Jun 25 2025
Off

TDS on Purchase of Property under Section 194IA: A Complete Guide for Buyers & Investors

By Team Lawgical Startup

When buying a property in India, most buyers focus on the agreement, location, loan, and registration — but often overlook an important tax responsibility: TDS on property purchase under Section 194IA of the Income Tax Act.

Whether you’re a first-time homebuyer, investor, real estate professional, or a startup dealing in real estate transactions — understanding your TDS obligations can help you avoid penalties and ensure smooth property transfer.

This blog offers a complete, beginner-friendly guide to Section 194IA — its applicability, process, due dates, and common errors.

What is Section 194IA of the Income Tax Act?

Section 194IA mandates that any person buying an immovable property (other than agricultural land) worth ₹50 lakhs or more must deduct TDS at 1% of the sale consideration or Stamp duty value, whichever is Higher and deposit it with the government.

This section was introduced to ensure transparency in high-value property transactions and prevent tax evasion.

When Does Section 194IA Apply?

TDS under Section 194IA applies when:

  • The buyer is a resident of India (not required to have a TAN).
  • The property value (sale consideration or stamp duty value) is ₹50 lakhs or more.
  • The seller is a resident of India (For NRI sellers, Section 195 applies).
  • The property is immovable (includes residential, commercial buildings, or land other than agricultural land).

Note: Even if the property is bought jointly by two buyers, and the individual share is less than ₹50 lakhs, but the total transaction value is ₹50 lakhs or more, TDS will still apply.

What is the TDS Rate Under Section 194IA?

  • TDS Rate: 1% of the total sale consideration or stamp duty value, whichever is higher
  • If PAN of the seller is not available: 20% TDS is applicable under Section 206AA

Example: If you’re buying a flat for ₹60,00,000:
You must deduct ₹60,000 (1% of ₹60 lakhs) as TDS and pay ₹59,40,000 to the seller.

Due Date for TDS Payment

TDS must be deposited to the government within 30 days from the end of the month in which the deduction is made.

  • The buyer must fill Form 26QB (online form for TDS on property).
  • After depositing TDS, the buyer should issue Form 16B (TDS Certificate) to the seller within 15 days of filing Form 26QB.

Step-by-Step Process to Pay TDS under Section 194IA

Step 1: Deduct 1% TDS from the sale value at the time of payment.

Step 2: Visit Income Tax Portal using your PAN login and fill Form 26QB which is a Challan cum Return Statement.

Step 3: Pay the TDS online via net banking or at a bank using challan.

Step 4: Download Form 26QB acknowledgment.

Step 5: Register on the TRACES portal as a Taxpayer and download Form 16B (TDS Certificate).

Step 6: Issue Form 16B to the seller.

Penalties for Non-Compliance

Non-payment or late payment of TDS can result in:

  • Interest @ 1% or 1.5% per month
  • Late fee of ₹200/day for late filing of Form 26QB upto the maximum of TDS amount deducted.
  • Penalty u/s 271H – up to ₹1 lakh

Common Mistakes to Avoid

  • Not deducting TDS when property exceeds ₹50 lakhs
  • Deducting TDS on amount excluding GST (TDS is on total sale value including GST, if applicable)
  • Using incorrect PAN of seller or buyer, if seller’s PAN is not available then TDS must be deducted at 20%.
  • Delaying Form 26QB filing or TDS deposit
  • Not issuing Form 16B to seller

FAQs on TDS under Section 194IA

Is TAN required by the buyer to deduct TDS on property?

Ans:- No. TAN is not required. Only PAN of both buyer and seller is necessary.

Is TDS applicable if property is under construction?

Ans:- Yes, TDS is applicable even for under-construction properties if the value is ₹50 lakhs or more.

Who pays the TDS — buyer or seller?

Ans:- The buyer is responsible for deducting and depositing the TDS.

What if I am buying property from multiple sellers?

Ans:- TDS must be deducted proportionately from each seller’s share.

Real-Life Scenario

Mr. Gupta buys a flat in Mumbai for ₹1.2 crore. He pays the developer in installments.
He must deduct 1% TDS on every installment and pay it within 30 days of each deduction, then issue Form 16B to the developer after each payment.

How Lawgical Startup Can Help You

Filing TDS on property can be tricky — one small mistake can lead to hefty penalties.

At Lawgical Startup, we help:

  • Calculate correct TDS amounts
  • File Form 26QB accurately
  • Generate and deliver Form 16B to sellers
  • Handle notices for TDS defaults

Let us take the stress out of TDS compliance. Contact us today.

Understanding and complying with Section 194IA is crucial for every property buyer in India. With increasing scrutiny from tax authorities, TDS on property can no longer be ignored. Ensure you deduct, deposit, and file TDS correctly to avoid legal troubles and penalties.

For expert assistance in TDS filing, property transactions, and legal compliance — reach out to Lawgical Startup.

Need Help with TDS on Property Purchase?
Contact us at info https://lawgicalstartup.com/contact/
Visit: www.lawgicalstartup.com

Posted inBlog
TagsCompany Law Startup guide Tax Compliances