TDS on Property Purchase Under ITA 2025: Section 394, Form 26QB & 1% Rate Guide

1. Property Buyer as Tax Deductor

When you purchase immovable property for Rs 50 lakh or more, ITA 2025 makes you -- the buyer -- a tax deductor. You must deduct 1% TDS from the payment to the seller and deposit it with the government. This obligation applies to every individual buyer, even those with no prior TDS experience. Failure creates demands, interest at 1.5% per month, and potential penalties. Understanding the complete process -- deduction, Form 26QB, and Form 16B issuance -- is essential for every property buyer.

2. Conditions for Property TDS (Section 394)

• Property type: land or building (residential, commercial) -- agricultural land is excluded
• Consideration: Rs 50 lakh or more per transaction
• Seller: Resident Indian (different rules for NRI sellers)
• Buyer: any person -- individual, HUF, company, or firm
• Threshold is per property/transaction, not aggregate annual

Two properties each valued at Rs 40 lakh: TDS NOT required (each below Rs 50L). One property at Rs 80 lakh: TDS required on the full Rs 80L.

3. TDS Rate and Computation

• Rate: 1% of full consideration (not just the amount above Rs 50L)
• Property at Rs 1 crore: TDS = Rs 1 lakh
• If seller has no PAN: TDS at 20% -- a severe penalty for seller negligence
• TDS deducted from each payment (advance, home loan disbursement, registration balance)
• If consideration includes GST (new under-construction flat): TDS on the base price portion, not on GST component

4. Form 26QB: How to File

Property buyer TDS is deposited via Form 26QB (not the regular business TDS challan):

1. Visit incometax.gov.in -- e-Pay Tax -- TDS on Property
2. Enter buyer PAN and seller PAN (both mandatory)
3. Enter property address and total consideration amount
4. Enter payment amount (instalment being paid)
5. Pay TDS online: 1% of the instalment amount
6. Download 26QB acknowledgment with CIN number

Each instalment to the seller requires a separate Form 26QB. For a property with three payment stages -- advance, loan disbursement, and registration -- file three separate 26QB forms.

5. Timing: 30-Day Deposit Window

TDS on property must be deposited within 30 days from the end of the month in which the payment was made:

• Payment in June: deposit by 31 July
• Payment in March: deposit by 30 April
• This is more generous than business TDS (7th of following month)
• Late deposit: 1.5% per month interest under Section 415 from the date TDS should have been deducted to actual deposit date

6. Form 16B: TDS Certificate to Seller

• Download Form 16B from TRACES portal after 26QB is processed (typically 2-3 weeks)
• Issue to seller within 15 days from due date of 26QB filing
• Seller uses Form 16B to claim TDS credit in capital gains ITR
• Without Form 16B, TDS may not appear in seller Form 26AS

7. Joint Buyers and Multiple Instalments

For joint property purchases (husband and wife both buyers):

• Each buyer files 26QB for their proportionate share of each payment
• If 50:50 ownership: each files 26QB for 50% of each instalment
• Multiple instalments: one 26QB per instalment per buyer
• A property with two joint buyers and four instalments requires eight 26QB filings in total

8. Builder Purchase: TDS on Progress Payments

Buying an under-construction flat from a developer:

• TDS applies on every progress payment if total consideration is Rs 50L+
• TDS even on the first small advance payment (since total will exceed Rs 50L)
• GST component of the invoice: TDS is on the base price, not on GST
• Obtain builder PAN before making the first payment

9. NRI Seller: Completely Different Rules

When the seller is a Non-Resident Indian:

• No Rs 50L threshold -- TDS from the first rupee
• Rate: 20% TDS (LTCG) or 30% (STCG) on entire consideration
• No Form 26QB -- use Section 195 TDS provisions
• NRI can apply for lower TDS certificate before sale
• Verify seller residential status (passport, visa, bank account type) before completing purchase

10. Why TaxClue

Property TDS catches buyers off-guard -- especially first-time homebuyers. TaxClue guides buyers through 26QB filing, Form 16B issuance, and seller TDS credit. Contact us for property TDS compliance under ITA 2025.