TDS on sale of property: Sec 194IA

Section 194IA of the Income-tax Act puts a tight TDS net on every immovable property transaction worth ₹50 lakh or more — a threshold unchanged for years but caught by Budget 2024's clarification that the threshold is checked against total consideration including stamp duty value. In 2026, with AIS pulling sale-deed data directly from registrar's offices, even one missed TDS deposit triggers a notice.

When Section 194IA is triggered

• Any buyer (transferee) of immovable property other than agricultural land must deduct TDS.
• The seller (transferor) is a resident of India.
• Total consideration or stamp duty value (whichever is higher) is ₹50 lakh or more.
• Property includes land (other than agricultural), buildings, and units in housing societies and commercial complexes.
• TDS applies on each instalment payment, not just on the final tranche.

Rate and computation

TDS is deducted at 1% of the higher of total consideration or stamp duty value (post Budget 2024 amendment), and at 20% if the seller does not furnish PAN under Section 206AA. The deduction is made at the time of credit or payment, whichever is earlier. The threshold of ₹50 lakh applies to total consideration, not per-instalment, so the buyer must deduct TDS on every payment once the total crosses the threshold.

Form 26QB — the buyer's compliance

1. Within 30 days from the end of the month in which TDS is deducted, the buyer files Form 26QB on the income tax portal (challan-cum-statement).
2. The form requires buyer's and seller's PAN, property details, consideration value, and TDS amount.
3. Payment is made online; the challan acknowledges deposit to government.
4. Within 15 days of filing 26QB, the buyer downloads Form 16B (TDS certificate) and issues it to the seller.
5. For joint buyers and joint sellers, separate 26QB forms are filed in respect of each PAN combination.

Common pitfalls

• Forgetting to deduct TDS on advance/booking payments before the agreement is signed.
• Computing TDS on net of stamp duty rather than gross consideration.
• Missing Form 26QB filing within 30 days — attracts interest at 1.5% per month on TDS and late fee under Section 234E.
• Not issuing Form 16B to the seller, leading to seller-side credit mismatch.
• Confusing 194IA (resident sellers) with Section 195 (non-resident sellers) — NRI sellers are governed by Section 195, with much higher rates and TAN requirement.

NRI sellers — a different regime

If the seller is a non-resident, Section 194IA does not apply. Instead, Section 195 governs the transaction, with TDS deducted at long-term capital gains rate (12.5% post Budget 2024 + surcharge + cess) or short-term rate (slab rate plus surcharge and cess), generally on the full sale consideration unless a Section 197 lower-deduction certificate is obtained from the Assessing Officer.

Common buyer FAQs and edge cases

Buyers frequently ask whether stamp duty and brokerage form part of consideration for TDS. The post-Budget 2024 position is clear — the relevant base is the higher of total consideration or stamp duty value of the property. Stamp duty and registration charges paid separately are not included; brokerage is also outside the base. However, club membership fees and amenity charges paid to the developer often are part of consideration.

Joint ownership and joint buying complicate the form filing. Each buyer-seller PAN combination requires a separate Form 26QB. For under-construction property bought via construction-linked plans, TDS is deducted on each instalment once aggregate consideration crosses ₹50 lakh. Builders typically incorporate this in the demand letter, but verification is the buyer's responsibility.

Refund and lower-deduction options for sellers

A seller whose actual capital gains tax liability is lower than 1% TDS on consideration can apply for a lower or nil-deduction certificate under Section 197 in Form 13. The application includes capital gains computation, cost of acquisition documentation, indexation working, and exemption claims under Sections 54, 54EC, or 54F.

Once granted, the certificate is uploaded to the income tax portal and the buyer deducts at the certificate rate (often nil for genuine loss cases). Without the certificate, the seller can still claim a refund through the ITR, but capital is locked for months. For larger transactions, the Section 197 route is well worth the effort.

Conclusion

Section 194IA looks deceptively simple but tripped up thousands of buyers in 2025 once AIS started flagging mismatches. Treat the 1% TDS as a non-negotiable line item in your buying budget, deduct it on every instalment past the threshold, file Form 26QB on time, and issue Form 16B promptly. If you are buying from an NRI, switch to the Section 195 framework — the rules are entirely different.