Greenland Properties
If you're buying property worth more than ₹50 lakh from a resident Indian seller, you — the buyer — have a tax obligation most people don't expect: deducting and depositing TDS before the seller ever sees the full amount. Get this wrong and you could face penalties, even if the seller has already paid their own taxes.
What is Section 194-IA?
Section 194-IA of the Income Tax Act requires any buyer purchasing immovable property (other than agricultural land) from a resident Indian seller, for a consideration of ₹50 lakh or more, to deduct 1% TDS at the time of each payment made to the seller — whether that payment is a lump sum or in instalments.
Important 2024 rule change: TDS is now on the higher value
Since 1 October 2024, TDS must be calculated on whichever is higher — the actual sale consideration, or the stamp duty value (i.e. the Ready Reckoner value) of the property. This closed a loophole where buyers and sellers could under-declare the sale price on paper to reduce the TDS amount.
Who is responsible for deducting and depositing it?
The buyer is responsible — not the seller, and not the broker. Practically, this means:
- Deduct 1% of the payment amount before paying the seller.
- Deposit the deducted amount with the government within 30 days from the end of the month in which the deduction was made, using Form 26QB (this also serves as the challan-cum-statement).
- Issue Form 16B to the seller as proof of the TDS deducted and deposited — the seller needs this to claim credit for it in their own income tax return.
What if the seller doesn't have a PAN?
If the seller's PAN is missing or invalid, the TDS rate jumps sharply — to 20% instead of 1%. This is a strong reason to confirm the seller's PAN details before the transaction, not after.
Are there any exemptions?
Agricultural land is exempt from Section 194-IA regardless of the transaction value. Transactions below the ₹50 lakh threshold are also outside this section entirely (though other TDS provisions can apply to NRI sellers under different sections, which have their own rules and rates).
A quick example
You buy a flat for ₹80 lakh, paid in two instalments of ₹40 lakh each. On each instalment, you deduct 1% (₹40,000), and pay the seller ₹39,60,000 per instalment. You then deposit the ₹40,000 deducted each time via Form 26QB within the deadline, and issue Form 16B to the seller.
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