Every property deal of ₹50 lakh or more in India carries a tax step that surprises first-time buyers: the buyer — not the seller, not the bank, not the registrar — must deduct 1% of the price as TDS and deposit it with the government. Miss it and the interest, late fees and notices land on the buyer. This guide covers the rule for resident sellers; NRI sellers are a different section of the Act entirely, and we flag that trap at the end.
Short answer
Short answer: if you buy immovable property (other than rural agricultural land) and the total consideration or the stamp duty value is ₹50 lakh or more, you must deduct 1% TDS from every payment to a resident seller under Section 194-IA, deposit it through Form 26QB — renumbered Form 141 from 1 April 2026 — within 30 days from the end of the month of deduction, and give the seller Form 16B. No TAN is needed; your PAN and the seller's PAN are enough.
| Item | Rule |
|---|---|
| Rate | 1% of the higher of sale consideration or stamp duty value |
| Threshold | ₹50 lakh — tested on the whole property, not per buyer or seller |
| Who deducts | The buyer, at the time of each payment or credit |
| Challan-cum-statement | Form 26QB (Form 141 from 1 April 2026) — no TAN required |
| Deposit deadline | 30 days from the end of the month in which TDS was deducted |
| TDS certificate | Form 16B to the seller, within 15 days of the filing due date |
| Not covered | Rural agricultural land; NRI sellers (Section 195 applies instead) |
When the 1% TDS applies
- The property is land (other than rural agricultural land), a house, a flat, an office or any other immovable property in India, and the seller is a resident.
- The total consideration OR the stamp duty value is ₹50 lakh or more — whichever is higher is also the amount you deduct on. A flat sold at ₹48 lakh with a stamp duty value of ₹52 lakh is inside the net, and TDS is 1% of ₹52 lakh.
- Since 1 October 2024, the ₹50 lakh test applies to the aggregate value of the property. Two buyers paying ₹30 lakh each cannot escape the rule by pointing at their individual shares — ₹60 lakh total means both deduct.
- Consideration includes every charge the builder bundles into the deal — club membership, car parking, maintenance advance, electricity or water connection fees paid as part of the transfer.
Buyer's steps — Form 26QB / Form 141
- Collect the seller's PAN before the first payment and verify it on the income tax portal. Without a valid PAN, the law forces you to deduct 20% instead of 1%.
- Deduct 1% at the time of each payment — booking amount, instalments, final payment — not just at registration.
- File Form 26QB (Form 141 from 1 April 2026) on the income tax portal within 30 days from the end of the month of deduction, and pay the TDS with it. It is a challan-cum-statement: one form does both jobs, and you do not need a TAN.
- Download Form 16B from TRACES within 15 days of the filing due date and hand it to the seller — it is their proof of the tax you deposited.
- Keep the acknowledgement with your purchase file; the registrar, your lender and the seller's CA will all ask for it.
Instalments and joint buyers
- Paying a builder in instalments? Deduct 1% from every instalment and file a Form 26QB for each payment — not one form at possession.
- Joint buyers: each buyer files their own Form 26QB for their share of each payment, even though the ₹50 lakh test was applied to the whole property.
- Multiple sellers (say, a husband and wife selling jointly): a separate form per buyer-seller pair. Two buyers and two sellers means four filings per payment — tedious, but it is how the portal reconciles credits.
Seller's side — credit, refund and capital gains
For the seller, the 1% is not an extra tax — it is an advance against whatever tax the sale actually produces. The credit appears in your Form 26AS and AIS once the buyer files, matched against Form 16B. You then compute the real liability: capital gains, not sale price.
- Held more than 24 months: long-term capital gains, taxed at 12.5% without indexation. For property acquired before 23 July 2024, resident individuals and HUFs may instead choose 20% with indexation — whichever gives the lower tax.
- Held 24 months or less: short-term gains, taxed at your slab rate.
- Because TDS was 1% of the gross price while tax is due only on the gain, sellers with reinvestment exemptions (Sections 54 / 54F / 54EC) or modest gains routinely end up with refunds — claimed by filing the ITR for the year of sale.
- Estimate the actual liability before you file with our capital gains calculator, and reconcile the credit against AIS before claiming it.
Mistakes and penalties — all of them land on the buyer
| Lapse | Cost |
|---|---|
| Did not deduct | Interest at 1% per month from the date it was deductible |
| Deducted but not deposited | Interest at 1.5% per month until deposit |
| Form 26QB filed late | Late fee of ₹200 per day under Section 234E, capped at the TDS amount |
| Seller's PAN missing or invalid | Deduction jumps from 1% to 20% |
| Persistent default | Penalty under Section 271H and a notice from TRACES |
The department matches registrar records (every registration above ₹30 lakh is reported) against Form 26QB filings, so unfiled TDS on a registered property is found mechanically, not by luck. If you have already missed a filing, deposit with interest before the notice arrives — voluntary compliance costs a fraction of assessed default.
If the seller is an NRI, stop here
Section 194-IA applies only when the seller is a resident. Buying from an NRI moves you to Section 195: TDS on the same deal jumps to the tax on the seller's capital gains — commonly deducted at 12.5%-plus on the full sale value unless a lower-deduction certificate is obtained first. There is no ₹50 lakh threshold. One simplification came in Budget 2026: buyers from NRI sellers no longer need a TAN and can deposit through a PAN-based facility on the portal. Everything else about the NRI route — the certificate under Section 197, the repatriation paperwork — is covered in our separate guide on TDS when an NRI sells property.
Frequently Asked Questions
Who pays the 1% TDS on sale of property — buyer or seller?
The buyer deducts it from the amount paid to the seller and deposits it with the government. On an ₹80 lakh purchase the seller receives ₹79.2 lakh and the remaining ₹80,000 goes to the department against the seller's PAN. The seller claims it as tax already paid when filing their return.
Is TDS deducted on the sale price or the stamp duty value?
On the higher of the two. If a property sells for ₹48 lakh but the stamp duty value is ₹52 lakh, the deal is inside the ₹50 lakh net and TDS is 1% of ₹52 lakh. The same higher-of figure decides whether the threshold is crossed.
What is Form 26QB and has it really become Form 141?
Form 26QB is the challan-cum-statement through which a property buyer deposits the 1% TDS — filed on the income tax portal within 30 days from the end of the month of deduction, no TAN needed. Under the Income Tax Act 2025 it is renumbered Form 141 with effect from 1 April 2026; the process is unchanged and most people still call it 26QB.
Do I deduct TDS on every instalment paid to the builder?
Yes. TDS applies at the time of each payment or credit, so each booking amount and instalment suffers 1%, with a Form 26QB filing for each payment. Waiting until possession and filing once invites interest and the ₹200-per-day late fee for every earlier instalment.
Two of us bought a flat for ₹60 lakh — ₹30 lakh each. Does TDS apply?
Yes. Since 1 October 2024 the ₹50 lakh threshold is tested on the property's aggregate value, not each buyer's share. Both buyers deduct 1% on their respective payments and each files their own Form 26QB.
How does the seller get the 1% back?
The deposited TDS appears in the seller's Form 26AS and AIS as a credit. When the seller files their ITR, actual tax is computed on the capital gain — 12.5% long-term without indexation, or the 20% indexed option for pre-23-July-2024 purchases — and the 1% credit is set off. If the credit exceeds the liability, common where Section 54 or 54EC exemptions apply, the excess is refunded.
What happens if the buyer forgets to deduct or deposit TDS?
Interest at 1% per month for non-deduction or 1.5% per month for non-deposit, a late fee of ₹200 per day for the delayed Form 26QB (capped at the TDS amount), and possible penalty under Section 271H. Registrar records are auto-matched against filings, so defaults surface on their own — depositing voluntarily with interest is always cheaper than the notice.
Does the 1% rule apply if I buy from an NRI?
No — that is the most expensive mistake in this area. Purchases from NRI sellers fall under Section 195: TDS at the capital-gains rate on the full sale value with no ₹50 lakh threshold, unless the seller first obtains a lower-deduction certificate under Section 197. From Budget 2026 the buyer no longer needs a TAN and can use the PAN-based facility, but the higher deduction itself is unchanged. Confirm the seller's residential status in writing before signing.
Selling or buying property? Get the tax side handled
26QB/Form 141 filings, capital gains computation, exemption planning under 54/54EC and the refund claim — fee confirmed before we start.
Learn more