TDS on property purchase: 1 percent from a resident, far more from an NRI

Any buyer of immovable property, other than rural agricultural land, deducts 1 percent where the consideration or the stamp duty value is ₹50 lakh or more. The 1 percent is computed on whichever of the two is higher, and consideration includes everything incidental to the purchase: club membership, car parking, electricity and water connection charges, maintenance deposits and advance fees.

Where there are several buyers or sellers, the ₹50 lakh test is applied to the property as a whole, not to each person’s share. A flat sold for ₹80 lakh to two co-buyers paying ₹40 lakh each is within the section; the law was amended from 1 October 2024 to put this beyond argument.

Tax is deducted at each payment, including every instalment to a builder. Where a bank disburses a home loan directly to the seller, the buyer is still the deductor and must make sure 1 percent is withheld from the disbursement.

1. On the e-filing portal open e-Pay Tax and choose Form 26QB, the challan-cum-statement for TDS on property. No TAN is needed; the buyer’s and seller’s PANs identify the transaction.
2. Enter the property address, the total consideration, the stamp duty value, the date of agreement, and the amount paid in this instalment. With joint buyers and sellers, each buyer files a separate form for each seller in proportion to their shares.
3. Pay the tax online. The form and payment are due within 30 days from the end of the month in which the tax was deducted.
4. After a few days, register on TRACES as a taxpayer, download Form 16B and give it to the seller within 15 days of the due date. The seller claims the credit from their Form 26AS.

If the seller’s PAN is missing, or inoperative because it is not linked to Aadhaar, the rate is 20 percent. Check the PAN status on the portal before the first payment; this has produced thousands of demands on buyers who deducted 1 percent in good faith.

Section 194-IA applies only where the seller is resident in India. If the seller is a non-resident under the income-tax test of days of stay, whatever their passport, the buyer deducts under section 195, there is no ₹50 lakh threshold, and the mechanics change entirely:

Because the deduction is on the full price rather than the gain, a seller with a modest gain loses a large amount of cash to TDS and waits a year for the refund. The remedy is an application in Form 13 for a lower-deduction certificate under section 197, which the Assessing Officer issues after computing the actual gain; the buyer then deducts at the certified rate. It takes a few weeks and should be started before the agreement is signed.

The Union Budget 2026 proposed a PAN-based facility so that a resident buyer of property from a non-resident need not obtain a TAN for a single transaction. Check whether it is live on the portal at the time of your purchase; until it is, apply for the TAN, which takes a few days.

The seller will need Form 15CA and 15CB to repatriate the proceeds; see our guide. Our NRI desk handles the lower-deduction certificate, the buyer’s TDS filings and the repatriation paperwork together.

Ask, in writing, before the token payment. A seller who has spent fewer than 182 days in India in the financial year is generally non-resident, with a 60-day and 120-day variation for certain visitors. Signs to check: an overseas address on the PAN record or the sale deed, an NRO or NRE account for receiving the money, a power of attorney signing on the seller’s behalf. Take a declaration of residential status with the seller’s passport stamps if there is any doubt. If the buyer deducts 1 percent and the seller turns out to be non-resident, the buyer is an assessee in default for the difference, with interest, and recovering it from a seller abroad is the buyer’s problem.

• Interest at 1 percent a month for late deduction and 1.5 percent a month for late deposit.
• A late fee of ₹200 a day for a late Form 26QB, capped at the tax.
• A penalty equal to the tax not deducted, and ₹10,000 to ₹1 lakh for a statement not filed or filed with a wrong PAN.
• Errors in Form 26QB, such as a wrong PAN or amount, are corrected online through TRACES, with the seller’s approval for some fields.