TDS on Purchase of Immovable Property under section 194IA

TDS on Purchase of Immovable Property under section 194IA

Under Section 194-IA of the Income-tax Act, 1961, any person (buyer) responsible for paying consideration for the transfer of an immovable property—such as a house, apartment, building, or land (other than agricultural land)—is required to deduct Tax Deducted at Source (TDS) at the time of payment to the seller.

Rate of TDS

The buyer must deduct TDS at the rate of 1% on the higher of:

• The sale consideration, or
• The stamp duty value of the property

This provision applies where the transaction value meets the prescribed threshold under the Act.

Budget 2026 Update

As per the amendments introduced in the Union Budget 2026, a significant compliance relief has been provided:

• A buyer purchasing immovable property from a non-resident seller is not required to obtain a Tax Deduction and Collection Account Number (TAN) for the purpose of TDS deduction under this section.
• The TDS deduction and payment can now be completed through the PAN-based online facility available on the Income Tax Portal.

This amendment simplifies the compliance process and reduces procedural burden for buyers involved in such transactions.

What is Section 194-IA?

Section 194-IA of the Income-tax Act, 1961 deals with Tax Deducted at Source (TDS) on the purchase of immovable property.

It requires the buyer of immovable property (other than agricultural land) to deduct TDS while making payment to the seller.

Requirements of Section 194-IA

(TDS on Purchase of Immovable Property)

Section 194-IA of the Income-tax Act, 1961 lays down specific conditions that must be fulfilled for TDS to be applicable on the purchase of immovable property.

1. Nature of Property

• Applicable to immovable property such as:
  • House
  • Flat/Apartment
  • Building
  • Land (excluding agricultural land)
• Agricultural land is not covered under this section.

2. Threshold Limit

• TDS is required only if the sale consideration is ₹50 lakh or more.
• The limit applies to the value of the property being transferred.

3. Rate of TDS

• TDS must be deducted at 1% of the higher of:
  • Sale consideration, or
  • Stamp duty value

4. Person Responsible to Deduct TDS

• The buyer (transferee) is responsible for deducting TDS.
• Even an individual or HUF (not engaged in business) is required to deduct TDS if the conditions are satisfied.

5. Time of Deduction

• TDS must be deducted at the time of:
  • Payment, or
  • Credit of amount to the seller
    (whichever is earlier)

6. Deposit of TDS

• TDS must be deposited within 30 days from the end of the month in which deduction is made.
• Payment is made through Form 26QB on the Income Tax Portal.
• TAN is not required; PAN of buyer and seller is sufficient.

7. Issuance of TDS Certificate

• After depositing TDS, the buyer must issue Form 16B to the seller within 15 days from the due date of filing Form 26QB.

Exceptions to Section 194-IA

While Section 194-IA of the Income-tax Act, 1961 mandates TDS on the purchase of immovable property, the following situations are not covered under this section:

1. Agricultural Land

No TDS is required if the property transferred is agricultural land (not being land situated in specified urban areas as per the Income-tax Act).

2. Property Value Below ₹50 Lakh

If the sale consideration is less than ₹50 lakh, Section 194-IA does not apply.

However, if the consideration is ₹50 lakh or more, TDS becomes applicable.

3. Purchase from a Non-Resident

If the seller is a non-resident, Section 194-IA does not apply.

Instead, TDS provisions of Section 195 of the Income-tax Act, 1961 will apply, and TDS must be deducted at the rates applicable to non-residents.

4. Transactions Not Considered as “Transfer”

If the transaction does not amount to a transfer under the Income-tax Act (for example, certain inheritance or gift transactions), TDS under Section 194-IA may not apply.

5. Compulsory Acquisition by Government

In certain cases of compulsory acquisition, separate TDS provisions may apply instead of Section 194-IA.

Important Clarification

Even if the buyer is an individual or not engaged in business, Section 194-IA still applies if the conditions are met. There is no exemption based on turnover or audit requirement.

Steps to Pay TDS on Property Purchase through Challan 26QB and Get Form 16B

(As per Section 194-IA of the Income-tax Act, 1961)

When purchasing immovable property (other than agricultural land) for ₹50 lakh or more, the buyer must deduct 1% TDS and deposit it using Form 26QB. After payment, Form 16B (TDS Certificate) must be issued to the seller.

Below is the complete step-by-step process:

Payment of TDS through Challan 26QB

When purchasing immovable property (other than agricultural land) for ₹50 lakh or more, the buyer must deduct 1% TDS and deposit it using Form 26QB. After payment, Form 16B (TDS Certificate) must be issued to the seller.

Below is the complete step-by-step process:

Step 1: Visit the Income Tax Portal

Go to the official website https://www.incometax.gov.in of the Income Tax Department

Step 2: Navigate to e-Pay Tax

• Click on e-Pay Tax
• Select TDS on Property (Form 26QB)

Step 3: Enter PAN Details

• Enter Buyer’s PAN
• Enter Seller’s PAN
• Validate details

Ensure PAN details are correct to avoid Form 16B issues.

Step 4: Fill Property & Payment Details

Provide the following information:

• Complete property address
• Date of agreement
• Total sale consideration
• Stamp duty value
• Amount paid/credited
• TDS amount (1% of higher of consideration or stamp duty value)

Step 5: Select Payment Mode

Choose one of the following:

• Net Banking
• Debit Card
• Other online payment options

Step 6: Make Payment

• Verify details carefully
• Submit the form
• Complete the payment
• Download the Acknowledgement Receipt

Due Date: Within 30 days from the end of the month in which TDS was deducted.

Form 16B (TDS Certificate)

Form 16B must be issued to the seller within 15 days from the due date of filing Form 26QB.

Step 1: Register/Login on TRACES Portal

Visit TDS Reconciliation Analysis and Correction Enabling System (TRACES) https://www.tdscpc.gov.in

Register as a taxpayer using PAN (if not already registered).

Step 2: Request Form 16B

• Login to TRACES
• Go to Downloads
• Select Form 16B (For Buyer)
• Enter:
  • Assessment Year
  • Acknowledgment Number of Form 26QB
  • Seller’s PAN

Submit the request.

Step 3: Download Form 16B

• After a few hours, go to Requested Downloads
• Download Form 16B
• Provide it to the seller

Important Points to Remember

• TAN is not required under Section 194-IA
• A separate Form 26QB must be filed for each buyer–seller combination
• TDS applies on installment payments also
• If PAN is not provided, TDS rate may increase

Consequences of Non-Filing under Section 194-IA

Failure to comply with Section 194-IA of the Income-tax Act, 1961 can lead to interest, penalty, and other legal consequences for the buyer (who is responsible for deducting and depositing TDS).

1. Interest for Non-Deduction of TDS

If TDS is not deducted:

• Interest @ 1% per month or part thereof
• Calculated from the date on which TDS was deductible to the date of actual deduction

2. Interest for Non-Payment After Deduction

If TDS is deducted but not deposited:

• Interest @ 1.5% per month or part thereof
• From date of deduction to date of actual payment

3. Late Filing Fee under Section 234E

If Form 26QB is not filed within the due date:

• Late fee of ₹200 per day
• Maximum fee = TDS amount

4. Penalty under Section 271H

The Assessing Officer may levy penalty:

• Minimum: ₹10,000
• Maximum: ₹1,00,000
• Applicable for failure to file or incorrect filing of TDS return

5. Disallowance of Expense (Where Applicable)

In certain cases involving business transactions, non-compliance may attract disallowance under Section 40(a)(ia).

6. Prosecution in Severe Cases

In extreme cases of willful default, prosecution provisions may apply under the Income-tax Act.

FAQs on Section 194-IA

1. What is Section 194-IA?

It is a provision that requires the buyer of immovable property (other than agricultural land) to deduct 1% TDS when the sale consideration is ₹50 lakh or more.

2. On what value is TDS calculated?

TDS is deducted at 1% on the higher of:

• Sale consideration, or
• Stamp duty value

3. Is TDS applicable if the property value is below ₹50 lakh?

No. If the sale consideration is less than ₹50 lakh, TDS under Section 194-IA is not applicable.

4. Is TAN required for deducting TDS under this section?

No. The buyer is not required to obtain TAN. TDS can be paid using PAN through Form 26QB on the Income Tax Portal of the Income Tax Department.

5. What is the due date for depositing TDS?

TDS must be deposited within 30 days from the end of the month in which deduction is made.

6. What is Form 26QB?

Form 26QB is a challan-cum-statement used for payment of TDS on property purchase.

7. What is Form 16B?

Form 16B is the TDS certificate that the buyer must issue to the seller after depositing TDS. It can be downloaded from the TDS Reconciliation Analysis and Correction Enabling System (TRACES) portal.

8. Is TDS required on each installment?

Yes. If payment is made in installments, TDS must be deducted on each installment.

9. What if there are multiple buyers or sellers?

Separate Form 26QB must be filed for each buyer–seller combination.

10. What happens if TDS is not deducted or deposited?

The buyer may have to pay:

• Interest (1% or 1.5% per month)
• Late filing fee under Section 234E
• Penalty under Section 271H

11. Does Section 194-IA apply if seller is a non-resident?

No. In such cases, Section 195 of the Income-tax Act, 1961 applies instead.