A Bengaluru buyer closing a 90 lakh rupee flat is ready to transfer the full amount to the seller and finish the deal. Their chartered accountant stops them at the last moment with a question that changes the payment: have you deducted the one percent tax you are legally required to withhold and deposit with the government. It is not the seller's job and not the bank's; under the income tax law, the buyer is the person responsible for deducting tax at source on a property purchase, and getting it wrong invites notices and penalties long after the keys have changed hands. The rule is simple once you know it, and expensive to ignore.

The short answer. Under Section 194-IA of the Income Tax Act, if you buy an immovable property, other than rural agricultural land, for 50 lakh rupees or more, you as the buyer must deduct tax at source of 1 percent on the higher of the sale consideration or the stamp duty value, and deposit it using Form 26QB. You do not need a TAN; your PAN is enough, and you must issue the seller a Form 16B certificate. The trade off is only in effort, not choice: this is a legal obligation on the buyer, and the small administrative step protects you from penalties far larger than the tax itself.

What does Section 194-IA actually require?

It requires the buyer to withhold 1 percent of the property value and pay it to the government instead of to the seller. As the Income Tax Department sets out, tax is deducted at 1 percent of the sale consideration or the stamp duty value, whichever is higher, where the amount is 50 lakh rupees or more, and rural agricultural land is excluded. In practice you pay the seller 99 percent of the price and route the remaining 1 percent to the tax authorities on the seller's behalf.

The logic is that the tax is a credit for the seller, not an extra cost, since the seller adjusts it against their own tax liability. For you as the buyer, the point is responsibility: the law places the duty to deduct and deposit squarely on the person buying, so it is your compliance record, not the seller's, that is affected if the step is missed. Treat it as a fixed part of closing rather than an optional formality. Because the amount is small relative to the price, buyers sometimes overlook it entirely, which is precisely how a routine purchase turns into a tax notice a year later.

When does the 1 percent apply, and on what value?

It applies once the property value is 50 lakh rupees or more, and it is charged on the higher of the sale consideration or the stamp duty value. The threshold is tested on the higher of those two figures, and when it is crossed, the 1 percent applies to the whole value, not just the amount above 50 lakh. So a flat at exactly 50 lakh attracts the deduction on the full 50 lakh, and a flat where the stamp duty value exceeds the price is measured on that higher stamp duty value.

This link to stamp duty value matters in Bengaluru, where the government guidance value can differ from the negotiated price. Before you compute the deduction, check both numbers and use the larger one, because deducting on your lower agreed price when the stamp duty value is higher leaves a shortfall the department can later ask you to make good. Getting the base value right is as important as remembering to deduct at all. A short check of the guidance value against your agreement now saves a reconciliation with the department later.

How do you actually pay it and prove it?

You deposit the tax using Form 26QB and then give the seller a Form 16B certificate as proof. The Income Tax Department confirms that no TAN is required for this deduction, so you can use your PAN in place of one, which removes a step many buyers fear. You file the challan cum statement in Form 26QB electronically and deposit the tax within 30 days from the end of the month in which the deduction was made, then issue Form 16B to the seller within the prescribed time.

Keeping this paperwork is not busywork; it is your evidence of compliance. The Form 26QB acknowledgement and the Form 16B certificate together show that the tax was deducted and deposited correctly, which is exactly what protects you if a query arises later. File on time, save both documents with your sale deed, and the obligation is closed cleanly rather than left as a loose end. The seller also relies on your Form 16B to claim credit for the tax, so filing promptly keeps the transaction clean on both sides.

What are the key numbers and deadlines?

The obligation comes down to a handful of fixed figures and dates. The table below summarises what a buyer needs to remember.

The single most avoidable mistake in this list is the last row. If the seller does not furnish a PAN, the law requires tax to be deducted at 20 percent rather than 1 percent, so collecting the seller's PAN before you pay is not a nicety but a way to keep the deduction at the low rate. Confirm every figure in the table before you release funds. None of these figures are negotiable, which is why a simple checklist beats relying on memory on a busy closing day.

What happens if the seller is a non resident?

Section 194-IA is the rule for buying from a resident seller, and a different regime applies if the seller is a non resident. When the seller is a non resident, the deduction falls under separate provisions of the income tax law that generally involve higher rates and different procedures, so the simple 1 percent under Form 26QB is not the right path in that case. Because the consequences of applying the wrong rule are significant, confirm the seller's residential status early.

The practical step is to establish who the seller is before you plan the tax. If there is any doubt about whether the seller is a resident, take professional advice rather than assuming the 1 percent applies, because deducting too little from a non resident seller can leave you exposed. This is one part of the process where a short conversation with a chartered accountant is well worth the fee. The rate difference between the two regimes is large enough to matter on any Bengaluru flat.

How does this fit the rest of your Bengaluru purchase?

TDS is a closing step that sits alongside your financing and your other costs. If you are still arranging the loan, our guide to how your home loan EMI works at the current repo rate helps you plan the cash flow into which this deduction fits, since the 1 percent is withheld from the seller rather than added to your loan. Seeing the full set of outflows together keeps closing day free of surprises.

Your ability to complete these steps cleanly also depends on your paperwork being in order, which is where financing readiness matters. Our guide to why home loans get rejected covers the documentation discipline that makes a smooth closing possible. If you are choosing between projects, a registered development such as Arvind Skycrest gives you clear consideration and value figures, which makes computing and depositing the correct TDS straightforward.

What should a Bengaluru buyer do about TDS?

Handle the deduction as a fixed part of closing:

1. Check whether the property value is 50 lakh rupees or more on the higher of price or stamp duty value.
2. Confirm the property is not rural agricultural land, which is outside this section.
3. Collect the seller's PAN before paying, since a missing PAN raises the rate to 20 percent.
4. Deduct 1 percent from the seller's payment on the higher value figure.
5. Deposit the tax using Form 26QB within 30 days from the end of that month.
6. Issue the seller a Form 16B certificate and keep it with your records.
7. Confirm the seller is a resident, and take advice if a non resident is involved.

Frequently asked questions

Who deducts TDS when buying a property?

The buyer deducts it. Under Section 194-IA, the person buying an immovable property worth 50 lakh rupees or more must deduct tax at source of 1 percent and deposit it with the government, paying the seller the balance. It is not the seller's or the bank's responsibility, so the compliance record and any penalty rest with the buyer.

On what value is the 1 percent TDS calculated?

It is calculated on the higher of the sale consideration or the stamp duty value of the property. The 50 lakh threshold is also tested on that higher figure, and once crossed, the 1 percent applies to the entire value rather than only the portion above 50 lakh. In Bengaluru, check the guidance value as well as your price.

Do I need a TAN to deduct TDS on property?

No. The Income Tax Department confirms there is no requirement to obtain a TAN for this deduction, so you can use your PAN instead. You deposit the tax through Form 26QB within 30 days from the end of the month of deduction and issue the seller a Form 16B certificate as proof. Keep both documents with your sale deed.

What if the seller does not give a PAN?

If the seller does not furnish a PAN, the law requires you to deduct tax at 20 percent instead of 1 percent. That is a large difference, so collecting the seller's PAN before you release any payment is essential. Both parties' PAN details are needed to file Form 26QB correctly.

Last updated 2026-07-24. PropNewz Team.