When a Mumbai buyer closed a 90 lakh rupee flat in the spring of 2026, the seller expected the full amount on registration day and was surprised to receive 89.1 lakh instead. The missing 90,000 rupees was not a shortfall, it was the one percent tax the buyer is required by law to deduct and deposit with the government. The seller had simply forgotten the rule. Understanding this small deduction in advance keeps closing day calm and keeps both sides on the right side of the tax department.

The short answer. When you buy an immovable property, other than rural agricultural land, and the consideration or the stamp duty value is 50 lakh rupees or more, you as the buyer must deduct one percent tax at source from the payment to a resident seller, deposit it using the challan cum statement Form 26QB, and give the seller a Form 16B certificate. The one percent applies to the whole price, not only the part above 50 lakh. The trade off is process, not cost: the money is the seller tax, but the legal duty to deduct and deposit sits with you, and getting it wrong can create interest and penalties. Confirm the current forms on the official income tax portal.

Who has to deduct TDS on a property purchase?

The buyer is responsible for deducting and depositing the tax, not the seller, which surprises many first time purchasers. Under the tax rule for purchase of immovable property, the transferee, meaning you the buyer, must deduct one percent from the amount paid to a resident transferor when the transaction crosses the threshold. This is your legal obligation even though the tax is ultimately the seller tax on their gain, so you cannot simply pay the full amount and assume the seller will handle it. If you are buying jointly, or the property has more than one seller, the same duty applies proportionately, and each payment leg must be handled correctly. Because the responsibility rests on the buyer, it is worth learning the steps before the closing rather than during it. A useful way to think about it is that the government has made the buyer its collection agent for this one transaction, so a clean deduction protects you as much as it protects the exchequer. If you skip it, the demand and any interest can land on you, not on the seller, which is why sellers who forget the rule still expect the full price while the legal risk stays with the person writing the cheque.

What is the rate and threshold under the rule?

The rate is one percent, and the rule applies when the consideration or the stamp duty value of the property is 50 lakh rupees or more. Importantly, no deduction is required only when both the consideration and the stamp duty value are below 50 lakh, so if either figure reaches the threshold the deduction applies. The provision covers immovable property other than rural agricultural land, with the usual tests for what counts as agricultural land near a municipality. The table below sets out the essentials, drawn from the Income Tax Department guidance on TDS on purchase of immovable property and a detailed filing walkthrough. Treat these as the framework and confirm the current form names on the official portal, because the governing law was restated under the new income tax code for transactions from April 2026.

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

It is one percent of the entire consideration once the threshold is crossed, not only the portion above 50 lakh. This is a point buyers get wrong often. If you purchase a flat for 70 lakh rupees, the one percent is calculated on the whole 70 lakh, which is 70,000 rupees, and not on the 20 lakh that exceeds the threshold. The same logic applies to installment payments in an under construction purchase, where you deduct one percent on each payment as it is made once the total consideration meets the threshold. Getting the base right matters because a short deduction leaves you exposed to interest and to a demand later, while an over deduction unfairly reduces what the seller receives.

How and when do you deposit the tax and issue the certificate?

You deposit the deducted amount with the government using Form 26QB within thirty days from the end of the month in which you made the deduction, and then issue Form 16B to the seller. Form 26QB is a combined challan and statement that you file online, quoting the permanent account numbers of both the buyer and the seller and the property details. After the payment is processed you download Form 16B, the certificate of tax deducted, and hand it to the seller within fifteen days of the due date for the statement. Keep the challan, the statement, and the certificate in your property file, because these are the documents that prove you met your obligation. Since the process now runs under the restated law for recent transactions, follow the current steps and form names on the official income tax portal. Missing the deposit window or filing with a wrong permanent account number are the two most common errors, and both are easy to avoid by checking the details twice before you submit.

What if the seller has no PAN, or is an NRI?

Both situations change the tax treatment, so identify them before you pay. The seller permanent account number is mandatory for this deduction, and if a resident seller does not provide a valid PAN, the tax must be deducted at a much higher rate, commonly cited as twenty percent, and the seller loses easy credit for it. A different rule applies entirely when the seller is a non resident, because the one percent provision covers resident sellers only. For a non resident seller the deduction falls under the separate rule for payments to non residents, usually at higher rates with surcharge and cess, and often needs a tax determination. If your seller is an NRI or cannot supply a PAN, pause and take professional tax advice before closing rather than guessing.

Why does this matter for a Mumbai buyer specifically?

In a high value market like Mumbai most apartment purchases cross the 50 lakh threshold easily, so this rule applies to the majority of buyers rather than a minority. Because the amounts are large, so is the exposure if the deduction is missed or mishandled, and closing day is not the moment to discover the requirement. The practical move is to raise it early with the seller so the payment schedule already accounts for the one percent, and so the seller is not surprised to receive slightly less than the headline price. Handled in advance, it is a routine formality; handled late, it can delay registration and sour an otherwise smooth deal. Build it into your cost and cash flow planning from the start. It is also worth writing the arrangement into the sale documents, so the deducted one percent, the balance payable, and the seller acknowledgement of the certificate are all recorded rather than left to memory.

A seven step TDS checklist for buyers

Follow these in order and keep every acknowledgement.

1. Confirm whether the consideration or stamp duty value reaches the 50 lakh rupee threshold.
2. Collect the valid permanent account numbers of every buyer and every seller.
3. Check whether any seller is a non resident, which changes the applicable rule.
4. Deduct one percent from each payment to a resident seller on the full consideration.
5. File Form 26QB and deposit the tax within thirty days from the end of the deduction month.
6. Download Form 16B and give it to the seller within the prescribed time.
7. Store the challan, statement, and certificate with your registered documents.

This tax step sits alongside your other Mumbai closing costs and checks. Read it with our guide to stamp duty and registration charges in Mumbai so your total closing budget is complete, and with our note on how to verify a MahaRERA project before booking so the project itself is on solid ground before money moves.

Frequently asked questions

Who has to deduct TDS on a property purchase?

The buyer is responsible for deducting and depositing the tax, not the seller. When you buy property other than rural agricultural land from a resident seller and the transaction crosses the threshold, you must deduct one percent, deposit it, and give the seller a certificate. The duty sits with the buyer even though the tax is on the seller gain.

What is the TDS rate and threshold on buying property?

The rate is one percent, and it applies when the consideration or the stamp duty value of the property is 50 lakh rupees or more. No deduction is needed only when both figures are below 50 lakh. The provision covers immovable property other than rural agricultural land. Confirm the current forms on the official income tax portal before you file.

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

It is one percent of the entire consideration once the threshold is crossed, not only the part above 50 lakh. For a 70 lakh rupee flat the tax is 70,000 rupees, calculated on the whole amount. For an under construction purchase you deduct one percent on each installment as it is paid once the total consideration meets the threshold.

What if the seller is an NRI or has no PAN?

Both change the treatment, so check before you pay. A resident seller without a valid PAN faces a much higher deduction rate, commonly cited as twenty percent. If the seller is a non resident, the one percent rule does not apply and a separate higher deduction for payments to non residents applies instead. Take professional tax advice before closing.

Last updated 2026-07-18. PropNewz Team.