Sec 194-IA — the property buyer's TDS checklist (≥ ₹50L)
A buyer paying ₹50 lakh or more for property other than agricultural land deducts 1% TDS under Sec 194-IA and pays it through Form 26QB. Since 1 July 2022 TDS is on the higher of the price and the stamp duty value; since 1 October 2024 the ₹50 lakh test uses the total paid by all buyers to all sellers.
The headline
- Threshold: Consideration ≥ ₹50,00,000 OR stamp duty value ≥ ₹50,00,000.
- Rate: 1% (20% if the seller's PAN is inoperative or not furnished, under Sec 206AA).
- Base: Higher of consideration paid OR stamp duty value (since 1 July 2022, Finance Act 2022).
- Form: 26QB — one form per buyer-seller combination per instalment.
- Due date: 30 days from end of the month in which deduction was made.
- Penalty for missing: 1% / 1.5% interest u/s 201, late fee ₹200/day u/s 234E up to TDS amount.
What property is in scope
Sec 194-IA covers immovable property other than agricultural land. So:
- ✓ Residential flat / apartment / villa
- ✓ Commercial office / shop / warehouse
- ✓ Land (non-agricultural)
- ✓ Under-construction property (TDS on each instalment to builder)
- ✗ Agricultural land — exempt
- ✗ Rural agricultural land (per Sec 2(14)) — exempt
The stamp-duty-value rule (Finance Act 2022)
Before 1 July 2022, TDS was deducted on the consideration as stated in the agreement. Buyers could agree to a sub-stamp-duty price in cash + the rest white, deducting TDS only on the white portion. The Finance Act 2022 closed that:
From 1-July-2022: TDS = 1% of (Consideration OR Stamp Duty Value, whichever is higher). And from 1-October-2024 (Finance (No. 2) Act 2024), the ₹50 lakh threshold is tested on the total consideration paid by all buyers to all sellers, so joint buyers each paying under ₹50 lakh still deduct.
So if you're buying a Chennai apartment for ₹68L (consideration) but the stamp duty / circle rate value is ₹72L, your TDS base is ₹72L, not ₹68L. Effective TDS = ₹72,000, not ₹68,000.
How to file Form 26QB
- Go to
www.incometax.gov.in→ e-Pay Tax → New Payment → Form 26QB. - Fill seller PAN, buyer PAN, addresses.
- Property type, address, agreement date.
- Total value of consideration + stamp duty value.
- Amount paid / credited in this instalment.
- Date of payment.
- TDS amount = 1% × higher of (consideration, SDV) × your share.
- Pay via netbanking / UPI → challan receipt.
- Download Form 16B for the seller (within 15 days from 26QB filing).
One 26QB per buyer-seller-instalment combination
If you have:
- 2 buyers + 1 seller + 5 instalments to a builder → 2 × 1 × 5 = 10 Form 26QBs.
- 1 buyer + 2 sellers (joint owners) + 1 lump sum → 2 Form 26QBs (one per seller).
- 1 buyer + 1 seller + 1 lump sum → 1 Form 26QB.
The form doesn't allow multiple sellers / buyers in one filing. Each combination is its own filing. This is the operational pain of Sec 194-IA — for an under-construction property with 10 instalments and 2 buyers, you'll file 20 Form 26QBs over 2-3 years.
NRI seller — switch to Sec 195
If the seller is a Non-Resident Indian, Sec 194-IA does NOT apply. Instead, Sec 195 applies at higher rates:
- Long-term capital gain: 12.5% without indexation for transfers from 23 July 2024. The 20%-with-indexation option for land or buildings bought before that date is for resident individuals and HUFs only, so it does not apply to an NRI seller.
- Short-term capital gain: per slab (up to 30%).
- Plus surcharge + cess.
Buyer needs:
- TAN (not just PAN) — apply via Form 49B.
- Form 27Q (instead of 26QB) for quarterly TDS return.
- Seller's TRC (Tax Residency Certificate) if claiming DTAA benefit.
- Seller's Form 10F if certain DTAA conditions need certification.
What to check before each instalment
- Seller's PAN active and PAN-Aadhaar linked. If inoperative, Sec 206AA bumps rate to 5%.
- Seller's residential status confirmed. If NRI, switch to Sec 195.
- Property's stamp duty value. Look up state circle rate / ready reckoner.
- Buyer-share calculation. Each joint buyer files separately for their share.
- 30-day clock. 26QB must be filed within 30 days of end of month of payment.
Documentation kit
- Agreement to sale + sale deed.
- Stamp duty calculation (sub-registrar receipt).
- Seller's PAN + Aadhaar + residential status proof.
- Bank account statement showing buyer's EMI / instalment payment.
- Form 26QB acknowledgement for each instalment.
- Form 16B issued to seller for each instalment.
Common mistakes
- Forgetting to deduct TDS at each instalment. Some buyers pay first 2-3 instalments to the builder without TDS, then catch up later. The interest u/s 201 (1.5% per month for late deposit) builds fast.
- Not deducting TDS on the booking advance. The "10% earnest money" is part of consideration. TDS applies from instalment 1 if the total consideration ≥ ₹50L.
- Using buyer's TAN (companies / firms). Sec 194-IA specifically permits TDS via PAN, not TAN. Use Form 26QB, not Form 26Q.
- Form 16B not issued to seller. Seller can't claim TDS credit without Form 16B. Buyer must download and email to seller within 15 days of 26QB filing.
- Pro-rating TDS wrong for joint owners. Both buyers pay for ₹1 Cr property. If 60:40 ownership and they paid in same ratio, file 26QB at 60% and 40% of total consideration each. Both PANs go on the sale deed.
What if you missed deducting?
If you closed a property transaction without deducting Sec 194-IA TDS:
- Compute the TDS that should have been deducted.
- Deposit immediately via challan 281 (not via 26QB — that's for normal flow) — pay TDS + interest u/s 201(1A) at 1% per month for delayed deduction + 1.5% per month for delayed deposit.
- File Form 26QB for the entire amount + interest.
- Issue Form 16B to seller.
- If seller has already filed ITR offering the gain, get Form 26A relief — the buyer's TDS default is treated as cleared once seller's tax position is verified by a CA.
Bottom line
Sec 194-IA is the most common TDS provision an ordinary citizen will ever execute. The mechanics are simple in principle — 1% on ≥ ₹50L property — but the operational details (joint buyers, joint sellers, multiple instalments, NRI seller flip, stamp-duty-value cap) break a lot of transactions. Plan the filings before the agreement is signed: identify the deductor, the deductee, the residential status, the share split, and the instalment schedule. Then file each 26QB within 30 days of the month-end of payment. The cost of compliance is one form per instalment. The cost of default is ~1.5% per month of interest, capped at the TDS amount as a late fee — easily 20% of the TDS quantum if you ignore it for a year.