TDS on Property: Two Completely Different Regimes
When you buy a property in India, TDS rules depend entirely on who is selling:
- Resident Indian seller: Simple 1% TDS via Form 26QB
- NRI seller: Complex 20–23% TDS under Section 195, with potential lower deduction certificate
Section 194IA: Buying from a Resident Indian
Who Needs to Deduct?
Any buyer who pays ≥ ₹50L for immovable property (land, flat, commercial) to a resident Indian seller must deduct TDS.
Threshold: ₹50L. If a property costs ₹48L, no TDS. If it costs ₹50,00,001 — TDS applies on the full amount.
Does not apply to: Agricultural land (rural), property < ₹50L.
TDS Rate: 1%
| Sale Price | TDS Rate | TDS Amount | Net Payment to Seller |
|---|---|---|---|
| ₹60L | 1% | ₹60,000 | ₹59,40,000 |
| ₹95L | 1% | ₹95,000 | ₹94,05,000 |
| ₹1.25 Cr | 1% | ₹1,25,000 | ₹1,23,75,000 |
| ₹1.80 Cr | 1% | ₹1,80,000 | ₹1,78,20,000 |
Important: TDS is on the sale consideration — not the stamp duty value. If you’re paying ₹95L for a flat, TDS is ₹95,000 regardless of the ready reckoner value.
When to Deduct
TDS is deducted at the time of payment — not at registration. If you’re paying in installments (e.g., token + loan disbursement), TDS is deducted on each payment proportionately.
Form 26QB: Step-by-Step Filing
Step 1: Access the Portal
- Go to: incometax.gov.in
- Navigate: e-Pay Tax → Form 26QB
Step 2: Enter Details
- Buyer’s PAN and Aadhaar
- Seller’s PAN (mandatory — you cannot file without seller’s PAN)
- Property address
- Total sale consideration
- Amount paid in this installment
- TDS amount (1% of amount paid)
Step 3: Pay
- Online payment via net banking (most major banks supported)
- Payment generates a unique acknowledgement number
Step 4: Deadline
TDS must be deposited within 30 days from the end of the month in which payment was made.
| Payment Made In | TDS Deposit Deadline |
|---|---|
| November | December 30 |
| December | January 30 |
| January | February 28/29 |
| March | April 30 |
Step 5: Issue Form 16B to Seller
- 15 days after Form 26QB is filed, Form 16B (TDS certificate) is auto-generated on TRACES (tdscpc.gov.in)
- Download and provide to seller — seller needs this to claim TDS credit in their ITR
If Multiple Buyers or Sellers
Joint buyers: Each buyer files separate Form 26QB for their proportionate share.
- Property ₹1 Cr, two buyers 50-50: each buyer files 26QB for ₹50L (TDS = ₹50,000 each)
Joint sellers: TDS is deducted proportionately for each seller’s share.
- Two sellers 50-50 on ₹1 Cr: buyer deducts ₹50,000 from each seller’s share
NRI Seller: Section 195 — Very Different Rules
When the seller is an NRI (Non-Resident Indian), TDS rules change dramatically.
TDS Rate for NRI Sellers
| Capital Gain Type | TDS Rate | Effective Rate (with surcharge + cess) |
|---|---|---|
| Long-term capital gain (held > 2 years) | 20% | ~22.88% |
| Short-term capital gain (held ≤ 2 years) | 30% (income tax slab) | ~34.32% |
| No capital gain calculation | 20% on gross sale price | ~22.88% |
Example: NRI sells Pune flat for ₹1.20 Cr. No LTCG certificate. Buyer must deduct:
- TDS = 22.88% × ₹1.20 Cr = ₹27.46L
The seller only receives ₹92.54L — the ₹27.46L goes to Income Tax department.
Lower Deduction Certificate (Form 13)
NRI sellers can apply to the Income Tax Assessing Officer for a Certificate Under Section 197 (Lower/Nil TDS), if their actual capital gains tax liability is lower than the standard rate.
Process:
- NRI applies via IT portal with capital gains calculation
- AO verifies and issues a certificate specifying lower TDS rate
- Buyer deducts TDS at the rate specified in the certificate
This is common for NRI sellers whose actual LTCG after indexation is much lower than 20% of gross sale price.
Form 27Q (Not 26QB) for NRI
For NRI sellers, the buyer files Form 27Q (not 26QB). Different form, different compliance route. Engage a chartered accountant — this process is more complex.
TDS and Property Registration
Increasingly, Sub-Registrar offices in Pune (PMC/PCMC jurisdictions) verify TDS compliance before accepting property registration documents for transactions above ₹50L.
What they check: Form 26QB acknowledgement / proof of TDS deposit.
If not done: Registration may be refused or delayed. The parties are then required to complete TDS compliance and rebook the registration appointment.
Worked Example: Hinjewadi Resale Purchase
Scenario: Buying resale 2 BHK in Hinjewadi for ₹1.15 Cr from a resident Indian. Paying in two tranches — ₹40L upfront, ₹75L via loan disbursement.
| Event | TDS Action |
|---|---|
| Pay ₹40L token/booking | Deduct ₹40,000 (1%) from payment; deposit via 26QB by end of next month |
| Loan of ₹75L disbursed to seller | Deduct ₹75,000 (1%); deposit via 26QB by end of that month |
| Total TDS | ₹1,15,000 |
| Seller receives | ₹1,13,85,000 |
Issue Form 16B to seller for each payment after TRACES generates it (15 days post-26QB).
FAQs
Q: Is TDS applicable if I pay in cash below ₹50L? Yes — TDS applies if the total property value is ≥ ₹50L, regardless of how you split the payment. If you pay ₹25L now and ₹30L later on a ₹55L property, TDS applies — you deduct 1% on each installment.
Q: The seller says “I’ll handle TDS myself” — is that possible? No. Section 194IA places the TDS obligation on the buyer. The buyer is responsible for deducting and depositing. If you fail to deduct and the seller doesn’t pay tax, the buyer faces the penalty. Do not accept this arrangement.
Q: What if the seller doesn’t have PAN? TDS rate becomes 20% (instead of 1%) if seller’s PAN is not available or invalid. Always get the seller’s PAN before any payment.
