TDS on a property purchase from a resident seller: Form 26QB, the 1% rule, and the mistakes that cost buyers

When you buy immovable property in India for ₹50 lakh or more from a resident seller, the law requires you — the buyer — to deduct 1% of the value as tax at source, deposit it with the government, and file Form 26QB. The seller does not do this for you. If the deduction is missed, deposited late, or filed wrong, the interest and penalty land on the buyer, not the seller — even if the seller has paid every rupee of their own income tax. Getting Form 26QB right is a buyer-protection step, not a formality.

When the 1% TDS applies

Section 194-IA of the Income Tax Act, 1961 requires a buyer to deduct 1% TDS when purchasing immovable property — any land or building other than agricultural land — from a seller who is a resident of India, where the consideration or the stamp-duty value is ₹50 lakh or more. Two points decide whether you are inside the section:

• The seller is a resident of India. If the seller is a Non-Resident Indian, this section does not apply at all — the transaction shifts to Section 195, a heavier regime with a higher rate and a different form (see the cross-links below). Confirm residential status before you pay anything.
• The consideration or the stamp-duty (guidance / ready-reckoner) value is ₹50 lakh or more. Since October 2024, the TDS is computed on the higher of the two — so a flat agreed at ₹48 lakh but with a stamp-duty value of ₹52 lakh is inside the section, and the 1% is charged on ₹52 lakh.

Multiple buyers or sellers — the aggregate rule

Buyers used to split a purchase to duck the threshold: two co-buyers each paying ₹30 lakh for a ₹60 lakh flat argued that no single share crossed ₹50 lakh. A Finance Act 2024 amendment to Section 194-IA, effective 1 October 2024, closed this. Where there is more than one buyer or more than one seller, the consideration is the aggregate of all amounts paid by all buyers to all sellers for that property. So the ₹60 lakh flat with two co-buyers is inside the section, and each buyer deducts 1% on their share of the total. Joint purchases by spouses, or a purchase from co-owners, are the common cases — check the aggregate, not the individual share.

How to deduct and pay — the Form 26QB steps

Form 26QB is a challan-cum-statement: it is both the payment instrument and the TDS return in one document. There is no separate quarterly return to file. It is filed online, and the buyer does not need a TAN (Tax Deduction Account Number) — Form 26QB runs on the PAN of the buyer and the seller instead.

1. Collect the seller's PAN and confirm it is correct. A wrong or inactive PAN is the most frequent reason TDS credit fails to reflect in the seller's records and triggers a demand notice later.
2. Calculate 1% on the higher of the agreed consideration or the stamp-duty value, at the time of each payment to the seller — including any advance. If you pay in instalments, deduct 1% on each instalment as it is paid, not once at the end.
3. File Form 26QB online on the Income Tax e-filing portal (incometax.gov.in) under e-Pay Tax, or via the Protean (TIN-NSDL) TDS-on-Property option, and pay the challan online.
4. Deposit the deducted amount within 30 days from the end of the month in which the deduction was made. A deduction made in July must be deposited by 30 August.
5. After the payment clears, download Form 16B — the TDS certificate — from the TRACES portal (tdscpc.gov.in) and hand it to the seller as proof that the 1% has been deposited against their PAN.
6. For multiple buyers or multiple sellers, file a separate Form 26QB for each buyer-seller pair. Two co-buyers purchasing from one seller file two forms; one buyer purchasing from two co-owners files two forms.

Common mistakes that create a buyer liability

• Deducting on the amount above ₹50 lakh instead of the whole value — the 1% is on the full consideration or stamp-duty value.
• Ignoring the stamp-duty value — since October 2024 the base is the higher of consideration or stamp-duty value, so a below-market agreement price does not reduce the TDS if the guidance value is higher.
• Treating the ₹50 lakh threshold per buyer in a joint purchase — after the 2024 amendment the aggregate across all buyers and sellers is what counts.
• Filing a single Form 26QB for a multiple-party transaction — one form per buyer-seller pair is required, not one per transaction.
• Entering an incorrect seller PAN — the TDS credit then does not reflect against the seller, and the mismatch surfaces as a notice.
• Depositing late or not at all — interest runs at 1% per month for failure to deduct and 1.5% per month for deducting but not depositing, plus a Section 271C penalty equal to the TDS not deducted. The seller paying their own income tax does not extinguish the buyer's default.
• Not keeping the Form 26QB acknowledgement and Form 16B — you will need both when you eventually sell, and to answer any departmental query.

What to do before you pay the first rupee

1. Confirm in writing that the seller is a resident of India for income-tax purposes, and record the PAN. This decides whether you file Form 26QB at 1% or move to Section 195.
2. Check the stamp-duty / guidance value for the property so you know the correct TDS base before any advance changes hands.
3. Agree the TDS mechanics with the seller in the sale agreement — that 1% will be withheld from each payment and a Form 16B provided — so it is not disputed at the registration counter.

SourceIncome Tax India — TDS on Purchase of Immovable Property (official guide to Section 194-IA and Form 26QB)

SourceTaxGuru — New TDS rules on immovable property sales effective 1 October 2024 (Finance Act 2024 amendment to Section 194-IA, aggregate consideration for multiple buyers/sellers)

SourcePropWatch — TDS on a property purchase (Section 194IA): Form 26QB and the NRI-seller trap

SourcePropWatch — TDS on sale of property by an NRI: rates, Form 27Q and the Section 197 lower-deduction certificate

SourcePropWatch — Stamp duty and registration charges in Bangalore (how the guidance value is set)