Section 194-IA of the Income Tax Act – TDS on Property Purchase Above Rs. 50 Lakh

Section 194-IA places a genuine compliance responsibility squarely on property buyers — not sellers or agents — making it essential to understand exactly when this TDS applies, how to file it correctly through Form 26QB, and what happens when the seller is an NRI. Missing this step can create complications well beyond the immediate transaction, including penalties and delays in property registration.

This page covers:

• What Section 194-IA requires and who it applies to
• Step-by-step process to file Form 26QB and download Form 16B
• Special provisions for property purchases from NRIs
• Exceptions where Section 194-IA does not apply
• Documents required for compliance
• Budget 2026 update simplifying NRI seller transactions
• Consequences of non-compliance

Section 194-IA of the Income Tax Act governs the deduction of Tax Deducted at Source (TDS) on the purchase of immovable property in India. Under this provision, the buyer — not the seller — is required to deduct TDS at the rate of 1% when purchasing a property valued above Rs. 50 lakh. The deduction must be made at the time of payment or credit to the seller, whichever occurs earlier.

This rule applies to residential, commercial, and other immovable properties, with one significant exception: agricultural land is excluded from this provision entirely. The objective is to ensure better tax compliance in high-value property transactions by creating a documented, traceable record at the point of sale.

• TDS at 1% must be deducted by the buyer — not the seller — before making payment
• Applicable only if the property's sale value exceeds Rs. 50 lakh
• Applies to all property types except agricultural land
• No additional cess or surcharge is added to the base 1% TDS rate
• The buyer must deposit the TDS within 30 days from the end of the month in which the deduction was made
• Form 26QB must be submitted along with the TDS payment, containing PAN details of both buyer and seller
• If the seller's PAN is unavailable, the TDS rate increases sharply to 20%
• A TDS certificate (Form 16B) must be issued by the buyer to the seller, downloadable from the TRACES portal

Scenario: You are purchasing a property for Rs. 80 lakh.
TDS Amount = Rs. 80,00,000 × 1% = Rs. 80,000
This Rs. 80,000 must be deducted at the time of payment to the seller and subsequently deposited with the government within the prescribed 30-day window — the seller receives only Rs. 79,20,000 directly, with the balance routed to the tax department on their behalf.

1. Log in to the Income Tax e-filing portal and select 'e-Pay Tax' under the e-File menu
2. Click '+ New Payment' to begin the process
3. Select '26QB – TDS on Property' as the payment type
4. Fill in buyer details — PAN, contact details, and address (some fields may auto-fill if already on record)
5. Fill in seller details — PAN, contact details, and address
6. Enter property and sale details — property address, type, date of sale agreement, and sale amount; the system auto-calculates the TDS amount
7. Make the payment via net banking or another authorised method, and download the Challan 280 as proof of payment
8. Register on the TRACES portal using your PAN and challan details — required to download Form 16B
9. Check Form 26AS after approximately 7 days to verify the TDS details appear correctly under Part F (TDS on Sale of Property)
10. Download Form 16B from the TRACES 'Download' tab, entering the seller's PAN and the acknowledgement number from Form 26QB; the zip file opens using the buyer's date of birth (format DDMMYYYY)
     

This Form 16B must then be handed over to the seller as formal proof of TDS deduction.

When purchasing property from a Non-Resident Indian (NRI) seller, the transaction carries additional complexity. NRIs selling property in India must pay capital gains tax, and the classification depends on the holding period:

• Long-term gains (property held for more than 2 years): taxed at 20%
• Short-term gains (held 2 years or less): taxed as per the NRI's applicable income slab

If the property was inherited, the original owner's purchase date and cost are used to determine whether the gain is long-term or short-term.

In these transactions, the buyer must deduct TDS from the sale amount and deposit it with the Income Tax Department, additionally submitting Form 27Q (rather than the standard Form 26QB used for resident sellers) to report the TDS deduction and payment.

As per the latest updates, buyers purchasing immovable property from a non-resident seller are no longer required to obtain a separate TAN specifically for this transaction. The Income Tax Department has introduced a PAN-based facility on the income tax portal, simplifying the process of deducting and depositing TDS under Section 194-IA for such transactions.

Buyers can now complete the TDS payment process using their PAN details directly through the online portal, reducing the overall compliance burden and making cross-border property transactions more convenient. Buyers must still ensure timely deduction and deposit of TDS to avoid penalties or interest charges under the Income Tax Act.

• Compulsory government acquisition: Properties acquired compulsorily by the government for infrastructure or development purposes fall under Section 194LA instead, not Section 194-IA.
• Rural agricultural land: Under the Income Tax Act, rural agricultural land is not treated as a capital asset, meaning no capital gains tax arises on its transfer — and consequently, TDS under Section 194-IA is not required. This exemption applies only when the land genuinely qualifies as rural agricultural land under the prescribed conditions.

• Registered sale agreement (certified copy) — necessary for determining the TDS amount
• Property details — location, size, and age, required for accurate TDS calculation
• PAN cards of both buyer and seller
• Aadhaar numbers of both parties, as per recent legal filing requirements

Understanding this TDS requirement is just one part of a complete property purchase plan. When securing a home loan for a purchase above Rs. 50 lakh, factor the 1% TDS obligation into your total transaction budget alongside your down payment and other charges — this ensures no last-minute funding gap when the deduction becomes due.

Section 194-IA places a clear, specific compliance obligation on property buyers in high-value transactions — understanding the exact process, timeline, and required forms ensures your property purchase proceeds smoothly without penalty risk. Bajaj Finance offers home loans from 7.25% p.a.* with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check eligibility today.