When Ravi booked an 80,00,000 rupee apartment in Gachibowli, he wired the full amount to the seller in three cheerful instalments and felt like a responsible buyer. Nine months later a notice from the income tax department told him he had missed a small but mandatory job: deducting 1 percent tax at source and filing it in the seller's name. The tax was never the seller's headache to chase. Under the law it was Ravi's, the buyer's, and the late fee had been quietly climbing every day.

The short answer. Under Section 194-IA of the Income Tax Act, the buyer of an immovable property must deduct 1 percent of the sale consideration as tax and deposit it with the government using Form 26QB. It applies only when the consideration and the stamp duty value are both 50,00,000 rupees or more, and it excludes agricultural land. The trade off is simple: the 1 percent is not an extra cost to you, it is money withheld from the seller and paid to the tax department in the seller's name, but the compliance duty and any penalty for missing it sit squarely on the buyer.

What is Section 194-IA, and who has to deduct the TDS?

Section 194-IA makes the buyer, not the seller, responsible for deducting tax at source on a property purchase. The official Income Tax Department guidance states that any person who is a transferee, meaning the buyer, and who is responsible for paying a resident transferor, meaning the seller, for the transfer of immovable property must deduct an amount equal to 1 percent of that sum as income tax. In plain terms, the government uses the buyer as its collection point so that a fraction of every large property payment reaches the exchequer immediately. This is why the duty cannot be waved away by a friendly seller who offers to handle it. If the tax is not deducted and deposited, it is the buyer who receives the notice and pays the interest and late fee.

A useful and buyer friendly feature is that this deduction does not require you to hold a tax deduction account number, the TAN that businesses use. A home buyer files the deduction against their own PAN through Form 26QB, which keeps the process within reach of an ordinary individual purchaser.

When does the 1 percent TDS apply, and when is it exempt?

The 1 percent deduction applies only when the consideration for the property and its stamp duty value are both 50,00,000 rupees or more. The department is precise about this: no deduction is required where the consideration for the transfer and the stamp duty value of the property are both less than fifty lakh rupees. So if either figure crosses the threshold, the deduction is triggered on the whole amount, not just the portion above 50 lakh. The section also excludes agricultural land, which the law defines by its location relative to municipal limits and population, so a farm plot outside those limits sits outside this rule.

Two practical points follow. First, the timing of the deduction is the earlier of when you credit the amount to the seller or when you actually pay, which is why instalment buyers must deduct on each payment rather than only at the end. Second, because the threshold looks at both the price and the stamp duty value, a property priced just under 50 lakh but valued higher for stamp duty can still fall within the section, so check both numbers before assuming you are exempt.

How does a Hyderabad buyer actually pay the TDS?

You pay the TDS by filing Form 26QB, the challan cum statement, and depositing the deducted amount within the deadline the department sets. The deducted tax must reach the government within 30 days from the end of the month in which you made the deduction, so a payment made in March must be filed by the end of April. Follow this sequence for a clean record.

1. Confirm the deal crosses the threshold by checking that both the consideration and the stamp duty value are 50,00,000 rupees or more.
2. Collect the PAN of every buyer and every seller, because a wrong or missing PAN is the most common cause of a defective filing.
3. Calculate 1 percent of the consideration for this payment, deducting it from the amount you hand the seller rather than adding it on top.
4. Open Form 26QB on the income tax e filing portal and enter the buyer, seller, property and payment details exactly.
5. Pay the deducted tax online through the portal, keeping the challan cum statement acknowledgement.
6. File within 30 days from the end of the month of deduction to avoid interest and a daily late fee.
7. Download the Form 16B certificate once available and hand it to the seller as proof the tax was paid in their name.

If there are two buyers or two sellers, the department treats each pairing as a separate transaction, so you may need more than one Form 26QB. When in doubt about a multi party deal or an instalment schedule, confirm the exact filing count on the official portal before you pay.

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

Form 16B is the TDS certificate that proves you deposited the seller's 1 percent with the government, and the seller needs it to claim credit for that tax. The department requires the buyer to issue Form 16B to the seller within 15 days from the due date for furnishing the Form 26QB challan cum statement. From the seller's side, the 1 percent is not a loss but an advance against their own tax, which they reconcile when they file their return, so the certificate is their evidence. A buyer who deducts the tax but never issues Form 16B leaves the seller unable to claim credit, which sours the closing and can invite a dispute. Treat the certificate as the final step that formally closes your obligation under the section.

Section 194-IA at a glance

Buyers remember rules better as a table than as prose, so here is the core of the section in one view.

Read down the last column and the theme is unmistakable: almost every duty here belongs to the buyer, which is exactly why buyers who assume the seller will handle it end up paying penalties.

What are the common mistakes buyers make with 194-IA?

The most common mistakes are missing the deadline, entering a wrong PAN, and forgetting to deduct on each instalment. Because the deduction duty is triggered at the earlier of credit or payment, a buyer who pays in stages must deduct 1 percent every time rather than once at handover. A wrong PAN for the buyer or seller produces a defective statement that has to be corrected, delaying the seller's credit. Missing the 30 day deposit window attracts interest on the unpaid tax and a separate daily late fee for the delayed statement, both of which fall on the buyer. Finally, some buyers deduct the tax but never generate Form 16B, which technically leaves their obligation incomplete. A calendar reminder tied to the end of the month of each payment prevents most of these errors.

What if the seller is an NRI?

Section 194-IA applies when you pay a resident seller, so a purchase from a non resident seller is governed by a different and stricter TDS provision. The official text of 194-IA specifically refers to paying a resident transferor, which is the signal that non resident sellers sit outside it. Buying from an NRI generally means higher TDS rates, a requirement to obtain a TAN, and different forms, so the light touch 26QB route does not apply. If your seller is an NRI, do not simply deduct 1 percent and assume you are compliant. Confirm the correct rate and process on the official income tax portal, and take professional help before you release payment, because the buyer again carries the compliance risk.

Frequently asked questions

Who pays the 1 percent TDS on a property purchase?

The buyer pays it by deducting 1 percent from the amount due to the seller and depositing it with the government. Under Section 194-IA the buyer, called the transferee, carries the duty, not the seller. The 1 percent is withheld from the seller's money and paid in the seller's name, but any penalty for failing to deduct or deposit falls on the buyer.

What is the threshold for Section 194-IA TDS?

No TDS is required when the consideration and the stamp duty value of the property are both less than fifty lakh rupees. If either figure is 50,00,000 rupees or more, the buyer must deduct 1 percent on the full consideration, not only the amount above the threshold. Agricultural land defined under the Act is excluded from the section.

What is Form 26QB and by when must it be filed?

Form 26QB is the challan cum statement a buyer uses to deposit the deducted 1 percent. The tax must be paid within 30 days from the end of the month in which the deduction was made. So a deduction in one month must be deposited through Form 26QB by the end of the following month to avoid interest and a daily late fee.

What is Form 16B in a property transaction?

Form 16B is the TDS certificate the buyer issues to the seller after depositing the 1 percent. The buyer must furnish it within 15 days from the due date for the Form 26QB statement. It is the seller's proof that the tax was paid in their name, which the seller uses to claim credit for that amount when filing an income tax return.

To budget the full cost of a Hyderabad purchase, pair this with our guide to Telangana stamp duty and registration charges, and before you pay anything, run the title check in our note on the Telangana encumbrance certificate. The rules above are drawn from the Income Tax Department's own page on TDS on purchase of immovable property.

Last updated 2026-07-13. PropNewz Team.