TDS on Property Purchase in Bengaluru under Section 194-IA

A Bengaluru buyer paying 80 lakh for a resale flat has a duty most never expect, to act as a tax collector for the government. Under Section 194-IA the buyer must deduct 1 percent of the price as tax at source, deposit it against the seller PAN, and hand the seller only the balance. Skip it, and the liability, with interest and penalty, lands on the buyer, not the seller who received the money.

This quiet obligation trips up first time buyers who assume tax is the seller problem. It is not. The deduction, the deposit and the certificate are the buyer responsibility, and getting it right protects you from a notice years later. This guide explains when 194-IA applies, how to comply, and the change arriving with the new income tax law.

The short answer. When a Bengaluru buyer purchases property of 50 lakh or more, other than agricultural land, Section 194-IA requires deducting 1 percent of the consideration as TDS and depositing it against the seller PAN. The trade off, the rule is simple but the liability sits on the buyer, so missing it means you, not the seller, face interest and penalty, and if the seller has no PAN the deduction jumps to 20 percent.

When does TDS on property purchase apply?

Section 194-IA applies when you buy immovable property, other than agricultural land, where the consideration or the stamp duty value is 50 lakh rupees or more. The buyer deducts 1 percent at the time of payment or credit to the seller. The threshold looks at the higher of the price or the stamp duty value, so TDS can apply even if the agreement value is just under 50 lakh but the stamp duty value crosses it.

The deduction is on the entire amount, not only the part above 50 lakh, a point buyers often misread. On an 80 lakh purchase the TDS is 80,000 rupees, deducted from the seller and deposited with the government. You can confirm the rule on the Income Tax Department site before your payment schedule begins.

How does a buyer comply with Section 194-IA?

The buyer deducts 1 percent, deposits it using the prescribed challan cum statement, historically Form 26QB, within 30 days from the end of the month of deduction, and issues the seller a TDS certificate, historically Form 16B. No tax deduction account number is needed, only the PAN of both buyer and seller, which keeps the process light for an individual buyer.

Where payment is in instalments, TDS is deducted on each instalment once the 50 lakh threshold is in play. Keep the deposit acknowledgements and certificates with your property file, because the seller will want the certificate to claim credit and you will want proof of compliance if questioned. Accuracy on the seller PAN is critical, an error misroutes the credit.

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

If the seller does not furnish a valid PAN, the buyer must deduct at 20 percent instead of 1 percent, a steep jump that protects the revenue and pressures sellers to provide PAN. So always collect and verify the seller PAN before releasing payment, because the higher rate is the buyer obligation if PAN is missing.

Section 194-IA covers resident sellers. If the seller is a non resident, a different provision, Section 195, applies with different rates and procedure, a distinction PropNewz covered in our guide to TDS when buying a flat from an NRI seller. Mixing up the two is a common and costly error, so confirm the seller residential status first.

What is changing under the new income tax law?

The substance of the rule, 1 percent on property of 50 lakh or more, is stable, but the legal framework is being modernised. The income tax department has indicated that for transactions from a date in 2026 a new framework under the Income tax Act, 2025 replaces the older section and forms. Because the exact form numbers and effective date are being rolled out, confirm the current form and procedure on the income tax portal at the time of your transaction.

For a buyer this means the rate and threshold you budget for do not change, but the paperwork route might. Do not rely on an old blog or a stale form reference, check the live procedure on the official portal when you actually deduct and deposit, so your compliance matches the framework in force on your payment date.

What is the real risk of getting 194-IA wrong?

The risk sits entirely on the buyer. Fail to deduct, or deduct and fail to deposit, and you face interest and penalty, and the expense can be disallowed, all while the seller has already walked away with the full amount. Recovering an over payment from a seller after the fact is far harder than deducting correctly at source.

The trade off is therefore lopsided, the compliance effort is small, a deduction, a deposit and a certificate, while the cost of skipping it is large and lands on you. Treat the TDS as a fixed step in every purchase of 50 lakh or more, build it into the payment schedule, and keep the proof. The table below summarises the key parameters.

Use this seven point checklist on TDS for a Bengaluru purchase.

1. Check if the price or stamp duty value is 50 lakh or more.
2. Collect and verify the seller PAN before releasing any payment.
3. Deduct 1 percent on the full consideration, not only the part above 50 lakh.
4. Deposit the TDS within 30 days from the end of the month of deduction.
5. Issue the seller the TDS certificate so the seller can claim credit.
6. Confirm whether the seller is resident or an NRI, since NRI sales use Section 195.
7. Check the current form and procedure on the income tax portal at transaction time.

How does Section 194-IA work with home loans and joint buyers?

When you fund the purchase with a home loan, the lender disburses to the seller, but the TDS obligation still sits with you as the buyer. In practice you must ensure 1 percent is deducted and deposited against the seller PAN as payments are made, including on disbursed instalments, so coordinate the timing with your lender. The bank funding the deal does not absolve you of the deduction duty, and a missed deduction is your liability, not theirs.

Joint buyers and joint sellers add a wrinkle worth getting right. Where there are multiple buyers or sellers, the deduction and the filing are generally apportioned according to each party share, so each buyer accounts for their portion against each seller PAN. Getting the apportionment and the PAN details exactly right matters, because an error misroutes the credit and complicates the seller ability to claim it, which can sour an otherwise clean transaction.

Keep the deduction certificates and deposit acknowledgements with your property file. The seller needs them to claim credit in their return, and you need them as proof of compliance if the transaction is ever queried. Treat the TDS as a fixed step in every purchase of 50 lakh or more, build it into the payment schedule from the start, and the small administrative effort protects you from a far larger problem later.

Remember that the rate and threshold are stable even as the law is rewritten. The core rule, 1 percent on property of 50 lakh or more, continues, but the framework is being modernised under the new income tax law from a date in 2026, which updates the section and the forms. Confirm the current form and procedure on the income tax portal at the time of your transaction, rather than relying on an older form reference.

The bottom line is that Section 194-IA is simple to comply with and expensive to ignore, and the liability sits on the buyer. On any purchase of 50 lakh or more, collect the seller PAN, deduct 1 percent, deposit it on time and keep the certificate. The small administrative step protects you from interest, penalty and a notice that can arrive long after the seller has moved on.

Frequently asked questions

What is TDS on property purchase under Section 194-IA?

When a buyer purchases immovable property, other than agricultural land, of 50 lakh rupees or more, Section 194-IA requires deducting 1 percent of the consideration as tax at source and depositing it against the seller PAN. The buyer, not the seller, is responsible for the deduction, deposit and certificate.

Is TDS deducted on the full amount or only above 50 lakh?

TDS is deducted on the entire consideration once the 50 lakh threshold applies, not only on the portion above 50 lakh. On an 80 lakh purchase the TDS is 80,000 rupees at 1 percent. The threshold is based on the higher of the agreement value or the stamp duty value of the property.

What if the seller does not have a PAN?

If the seller does not furnish a valid PAN, the buyer must deduct TDS at 20 percent instead of 1 percent. This makes collecting and verifying the seller PAN before payment essential. Section 194-IA covers resident sellers, while a sale by a non resident falls under Section 195 with different rates and procedure.

Has the TDS rule on property changed in 2026?

The core rule, 1 percent on property of 50 lakh or more, is stable, but the legal framework is being modernised under the Income tax Act, 2025, which updates the section and forms for transactions from a date in 2026. Confirm the current form and procedure on the income tax portal at the time of your transaction.

Sources and tools, the Income Tax Department, with prior PropNewz coverage of TDS on buying from an NRI seller and MODT charges on a home loan.

Last updated 2026-06-18. PropNewz Team.