form 27Q rather than Form 26QB. This is a materially heavier compliance burden, and getting it wrong can be costly, so if you are buying from an NRI seller it is wise to involve a tax professional early. Confirm the seller's residential status in writing before you plan the deduction.

Missing this step is not a harmless oversight, which is why it deserves attention. When TDS is not deducted or not deposited on time, the responsibility and the cost fall on the buyer, and interest can run on the delay along with a fee for late filing of the return. In Karthik's case the underlying tax was small, but the interest and penalty for handling it late were an avoidable irritation on top of a purchase that was otherwise complete. Treating the deduction as a fixed part of closing, rather than something to sort out afterwards, removes that risk entirely and costs you nothing extra.

What should a Bengaluru buyer do to stay compliant?

Build the TDS step into your payment plan from the outset so it is never an afterthought. The most common mistake, like Karthik's, is paying the seller the full amount and only later realising 1 percent should have been withheld and deposited. The checklist below keeps you on the right side of the rule.

1. Confirm whether the property value reaches the 50 lakh threshold.
2. Collect and verify the seller's PAN and residential status in writing.
3. For a resident seller, deduct 1 percent from the payment, not from your own pocket.
4. Deposit the amount using Form 26QB within 30 days from the end of that month.
5. Download Form 16B from TRACES and give it to the seller.
6. For an NRI seller, obtain a TAN and follow the Section 195 route with advice.
7. Keep the challan and Form 16B safe with your purchase papers.

Does TDS reduce my total cost or the seller's?

TDS does not add to your cost; it is part of the price, simply paid to the government instead of the seller. When you deduct 1 percent, the seller receives 99 percent from you and gets credit for the 1 percent you deposited on their behalf, which they can adjust against their own tax. So this is not an extra charge like stamp duty; it is a redirection of part of the price. The reason it matters so much is procedural: if you fail to deduct and deposit it, the shortfall plus interest and penalty land on you, even though the underlying money was always the seller's tax. Handled correctly, the deduction is quietly routine, and it leaves both you and the seller with clean records that hold up years later.

Common questions from Bengaluru buyers

When do I have to deduct 1 percent TDS on a property?

You deduct 1 percent TDS when you buy an immovable property valued at 50 lakh rupees or more, under Section 194-IA. It applies to residential and commercial property but not to rural agricultural land. The duty falls on you as the buyer, not the seller, so plan the deduction into how you make payment.

Is TDS calculated on the sale price or the stamp duty value?

It is calculated on the higher of the two. Section 194-IA requires 1 percent of the sale consideration or the stamp duty value, whichever is greater. Writing a lower price in the agreement does not reduce the TDS, so check both figures, particularly where the area's guidance value has risen, before computing the amount to deduct.

How do I deposit the TDS and give the seller a certificate?

Deposit it using Form 26QB on the Income Tax portal within 30 days from the end of the month of deduction. You do not need a TAN, only your PAN and the seller's PAN. After processing, register on TRACES, download Form 16B, and hand that certificate to the seller as proof of the tax deducted.

What if I am buying from an NRI seller?

Then Section 194-IA does not apply and Section 195 does instead. You need a TAN, deduct TDS at the applicable capital gains rates rather than a flat 1 percent, and file Form 27Q. Because this is more complex and the amounts are larger, confirm the seller's status early and take professional tax advice before you pay.

TDS is one part of the money side of buying in Bengaluru. Pair it with our guide to home loan tax benefits under sections 24b and 80c, and budget the transaction with our explainer on the cost to register a home in Bengaluru. If you are buying in a large project such as Prestige City on Sarjapur Road, the same 1 percent rule applies once the price crosses 50 lakh.

Last updated 2026-09-04. PropNewz Team.