1 Percent TDS on Buying Property: Section 194-IA for Buyers

A Bengaluru buyer closing an 80 lakh rupee flat learned on the morning of registration that he, not the seller, was responsible for deducting 80,000 rupees of tax and filing a form with the income tax department. He had never heard of it, the seller had not mentioned it, and the sub-registrar does not collect it. This is Section 194-IA, the 1 percent TDS on property purchases, and the duty to get it right sits squarely on the buyer. Miss it, and the penalties and interest are yours, not the seller's.

The short answer. If you buy a property where the sale consideration or the stamp duty value is 50 lakh rupees or more, you must deduct 1 percent as TDS, deposit it using Form 26QB, and give the seller Form 16B. The 1 percent applies to the higher of the price or the stamp duty value, and to the whole amount, not just the part above 50 lakh. The trade-off to understand: this is a compliance duty, not an extra cost to you, because the 1 percent is adjusted against the seller's tax, but if you skip it the interest and penalty fall on you as the buyer.

Who deducts the TDS, and when does it apply?

The buyer deducts it, and it applies once the consideration or the stamp duty value reaches 50 lakh rupees. Under Section 194-IA, the buyer of immovable property must deduct 1 percent TDS when the property is 50 lakh rupees or more, calculated on the sale consideration or the stamp duty value, whichever is higher. As ClearTax's guide to TDS on property sets out, the TDS applies to the whole amount, not just the excess over 50 lakh, so on a 70 lakh rupee property the TDS is on the full 70 lakh. It is also deducted on each instalment where the price is paid in parts. The important point for a buyer is that the obligation is yours: the seller does not deduct it, and the sub-registrar does not collect it, so if you do not handle it, no one does.

Note that the 50 lakh test looks at the higher of the price or the stamp duty value. A flat agreed at 48 lakh but with a stamp duty value of 51 lakh crosses the threshold, and the TDS is worked on the higher figure. This is also why the stamp duty value you looked up for your duty calculation matters for your TDS too: the two obligations draw on the same number. A buyer who checked the guidance or stamp duty value early for one purpose already has the figure that decides the other, which is a small efficiency worth knowing when the paperwork piles up near registration.

How much do I deduct, and from what?

You deduct 1 percent of the higher of the sale consideration and the stamp duty value. On an 80 lakh rupee flat where the price is the higher figure, that is 80,000 rupees. You deduct this from the payment to the seller and deposit it with the government, so the seller receives the price minus the 1 percent, and that 1 percent becomes a credit the seller can set against their own tax. For the buyer it is not an additional cost; it is simply a slice of the price routed to the tax department on the seller's behalf. This distinction matters because buyers sometimes mistake the TDS for a fresh expense on top of the price and over-provision their funds, while others forget it entirely and hand the full amount to the seller, leaving themselves to pay the 1 percent again out of pocket to meet the obligation. The correct handling is in the middle: pay the seller the price less the 1 percent, and send that 1 percent to the government, so the total you part with equals the agreed price and no more. Where the price is paid in instalments, you deduct 1 percent from each instalment rather than in one lump, which matters for under-construction purchases with a payment schedule. In that case a separate Form 26QB is filed for each payment, so the compliance is spread across the construction period rather than done once. It helps to set a reminder against each milestone, because the thirty-day clock to deposit runs from the end of the month of each deduction, and a payment made in a busy month is easy to overlook until the deadline has passed.

Why does the seller's PAN matter so much?

Because without the seller's PAN the rate jumps from 1 percent to 20 percent. ClearTax's guide notes that if the seller's PAN is missing, the TDS is 20 percent instead of 1 percent, and the seller cannot get credit for it. For a buyer that is a twenty-fold difference on a large sum, so collecting a correct PAN from the seller is not a formality. You use your own PAN and the seller's PAN on the form, and you do not need a TAN, which keeps the process simpler than the TDS obligations that businesses face. If the seller cannot or will not provide a PAN, that is a reason to pause the transaction, not to proceed and sort it out later.

How do the pieces of the TDS fit together?

The table below lays out the main rules so you can see the shape of the obligation at a glance.

What is the step-by-step for a buyer?

You deduct at payment, deposit through Form 26QB, and hand the seller Form 16B. The checklist below runs through it in order.

1. Confirm whether the consideration or the stamp duty value is 50 lakh rupees or more, taking the higher figure.
2. Collect the seller's correct PAN, since a missing PAN pushes the rate to 20 percent.
3. Deduct 1 percent of the higher value from the payment to the seller, or from each instalment.
4. Deposit the TDS using Form 26QB within 30 days from the end of the month of deduction.
5. Use your own PAN and the seller's PAN on the form, with no TAN required.
6. Download Form 16B from the TRACES portal once the deposit is processed.
7. Give Form 16B to the seller as proof, so the seller can claim credit for the TDS.

If there is a home loan, coordinate the TDS with the disbursal, because the bank typically releases the sale consideration and you need the 1 percent handled against that flow rather than discovered afterwards. Agreeing with the seller in writing, before registration, that the price will be paid net of the 1 percent TDS avoids an awkward conversation at the counter and keeps the arithmetic clean for both sides.

What are the traps buyers fall into?

The commonest trap is not knowing the duty exists until the last minute, then scrambling after registration. The next is budgeting on the agreement price when the stamp duty value is higher, which changes both whether the threshold is crossed and the base for the 1 percent. A third is a non-resident seller: Section 194-IA covers resident sellers only, and if the seller is a non-resident a different and generally higher TDS regime applies, so a buyer in that situation should take professional advice rather than default to 1 percent. Filing Form 26QB late attracts interest and a fee, and failing to file can leave the seller unable to claim credit, which sours the deal. Because the TDS is part of the money flow at purchase, it belongs in the same plan as the rest of your costs; our guide to stamp duty and registration charges in Bangalore and our explainer on home loan LTV and the real down payment set out the other pieces. When you are closing on a specific flat, say at 42 Estates Light of South in JP Nagar, build the TDS step into the payment timeline from the start.

Frequently asked questions

When does 1 percent TDS apply on a property purchase?

It applies when you buy immovable property and the sale consideration or the stamp duty value is 50 lakh rupees or more. The buyer deducts 1 percent of the higher of those two figures, on the whole value, not just the part above 50 lakh. If both are below 50 lakh, no TDS applies under Section 194-IA.

Who is responsible for deducting and depositing the TDS?

The buyer is. You deduct the 1 percent from the payment to the seller, deposit it using Form 26QB within 30 days from that month's end, and issue Form 16B to the seller. The seller does not deduct it and the sub-registrar does not collect it, so any interest and penalty for missing it fall on the buyer.

What happens if the seller does not give a PAN?

The TDS rate rises from 1 percent to 20 percent if the seller's PAN is not provided, and the seller cannot claim credit for it. Because that is a twenty-fold increase on a large sum, collect a correct PAN before you proceed. A seller who cannot provide a valid PAN is a reason to pause rather than carry on.

Does the 1 percent TDS apply if the seller is an NRI?

No, not under Section 194-IA, which covers resident sellers only. If the seller is a non-resident, a different and generally higher TDS regime applies to the purchase, with its own forms and rules. A buyer dealing with a non-resident seller should take professional tax advice rather than assume the 1 percent rate applies.

The short version: on a property of 50 lakh rupees or more, the buyer deducts 1 percent, files Form 26QB and gives the seller Form 16B. Collect the seller's PAN, watch the stamp duty value, and do it on time.

Last updated 2026-10-08. PropNewz Team.