TDS on Property Purchase: 194-IA Now Section 393
- Section 194-IA renumbered as Section 393. 1% TDS on property purchase above Rs 50 lakh continues.
- Buyer is the deductor. File Form 26QB within 30 days of payment. Issue Form 16B to the seller.
- Joint buyers: Each buyer must file a separate Form 26QB for their share of the consideration.
- NRI sellers trigger Section 195 / Section 400 instead. TDS rate jumps to 20% on long-term capital gains.
If you are buying property worth more than Rs 50 lakh, you are required to deduct TDS and deposit it with the government. Section 194-IA is now part of Section 393 under the Income Tax Act 2025. The 1% TDS rate and Rs 50 lakh threshold remain unchanged.
Section 194-IA to Section 393: What Changed
Who Must Deduct TDS on Property
Any person (including individuals who are not normally required to deduct TDS) buying immovable property from a resident seller must deduct TDS if the total sale consideration is Rs 50 lakh or more. This applies to:
- Residential property (flat, house, plot with construction)
- Commercial property (office, shop)
- Land (other than agricultural land)
Agricultural land is exempt from this TDS requirement.
TDS Rate and Calculation
- Rate: 1% of the total sale consideration (not just the amount exceeding Rs 50 lakh)
- TDS applies on the entire amount if the property value is Rs 50 lakh or more. For example, if you buy a flat for Rs 75 lakh, TDS is 1% of Rs 75 lakh = Rs 75,000
- TDS must be deducted at the time of payment or credit to the seller, whichever is earlier
Form 26QB and Timeline
As a buyer, you must:
- File Form 26QB online on the income tax e-filing portal
- Pay the TDS within 30 days from the end of the month in which TDS was deducted
- Issue Form 16B (TDS certificate) to the seller after filing Form 26QB
- Each buyer must file a separate Form 26QB for their share if there are multiple buyers
Penalty for Non-Compliance
If you fail to deduct or deposit TDS on property purchase:
- Interest on late deduction: 1% per month from the date TDS was deductible
- Interest on late deposit: 1.5% per month from the date TDS was deducted to the date of actual deposit
- Late filing fee: Rs 200 per day for late filing of Form 26QB (capped at TDS amount)
- Penalty: Equal to the TDS amount in cases of complete failure to deduct
NRI Property Purchase - Higher TDS
If you are buying property from an NRI seller, different rules apply under Section 400 (old Section 195):
- TDS rate is approximately 20% (plus surcharge and cess) on long-term capital gains
- 30% TDS if the property is held for less than 2 years (short-term)
- The seller can apply for a lower TDS certificate from the tax officer under Section 401 (old Section 197)
- TAN is required for deducting TDS from NRI sellers (unlike resident sellers where PAN-based Form 26QB is sufficient)
If you buy with your spouse (50:50 share), both file Form 26QB for their share of the consideration. Buying jointly without filing both forms is a common compliance miss that the AO catches during scrutiny.
Frequently Asked Questions
What is the new section number for TDS on property (194-IA)?
Section 194-IA is now part of Section 393 under the Income Tax Act 2025. The 1% TDS rate on property purchases above Rs 50 lakh remains unchanged.
Do I need to deduct TDS if I buy agricultural land?
No. Agricultural land is exempt from TDS provisions under Section 393. TDS applies only to immovable property other than agricultural land, where the consideration is Rs 50 lakh or more.
What is the TDS rate when buying property from an NRI?
When buying from an NRI, TDS is approximately 20% (plus surcharge and cess) for long-term capital gains, or 30% for short-term gains. This is governed by Section 400 (old Section 195). The NRI seller can apply for a lower deduction certificate.
What happens if I forget to deduct TDS on property purchase?
You will face interest at 1% per month from the date TDS should have been deducted, plus a potential penalty equal to the TDS amount. Deduct TDS before making payment to the seller.
For the broader TDS picture across all sections (salary, contractor, professional, rent), see TDS sections under the new Act. For capital gains on property sale, see capital gains now Section 67.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
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