TDS on Sale of Property: Section 194-IA Rules for Buyers & Sellers

When Does Section 194-IA Apply?

Section 194-IA requires the buyer of immovable property (other than agricultural land) to deduct TDS at 1% of the sale consideration if the consideration is ₹50 lakh or more. Key points:

Use the Dividend Income Tax and TDS Credit Calculator to apply these points to your figures or facts.

• The threshold applies to the total sale consideration, not the buyer's or seller's individual share — so if a property worth ₹60 lakh is jointly owned by two sellers and bought by two buyers, TDS still applies even though each buyer-seller pair's share may individually be below ₹50 lakh.
• TDS is deducted on the higher of the sale consideration or the stamp duty value of the property (effective from recent amendments), to prevent under-reporting of consideration.
• The seller does not need to have a PAN exemption or lower-deduction certificate for this to apply — 1% is the standard rate as long as the seller furnishes PAN; if the seller does not furnish PAN, TDS is deducted at 20%.

How the Buyer Deducts and Deposits TDS (Form 26QB)

Unlike salary or contractor TDS, the buyer in a property transaction does not need a TAN. The process is:

For the connected rule, example or next step, see Property TDS With Multiple Buyers or Sellers: Section 194-IA Mistakes.

1. At the time of payment (or credit, whichever is earlier — including for instalment payments), the buyer deducts 1% of that instalment/payment as TDS
2. The buyer deposits this TDS using Form 26QB on the income tax e-filing portal, within 30 days from the end of the month in which the deduction was made
3. The buyer then downloads and issues Form 16B (the TDS certificate) to the seller

What the Seller Should Check

As a seller, you should:

• Confirm the buyer has deducted exactly 1% (not more, not less) and obtain Form 16B
• Verify the TDS appears in your Form 26AS against the buyer's TAN-less Form 26QB filing — see our Form 26AS vs AIS vs TIS guide
• Report the full sale consideration and compute capital gains correctly — the 1% TDS is only an advance deduction, not the final tax on the capital gain, which may be higher or lower depending on indexation (for applicable assets), holding period and exemptions claimed under Sections 54/54EC/54F

Special Case: NRI Sellers — Section 195, Not 194-IA

If the seller is a non-resident, Section 194-IA does not apply at all — instead, Section 195 applies, which requires TDS at a much higher rate (based on the applicable capital gains tax rate plus surcharge and cess, often in the 20-30%+ range on the entire gain or sale value depending on a lower-deduction certificate), and the buyer in this case does need a TAN and must file TDS returns (Form 27Q) rather than Form 26QB. Buyers should always confirm the seller's residential status before assuming the 1% Section 194-IA rate applies — deducting only 1% when Section 195 applies can make the buyer liable for the shortfall, interest and penalty.