TDS on Property Purchase in Bengaluru: Section 194-IA Explained
If you buy a Bengaluru property above 50 lakh from a resident seller, you must deduct 1 percent TDS under Section 194-IA. Here is how it works, how to file Form 26QB, and how to avoid penalties.
A Bengaluru buyer paid the full 85 lakh for a resale flat in 2025, delighted to close quickly. Months later he got an income tax notice. He had forgotten one obligation that sits entirely on the buyer: deducting 1 percent TDS on the purchase and depositing it with the government. The seller had the money, the deal was done, but the missing 85,000 rupees of TDS, plus interest and a late fee, were now the buyer's problem, not the seller's. A rule he had never heard of turned a smooth purchase into a tax headache.
The short answer. Under Section 194-IA of the Income Tax Act, if you buy a property valued at 50 lakh or more from a resident seller, you must deduct 1 percent of the amount as TDS and deposit it with the government using Form 26QB within 30 days from the end of the month of deduction. The 1 percent is calculated on the higher of the sale consideration or the stamp duty value. You do not need a TAN; your PAN is enough. The trade-off to understand: the 1 percent is not an extra cost to you, since it comes out of the seller's payment, but the legal duty to deduct and deposit it is entirely yours, so the penalty for missing it falls on you, not the seller.
What is TDS under Section 194-IA?
Section 194-IA is the rule that makes the buyer of a property responsible for deducting a small tax at source and paying it to the government on the seller's behalf. It applies when you buy any immovable property, other than rural agricultural land, from a resident seller, and the value crosses a threshold. The idea is to bring property transactions into the tax net and ensure the seller's gain is reported, with the buyer acting as the collection point.
For a buyer, the key thing to absorb is that this is your compliance obligation, not the seller's. The 1 percent is deducted from what you pay the seller, so it does not increase your total outlay, but you are the person the tax department holds responsible for deducting it correctly and depositing it on time. Treating it as a routine step in every eligible purchase, rather than an afterthought, keeps you clear of notices.
It helps to see where the 1 percent actually goes. You are not paying the government an extra 1 percent on top of the price; you are holding back 1 percent of the seller's own money and routing it to the tax department in the seller's name. The seller later claims credit for it against their capital gains tax. So the total leaving your hands is unchanged, only its destination is split, with 99 percent going to the seller and 1 percent going to the government on the seller's behalf.
When does the 1 percent TDS apply, and on what amount?
The 1 percent TDS applies when the property value is 50 lakh or more, and it is calculated on the higher of the sale consideration or the stamp duty value, according to income tax guides on Section 194-IA. In practical terms, if either your agreed price or the government stamp duty value of the property is 50 lakh or above, you deduct 1 percent of that higher figure. Below 50 lakh, no TDS is required under this section.
This is why the stamp duty value, which in Karnataka flows from the guidance value, matters here as well as for your registration cost. If your negotiated price is below 50 lakh but the stamp duty value is above it, the TDS obligation is still triggered on the higher figure. For most Bengaluru flats, which sit comfortably above 50 lakh, the 1 percent applies as a matter of course, so build it into your process from the start.
The table below sets out the common situations a buyer meets, so you can quickly place your own transaction.
| Situation | TDS treatment |
| Resident seller, value 50 lakh or more | 1 percent on the higher of price or stamp duty value |
| Value below 50 lakh | No TDS under Section 194-IA |
| Seller does not provide a PAN | 20 percent instead of 1 percent |
| Non resident seller | Section 195 applies, usually higher rates |
Who deducts it, and how do you deposit it using Form 26QB?
The buyer deducts the TDS and deposits it using Form 26QB, which you file online, and you do not need a TAN because your PAN is sufficient. The flow is to deduct 1 percent from the payment to the seller, then pay it to the government through the income tax e-filing portal by selecting the e-Pay Tax and 26QB option, entering the buyer and seller details and the property information. The system calculates the tax, you complete the payment, and Form 26QB must be filed within 30 days from the end of the month in which you deducted the tax.
After payment, you register on the TRACES portal to download Form 16B, the TDS certificate, and hand it to the seller. This certificate is what lets the seller claim credit for the TDS in their own tax return, so it is not just paperwork for you, it closes the loop for them. Keep Form 26QB and Form 16B safely, as they are your proof of compliance.
What if the seller has no PAN, or is an NRI?
If the seller does not provide a PAN, the TDS rate jumps from 1 percent to 20 percent, so always collect the seller's correct PAN before you pay. This single step protects you from a twentyfold higher deduction and the disputes that follow. Verify the PAN against the seller's identity and the sale documents, and make providing it a condition of your payment.
If the seller is a non resident, Section 194-IA does not apply at all. Instead, a different provision, Section 195, governs the deduction, usually at higher rates and with additional steps, because the seller is taxed differently. Confusing the two is a common and costly error, so confirm the seller's residential status early. For a full walk through of that case, see our guide on TDS when buying from an NRI seller under Section 195, which is a genuinely different process from the resident seller rule covered here.
What happens if you skip or delay the TDS?
If you skip or delay the TDS, the consequences land on you as the buyer, not the seller. You can face interest for late deduction or late payment, a fee for late filing of Form 26QB, and in some cases you may be treated as an assessee in default for the amount not deducted. The seller, meanwhile, cannot claim credit for TDS that was never deposited, which can also sour the transaction.
The practical damage is usually a notice months after you thought the deal was closed, followed by the original TDS plus interest and fees out of your pocket. Because the rule is mechanical and the deduction comes from the seller's money anyway, the whole problem is avoidable with a little discipline at payment time. Build the TDS step into your closing checklist so it is never the thing you remember too late.
How should a Bengaluru buyer handle 194-IA smoothly?
Handle it by treating the TDS as a fixed step in your payment process, planned before you transfer the balance, not discovered afterwards. Confirm the seller is a resident, collect a verified PAN, work out the higher of your price or the stamp duty value, and set aside the 1 percent to deduct and deposit. If you buy a ready flat above 50 lakh, for example a home in a project such as Brigade Kadugodi in Whitefield, assume the rule applies and plan for it.
Coordinate this with your other cost checks, since the same stamp duty value feeds your guidance value based registration math. If your purchase is complex, involving multiple sellers, a home loan disbursement, or an under construction payment plan, a quick word with a tax advisor on the timing of each Form 26QB is worth it. Done properly, 194-IA is a ten minute task, not a tax problem.
Seven step 194-IA checklist for buyers
- Confirm the seller is a resident, not an NRI, before you pay.
- Collect and verify the seller's PAN to avoid the 20 percent rate.
- Take the higher of your price or the stamp duty value as the base.
- Check whether that value is 50 lakh or more, which triggers the TDS.
- Deduct 1 percent from the payment to the seller.
- Deposit it and file Form 26QB within 30 days of the month end.
- Download Form 16B from TRACES and hand it to the seller.
Is TDS mandatory when buying property in Bangalore?
Yes, if the property value is 50 lakh or more and the seller is a resident, you must deduct 1 percent TDS under Section 194-IA and deposit it. It is calculated on the higher of the sale consideration or the stamp duty value. The obligation sits on you as the buyer, so plan the deduction before you pay the balance.
Who pays the 1 percent TDS on property, buyer or seller?
The buyer deducts and deposits the 1 percent TDS, but it comes out of the seller's proceeds, so it is not an extra cost to you. In effect the seller bears the tax while the buyer carries the legal duty to deduct and pay it. If the buyer fails, the penalty and interest fall on the buyer.
How do I deposit TDS on property purchase?
You deposit it using Form 26QB on the income tax e-filing portal, under the e-Pay Tax and 26QB option. No TAN is needed, as your PAN is sufficient. File within 30 days from the end of the month of deduction, then download Form 16B from the TRACES portal and give it to the seller as the TDS certificate.
What if the seller does not have a PAN?
If the seller does not provide a PAN, the TDS rate rises from 1 percent to 20 percent. To avoid this, collect and verify the seller's correct PAN before you make the payment, and treat providing it as a condition of the deal. A missing PAN can also delay the seller's tax credit.
Last updated 2026-09-07. PropNewz Team.
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