Buying property in Pune — or anywhere in India — above ₹50 lakhs triggers a tax obligation that surprises many first-time buyers: the requirement to deduct Tax Deducted at Source (TDS) from the payment made to the seller and deposit it with the Income Tax Department. This obligation falls squarely on the buyer, not the seller, which is counterintuitive to most people encountering it for the first time.
Failure to comply with TDS rules on property purchase can result in penalties, interest charges, and even legal liability — even if the underlying transaction is entirely legitimate and both buyer and seller are in good faith. This guide provides a complete, step-by-step explanation of TDS on property purchase under Section 194-IA of the Income Tax Act, tailored for Pune property buyers in 2026.
What Is Section 194-IA?
Section 194-IA was introduced in Finance Act 2013, effective from June 1, 2013. It mandates that any person (the buyer) purchasing immovable property — land, flat, house, plot, or commercial unit — for consideration of ₹50 lakh or more must deduct TDS at 1% from the payment made to the seller.
The logic is straightforward from the government’s perspective: property transactions are a common vehicle for undisclosed income, and requiring the buyer to deduct and deposit TDS creates a paper trail and ensures that at least some tax is captured on large transactions.
Key Parameters of Section 194-IA
| Parameter | Rule |
|---|---|
| Threshold | Transaction value ≥ ₹50,00,000 (fifty lakhs) |
| TDS Rate (resident seller) | 1% of transaction value |
| TDS Rate (NRI seller) | 20% + surcharge + cess (different rules apply) |
| Deductor | Buyer |
| Deductee | Seller |
| Form for payment | Form 26QB |
| Certificate to seller | Form 16B |
| Payment deadline | Within 30 days from end of month of deduction |
| Applicability | Agricultural land is excluded |
Does TDS Apply to Under-Construction Flats?
Yes. If you are buying an under-construction flat from a developer for ₹50L+ and paying in instalments, TDS applies on each instalment payment if the total transaction value crosses ₹50L. You cannot wait until final payment to deduct TDS — it must be deducted and deposited on each payment above the threshold.
Step-by-Step: How to Pay TDS on Property (Form 26QB)
Step 1: Collect the Seller’s PAN
Before making any payment, collect the seller’s PAN (Permanent Account Number). TDS cannot be deposited without the seller’s PAN. If the seller does not have a PAN or refuses to provide it, TDS must be deducted at 20% (under Section 206AA) instead of 1%. In practice, you should make PAN provision a condition of the sale agreement.
For developers (companies), collect the company’s PAN — not an individual director’s PAN.
Step 2: Calculate the TDS Amount
TDS is calculated on the total consideration amount, not just on amounts above ₹50L.
Example: If you buy a flat in Baner for ₹85 lakhs, TDS is 1% of ₹85,00,000 = ₹85,000. You pay the seller ₹84,15,000 and deposit ₹85,000 with the government.
If you are paying in instalments, deduct 1% from each instalment.
Example of instalment-based TDS:
- Booking amount paid: ₹10,00,000 → TDS = ₹10,000 → Pay seller ₹9,90,000
- Second instalment: ₹20,00,000 → TDS = ₹20,000 → Pay seller ₹19,80,000
- Final payment: ₹55,00,000 → TDS = ₹55,000 → Pay seller ₹54,45,000
- Total TDS: ₹85,000
Step 3: File Form 26QB Online
Form 26QB is the TDS return-cum-payment form for property transactions. It is filed on the NSDL (now Protean) website and links to your bank account for payment.
Process:
- Go to tin.tin.nsdl.com (or onlineservices.tin.egov-nsdl.com)
- Navigate to: TDS → Online Form 26QB
- Select Tax Applicable: (0021) Income Tax (Other than Companies) — for individual sellers
- Fill in:
- PAN of buyer (and co-buyers if joint purchase)
- PAN of seller (and co-sellers if joint sale)
- Complete property address including PIN code
- Total transaction value
- Amount paid in this instalment (if applicable)
- TDS amount
- Date of payment/credit
- Choose payment mode: Net banking (immediate) or e-pay later
- Submit and receive Acknowledgement Number
Important: If there are multiple buyers and/or multiple sellers, each buyer–seller combination requires a separate Form 26QB. For example, if a couple (joint buyers) purchase from an individual seller, each buyer files one Form 26QB for their respective 50% share.
Step 4: Make the TDS Payment
After submitting Form 26QB, you will be redirected to your bank’s net banking portal for payment. Complete the payment and save the challan receipt (Bank BSR code and Challan Identification Number will be needed for Form 16B).
The payment must be made within 30 days from the end of the month in which TDS was deducted. If you deduct TDS in February, payment must be made by March 31.
Step 5: Download and Issue Form 16B to the Seller
Within 15 days of the due date of furnishing Form 26QB, you must provide Form 16B (the TDS certificate) to the seller.
Form 16B is downloaded from:
- TRACES website: tdscpc.gov.in
- Register as a taxpayer (or login if already registered)
- Navigate to: Downloads → Form 16B (For Buyer)
- Enter the Acknowledgement Number from Form 26QB
- Form 16B will be generated (may take 5–7 working days after payment confirmation)
- Download and provide to the seller
The seller needs Form 16B to claim credit for TDS against their tax liability when they file their income tax return.
NRI Seller: Different and Significantly Higher TDS Rules
If the seller is a Non-Resident Indian (NRI), Section 194-IA does not apply. Instead, Section 195 of the Income Tax Act governs TDS on payments to non-residents, and the rates are dramatically higher.
TDS Rates for NRI Sellers (Section 195)
| Type of Capital Gain | TDS Rate | Plus Surcharge & Cess |
|---|---|---|
| Short-term capital gain (property held < 2 years) | 30% | Surcharge 10–15% + 4% cess |
| Long-term capital gain (property held ≥ 2 years) | 20% with indexation | Surcharge 10–15% + 4% cess |
Effective TDS rate for LTCG from NRI seller: Approximately 22.88% to 23.92% depending on surcharge slab.
This is far higher than the 1% applicable for resident sellers. The implication for buyers is significant: if you are purchasing a ₹1 crore flat from an NRI seller, you may need to withhold ₹22–24 lakh as TDS — which means the seller effectively receives ₹76–78 lakh at closing, with the balance deposited with the Income Tax Department against their tax liability.
Lower Deduction Certificate
NRI sellers can apply to the Income Tax Department for a Lower Deduction Certificate (LDC) under Section 197, which may reduce the TDS rate if the actual tax liability is lower than the standard rate. Buyers should request this certificate from NRI sellers before finalising the transaction. Without an LDC, buyers must apply the standard Section 195 rates.
How to Determine if Seller is NRI
Sellers are required to self-declare their residential status. However, buyers can verify by:
- Requesting the seller’s passport and visa stamps (extended stays abroad)
- NRIs typically have NRE/NRO bank accounts
- Check whether seller’s PAN is linked to a foreign address
If you buy from someone who represents themselves as a resident but is actually an NRI, you (the buyer) bear the TDS liability. Due diligence on the seller’s residential status is critical.
Common Mistakes and Penalties
Mistake 1: Not Deducting TDS at All
Penalty: Under Section 201(1A), interest at 1.5% per month from the date TDS was deductible to the date of actual deposit. Additionally, under Section 271C, a penalty equal to the TDS amount not deducted may be levied. The buyer can also be treated as an “assessee in default.”
Mistake 2: Late TDS Payment (After 30-Day Window)
Penalty: Interest at 1.5% per month (Section 201(1A)) from the date of deduction to the date of payment. If TDS is deducted but not deposited on time, additional late filing fees under Section 234E at ₹200 per day apply.
Mistake 3: Filing Form 26QB with Wrong PAN
If the seller’s PAN is incorrectly entered in Form 26QB, the TDS credit will not appear in the seller’s Form 26AS, creating complications. Correction of Form 26QB requires a separate correction request process on TRACES. Prevention is far easier than correction — verify PAN carefully before filing.
Mistake 4: Ignoring TDS for Under-Construction Properties
As noted above, TDS applies to each instalment payment. Buyers who defer TDS to the final payment face interest for prior instalments. Establish the TDS deduction protocol with the developer from the first payment.
Mistake 5: Joint Purchase Without Separate Form 26QB
If a married couple jointly purchases a property, each buyer must file Form 26QB separately for their respective share. Filing only one Form 26QB for the full amount is incorrect and can result in notices.
TDS on Resale Properties in Pune
For resale transactions in Pune — buying a flat from an individual (not a developer) — the TDS rules are identical to the above. The only practical difference is that you are dealing with an individual seller rather than a corporate entity, which means:
- Seller’s PAN must be obtained from the individual (carry a copy of their PAN card at registration)
- TDS deduction happens at the time of payment (often the registration day or the agreement-to-sale stage)
- Seller must be informed about Form 16B and the TRACES process, as many individual sellers are unfamiliar with it
Professional Help: When to Involve a CA
For straightforward transactions (resident seller, single buyer, single instalment), the Form 26QB process is manageable independently through the NSDL portal. However, involve a chartered accountant when:
- Seller is an NRI or there is ambiguity about residential status
- Transaction has multiple buyers and/or multiple sellers
- Property has been purchased in instalments over multiple financial years
- Seller claims a lower TDS rate (you need to verify the LDC validity)
- The transaction involves inherited property or succession (tax implications multiply)
CA fee for TDS compliance on a property transaction typically ranges from ₹3,000–8,000 in Pune for straightforward cases and ₹10,000–25,000 for NRI transactions.
Checklist for Pune Property Buyers
Before concluding the transaction:
- Seller’s PAN collected and verified
- Transaction value confirmed (including any extras that form part of “consideration”)
- TDS amount calculated (1% for resident seller)
- Form 26QB filed online on NSDL portal
- TDS deposited within 30-day window
- Form 16B downloaded from TRACES and provided to seller
- All Form 26QB acknowledgement numbers saved for records
For independent guidance on TDS compliance, property registration process, stamp duty calculations, and legal documentation review for Pune properties, visit punerealtyhub.com. We connect buyers with vetted property lawyers and chartered accountants who specialise in Maharashtra real estate transactions.
