A salaried buyer in Sarjapur, Bengaluru, arranged every rupee for a flat in early 2026, down to the last instalment, and then learned at the registration counter that he was expected to have deducted a slice of the payment and sent it to the tax department himself. He had never heard of it. The amount was small as a percentage, but the responsibility was entirely his as the buyer, and getting it wrong can create a compliance headache long after the keys are handed over. This is the quiet duty of tax deducted at source on a property purchase.

The short answer. When you buy an immovable property, other than rural agricultural land, from a resident seller for fifty lakh rupees or more, Section 194-IA of the Income Tax Act requires you, the buyer, to deduct one percent as tax at source and deposit it to the government. You report it through Form 26QB and give the seller a Form 16B certificate. The trade-off to accept: the rate is only one percent, but the duty and the paperwork sit with you, so a small tax carries a real compliance responsibility you cannot pass to the seller.

What is TDS on property under Section 194-IA?

Section 194-IA is the rule that makes the buyer withhold a small part of the price and pay it to the tax department. In the words of the provision, any person, being a transferee, responsible for paying a resident transferor any sum as consideration for transfer of immovable property other than agricultural land, must deduct an amount equal to one percent. In plain language, on a qualifying purchase the buyer keeps back one percent of the payment and routes it to the government on the seller's behalf.

The purpose is to capture tax at the point of a large transaction and to leave a clear record of it. For a buyer, the key mental shift is that this is your legal duty, not the seller's, and not the bank's. Even when a home loan funds most of the price, the obligation to deduct and deposit under Section 194-IA rests with you as the purchaser, so it belongs on your checklist from the start.

When does the one percent TDS apply?

It applies when the property is immovable, not rural agricultural land, and the value crosses the fifty lakh threshold. The official position is that the buyer deducts one percent where the consideration and the stamp duty value both equal or exceed fifty lakh rupees, on a transfer from a resident seller. Rural agricultural land is outside the rule, though agricultural land within municipal limits or within specified distances of urban centres can fall inside it, which is a point to confirm for a specific plot.

Because both the price and the stamp duty value are considered, a buyer should look at both figures rather than only the negotiated price. If either meets the threshold, the duty is triggered. The one percent is calculated on the consideration, and it is deducted from the payment to the seller rather than added on top, so the seller receives the price minus the tax that you route to the government.

Who deducts and deposits the TDS?

The buyer deducts the tax and deposits it, full stop. Section 194-IA places the responsibility on the transferee, meaning you as the purchaser, to withhold one percent and pay it to the government. This is true even though the money ultimately concerns the seller's tax position, and it is true even when a lender disburses the bulk of the price. Treating it as someone else's job is the most common way buyers fall foul of the rule.

Because the duty is yours, so is the record keeping. You deduct at the time of payment or credit, deposit within the prescribed window, and issue the seller their certificate. If you are paying in instalments, the deduction applies to the payments, so keep the mechanics in mind across the schedule rather than treating it as a one time event. When in doubt on timing for a specific structure, take professional advice.

How do Form 26QB and Form 16B work?

These two forms are how you report the tax and prove it to the seller. Form 26QB is the challan cum statement through which you deposit the deducted tax, and it must be filed within thirty days from the end of the month in which the deduction was made. Form 16B is the certificate of that deduction, which you download and give to the seller within fifteen days of the Form 26QB due date, so the seller has proof for their own records.

What about PAN, TAN and multiple buyers or sellers?

PAN is mandatory, TAN is not, and multiple parties are handled on the total value. Both the buyer and the seller need a valid PAN, and if the seller does not provide one the deduction can rise to a much higher rate, so collecting a correct PAN is essential before you pay. Unlike many other tax deductions, you do not need a TAN for Section 194-IA, and you can use your PAN instead, which keeps the process simpler for an individual buyer.

Where there is more than one buyer or seller, the value is looked at in aggregate. The consideration is the total amount paid by all buyers to all sellers for the property, so a purchase does not escape the rule merely by being split across names. If your transaction involves several parties, work out the position on the total value and, for anything unusual, take advice so the deduction and forms are handled correctly.

Does this apply if the seller is a non resident?

No, a different rule applies when the seller is a non resident, and this is a crucial distinction. Section 194-IA covers payments to a resident seller. Where the seller is a non resident, the deduction falls under a different provision of the Income Tax Act, often at higher rates and with different compliance, including the need for a TAN in many cases. Assuming the one percent rule applies to an NRI seller is a serious and common mistake.

Because the consequences of getting this wrong can be significant, confirm the seller's residential status early and take professional advice where the seller is a non resident. The mechanics, rates and forms differ, and the safest path is to have the deduction structured correctly from the outset rather than discovering a shortfall later. When in doubt about status or process, a tax professional is well worth the cost.

How does TDS fit into your buying costs and timeline?

TDS is a duty to plan for, not an extra cost on top of the price. The one percent is deducted from what you pay the seller, so it is part of the consideration rather than an addition, but the responsibility to deduct, deposit and certify is yours and needs to be scheduled around your payments and registration. Missing the deposit window or the certificate can create avoidable trouble later, including notices and interest, so build these steps into your timeline from the start.

Pair this with our guides on loan to value and planning your down payment and on home loan sanction versus disbursement. If you are evaluating a specific project, you can also look at a listing such as this Bengaluru project. Together, understanding your payment plan, your loan flow and your TDS duty keeps the money side of the purchase in order.

Your seven step property TDS checklist

1. Check whether the consideration or stamp duty value reaches fifty lakh rupees.
2. Confirm the seller is a resident, since a non resident seller falls under a different rule.
3. Collect valid PAN details for both the buyer and the seller before paying.
4. Deduct one percent from the payment to the seller at the time of payment.
5. Deposit the tax through Form 26QB within thirty days of the month end.
6. Download Form 16B and give it to the seller within the prescribed window.
7. For instalments, multiple parties or any doubt, take professional advice.

Frequently asked questions

Who pays the one percent TDS on a property purchase?

The buyer does. Under Section 194-IA the purchaser must deduct one percent from the payment to a resident seller and deposit it with the government, on a qualifying purchase of fifty lakh rupees or more. The duty sits with the buyer, not the seller or the bank, even when a home loan funds most of the price.

When does Section 194-IA TDS apply?

It applies when you buy immovable property, other than rural agricultural land, from a resident seller where the consideration and stamp duty value are fifty lakh rupees or more. The rate is one percent of the consideration. Because both the price and the stamp duty value matter, check both figures, not only the negotiated price.

Do I need a TAN to deduct TDS on property?

No. For Section 194-IA you do not need a Tax Deduction Account Number, and you can use your PAN instead, which keeps the process simple for an individual buyer. However, a valid PAN for both buyer and seller is mandatory, and a missing seller PAN can raise the deduction sharply, so confirm PAN details before making any payment.

What if the seller is an NRI?

Then Section 194-IA does not apply. Payments to a non resident seller fall under a different provision of the Income Tax Act, often at higher rates and with different compliance, sometimes including a TAN. Do not assume the one percent rule applies to an NRI seller. Confirm the seller's residential status early and take professional advice.

Last updated 2026-07-16. PropNewz Team.