TDS on Purchase of Property in India: Buyer Guide 2026

TDS on purchase of property is one of the most commonly missed responsibilities in an Indian real estate deal, and the surprise is that it falls on the buyer, not the seller. If you buy a house, flat, plot or commercial unit worth Rs 50 lakh or more, the law requires you to deduct a small percentage of the payment and deposit it with the government before the rest goes to the seller. Miss this step, and you can face interest, penalties and a stalled registration. This guide explains the rules, rates, forms and process in plain language, so you stay compliant and stress-free.

The figures here reflect the position for 2026. Tax rules change, and the law is being modernised under the new Income-tax Act, so treat this as an informational guide and confirm the current position on the income tax portal or with a chartered accountant before you file.

TDS stands for Tax Deducted at Source. It is a system where the person making a payment deducts a small part as tax and deposits it directly with the government, instead of the receiver paying it later. In a property deal, the buyer deducts the tax from the amount payable to the seller and pays it to the government on the seller's behalf. The seller then gets credit for that amount against their own tax.

The government introduced TDS for property buying to track high-value transactions and reduce the use of unaccounted money in real estate. It creates a clear paper trail for every large deal. For you as a buyer, it matters because the duty is legally yours. If you skip it, the tax office can treat you as an assessee in default, and the cost lands on you, not the seller.

Section 194-IA of the Income Tax Act is the rule that governs TDS on purchase of immovable property from a resident seller. It says that any buyer of immovable property, other than rural agricultural land, must deduct 1% TDS when the sale consideration or the stamp duty value is Rs 50 lakh or more.

A helpful feature of this section is that you do not need a TAN (Tax Deduction Account Number) to comply. You can use your PAN and the seller's PAN, which keeps the process simple for ordinary buyers.

Properties Covered Under Section 194-IA

One point trips up many buyers: the 1% applies to the full purchase price, not just the amount above Rs 50 lakh. So a flat bought for Rs 75 lakh attracts TDS of Rs 75,000, not 1% of the Rs 25 lakh excess.

The rate depends entirely on the seller's residential status, and this is the single most important thing to confirm before you deduct anything.

For a resident seller, the 1% rate is straightforward. If the seller does not provide a PAN, the rate rises sharply to 20%, so always collect the seller's PAN first.

Buying from an NRI is a completely different exercise, and mixing it up with the 1% rule is a common, costly error. When the seller is a non-resident, Section 195 applies, not Section 194-IA. The key differences:

Under Budget 2026, buying from an NRI seller has been made a little easier: a PAN-based facility on the income tax portal now allows this compliance without a separate TAN in the specified cases. Because NRI deductions can run into lakhs, the seller can apply for a Lower Deduction Certificate to reduce the amount, and it is wise to involve a chartered accountant for these deals.

For a resident seller, the calculation is simple. Take the higher of the sale consideration or the stamp duty value, and apply 1%.

Example: You buy a flat for Rs 80 lakh, and the stamp duty (DLC) value is Rs 78 lakh. TDS is 1% of the higher figure, Rs 80 lakh, which is Rs 80,000. You pay the seller Rs 79,20,000 and deposit Rs 80,000 with the government.

If you pay in instalments, you deduct 1% from each instalment as you pay it. With joint buyers or sellers, the Rs 50 lakh threshold is judged on the total property value, and each buyer-seller pair may need a separate filing.

Follow these steps in order:

Form 26QB is the combined challan-cum-statement you use to deposit the TDS. It captures the buyer and seller PAN, property details and the amount. Form 16B is the TDS certificate you download afterwards and hand to the seller, so they can claim credit for the tax you deducted.

A note on the difference between Form 16A and Form 16B: Form 16A is a general TDS certificate for non-salary payments like interest or rent, while Form 16B is specific to TDS on property transactions under Section 194-IA.

For NRI sellers there is no such threshold, so the "below Rs 50 lakh" exemption does not apply to them.

TDS is not the buyer's money to reclaim, it belongs to the seller, who claims credit for it. The seller sees the deducted amount reflected against their PAN and adjusts it in their income tax return. If the seller's actual tax liability is lower than the TDS deducted, the excess is refunded to the seller when they file their return, subject to the department's processing. This is common in NRI deals, where the higher TDS often exceeds the real tax due, and a Lower Deduction Certificate helps avoid locking up large sums.

The framework is being modernised. For transactions where the payment or credit happens on or after 1 April 2026, the new Income-tax Act, 2025 applies. In substance the rule is unchanged for resident sellers, 1% TDS, buyer responsible, but the section numbers and forms are being renumbered. Section 194-IA maps to the new Section 393, and Form 26QB is being replaced by Form 141. Because the rollout is recent, confirm the current form and procedure on the income tax portal at the time of your transaction.

With property prices in growing cities regularly crossing Rs 50 lakh, this compliance now touches almost every serious deal. If you are buying apartments in Jaipur or comparing flats in Jaipur, budget for the TDS step alongside your other costs like stamp duty in Rajasthan and registration charges. Checking the stamp duty (DLC) value for your locality matters here too, since TDS is charged on the higher of your price or that value.

Buying from established developers makes the paperwork smoother. Many of the top builders in Jaipur provide clean documentation and clear seller details, which helps you file Form 26QB correctly. Verifying a project on the RERA site adds another layer of confidence before you deduct and deposit the tax.

Last updated 2026. TDS rates, forms and procedures can change, and the new Income-tax Act is being rolled out. This article is for information only and is not tax advice. Confirm the current rules on the income tax portal or with a chartered accountant before deducting or filing.