Buying property in India comes with important legal and tax responsibilities. One key compliance rule is TDS on property purchase. Many first-time buyers are unaware that tax must be deducted at source when purchasing property over a certain value.
In this guide, we’ll explain what TDS on property purchase means, when it applies, who must pay it, how to file it correctly, and common mistakes to avoid. If you’re buying property in India in 2025, this guide will help you stay compliant and informed.
Table of Contents
What is TDS on Property Purchase?
TDS on property purchase refers to the tax deducted at source under Section 194-IA of the Income Tax Act. When a buyer purchases an immovable property (excluding agricultural land) worth ₹50 lakh or more, they are required to deduct 1% TDS from the sale value and deposit it with the Income Tax Department.
This rule ensures tax transparency in high-value property transactions and reduces tax evasion.
When is TDS on Property Purchase Applicable?
TDS is applicable when:
- The sale value of the property is ₹50 lakh or more
- The property is immovable, such as land, a residential flat, or commercial property
- The buyer is purchasing from a resident seller (different rules apply for NRI sellers)
It is important to note that TDS must be deducted even if the payment is made in installments. If the total consideration is ₹50 lakh or more, the rule applies.
Who is Responsible for Deducting TDS?
In every eligible transaction, the buyer is responsible for deducting and depositing the TDS with the government. The seller does not have to take any action related to deduction.
Even if there are multiple buyers or sellers, TDS must be deducted if the total sale price crosses ₹50 lakh. The obligation is on the buyer to complete this step before making the final payment to the seller.
What is the TDS Rate for Property Purchase?
The current TDS rate is 1% of the total sale value.
Example:
If you’re buying a property for ₹70 lakh, you must:
- Deduct ₹70,000 (1%) as TDS
- Pay the remaining ₹69.3 lakh to the seller
- Deposit the ₹70,000 with the Income Tax Department
How to Pay TDS on Property Purchase – Step-by-Step Guide
Paying TDS on property purchase is a one-time process through the official TIN portal. Here’s how to do it correctly:
Step 1: Go to the TIN Website
Visit the official website and click on “TDS on Sale of Property (Form 26QB)” under Services.
Step 2: Fill Form 26QB Online
Form 26QB is the challan-cum-statement for TDS payment. Fill in:
- Buyer and seller PAN details
- Property address
- Sale value and payment details
- Date of agreement and payment
Ensure PAN numbers are entered correctly. Mistakes can lead to complications.
Step 3: Submit and Generate Challan
After filling the form, submit and generate the online TDS payment challan.
Step 4: Make the Payment
You can pay using internet banking or debit card. Once paid, save the challan and acknowledgment receipt.
Step 5: Download Form 16B
After payment, wait for 5–10 days and then log in to the TRACES portal to download Form 16B. This is the TDS certificate that must be given to the seller.
Due Date for TDS Payment
TDS must be deposited within 30 days from the end of the month in which payment to the seller is made.
For example, if the sale is completed on March 10, the TDS must be deposited by April 30.
Timely payment is essential to avoid penalties and interest.
Penalty for Non-Compliance
Failing to deduct or deposit TDS on property purchase can result in:
- Interest on late deduction: 1% per month
- Interest on late deposit: 1.5% per month
- Penalty: Equal to the amount not deducted or deposited
- Late filing fee: ₹200 per day (under Section 234E)
It is the buyer’s legal responsibility to ensure correct and timely compliance.
TDS on Property Purchase from NRI Sellers
If the seller is a Non-Resident Indian (NRI), the TDS rules are different. Under Section 195 of the Income Tax Act:
- TDS must be deducted at 20% or higher, depending on capital gains
- The buyer should obtain a Tax Deduction Account Number (TAN)
- A certificate from the Income Tax Officer may be required to determine the correct deduction rate
Professional help is advised in such cases to avoid errors.
Documents to Keep for Record
For every transaction where TDS on property purchase is applicable, keep the following:
- Copy of Form 26QB (payment challan)
- Form 16B (TDS certificate)
- Acknowledgment receipts
- Sale agreement copy
- PAN cards of both buyer and seller
These documents are important during property registration and future audits.
Common Mistakes to Avoid
- Wrong PAN details – Always double-check PAN numbers before submitting Form 26QB
- Not issuing Form 16B – The seller may face issues filing taxes without this
- Late payments – These can lead to hefty interest and penalties
- Incorrect sale value entry – TDS must be based on total sale consideration, not just what’s paid upfront
- Skipping TDS when price is just ₹50 lakh – The rule applies if the amount is ₹50,00,000 or more. Even ₹50,00,001 requires TDS deduction.
Openplot’s Role in Transparent Property Deals
At Openplot, we ensure that buyers are equipped with legal and tax knowledge during their property journey. While we don’t directly handle TDS payments, our blog and listing platform guide users at every step of the buying process.
Our verified property listings, legal guides, and blogs help buyers understand key financial responsibilities—like TDS on property purchase—before signing any agreement.
Conclusion
Understanding TDS on property purchase is essential for any buyer investing ₹50 lakh or more in real estate. From knowing when to deduct, how to pay, to avoiding penalties—this simple tax step can protect you from future legal issues.
Make sure you plan your property payments in sync with your TDS obligations. Whether you’re buying an apartment, residential plot, or commercial property—always comply with the tax laws and keep your records updated.
Openplot offers trusted property listings, legal insights, and expert articles that make your buying experience smarter and more secure.
Frequently Asked Questions
Q1: Can I pay TDS on a property purchase after registration?
No. TDS must be paid within 30 days from the end of the month of payment to the seller, ideally before or during registration.
Q2: Do I need a TAN to pay TDS on property purchase?
Not for resident sellers. You can use PAN to file Form 26QB. TAN is needed only for NRI transactions.
Q3: What if the property value is split across two buyers?
TDS applies if the total sale value is ₹50 lakh or more, not individual shares. All buyers must comply jointly.
Q4: Can I claim a refund of the excess TDS deducted?
Yes. The seller can claim a refund while filing their income tax return, if more TDS was deducted than applicable.