TDS on Property Purchase under the Income-tax Act, 2025 — 1% Rate, Form 26QB & NRI Seller Rules
Quick Answer
Under the Income-tax Act, 2025 (Act 30 of 2025), every buyer of immovable property (other than agricultural land) must deduct TDS at 1% on the full sale consideration when the consideration equals or exceeds ₹50 lakh. The 1961 Act provision (old Section 194-IA) has been brought forward substantively unchanged into Chapter XIX of the 2025 Act for the tax year 2026-27 and beyond. The buyer does not need a TAN, files Form 26QB within 30 days from the end of the month of deduction, and issues Form 16B to the seller within 15 days thereafter. For an NRI seller, the non-resident withholding provision applies instead — not the 1% rate.
Last Updated: 15 April 2026 | Applicable From: Tax Year 2026-27 (1 April 2026 onwards) | Reference: Income-tax Act, 2025 (30 of 2025), as amended by Finance Act, 2026
The Income-tax Act, 2025 received Presidential assent on 21 August 2025 and commenced on 1 April 2026. From the first tax year under the new Act — tax year 2026-27 — every property buyer in India must apply the TDS rules carried forward from the repealed 1961 Act into Chapter XIX (Collection and Recovery of Tax) of the 2025 Act. This article is written for property buyers, chartered accountants handling closings, NRIs selling Indian property, and builders collecting instalment payments. It walks through when the 1% TDS is triggered, how to file Form 26QB, when the buyer must issue Form 16B, how the rule interacts with stamp duty value, and what happens when the seller is a non-resident. Worked examples, compliance checklists and a 14-question FAQ complete the guide.
Definition — TDS on Property Purchase (1% rule): Under the Income-tax Act, 2025, the transferee (buyer) of any immovable property — other than agricultural land — is required, at the time of credit of the sum to the account of the seller or at the time of payment, whichever is earlier, to deduct income-tax at 1% of the sale consideration, where such consideration equals or exceeds ₹50 lakh.
Definition — Immovable Property: Any land (other than agricultural land) or any building or part of a building. This covers residential flats, commercial offices, non-agricultural plots, shops, villas, row houses, and parts of built-up structures. Rural agricultural land falling outside the definition of “capital asset” is fully excluded.
The Income-tax Act, 2025 preserves the 1% TDS regime on property purchase in substantive form. Who deducts: the buyer. Rate: 1% of the sale consideration (2% for a non-PAN seller under the higher-rate provision). Threshold: ₹50 lakh — triggered on full consideration, not per instalment. TAN: not required for the buyer. Form: Form 26QB, filed online on the e-filing portal through the e-Pay Tax facility. Deadline: 30 days from the end of the month of deduction. Certificate: Form 16B, issued to the seller within 15 days from the Form 26QB due date. Exclusions: agricultural land and NRI sellers (non-resident withholding applies instead). The buyer of under-construction property must deduct TDS on every demand-letter payment — not just at final registration. For joint buyers, a separate Form 26QB is filed for each unique buyer-seller combination.
Table of Contents
- When the 1% TDS Applies
- The ₹50 Lakh Threshold and Sale Consideration Base
- Interaction with Stamp Duty Value
- Form 26QB — Filing the Challan-cum-Statement
- Form 16B — The TDS Certificate for the Seller
- NRI Sellers — Non-Resident Withholding Instead of 1%
- Joint Purchases and Under-Construction Property
- Penalty and Interest for Non-Compliance
- Expert Insight
- Key Takeaways
- Frequently Asked Questions
When the 1% TDS Applies
The TDS provision applies to every transaction involving the transfer of immovable property (other than agricultural land) where the sale consideration for the property equals or exceeds ₹50 lakh. It is a buyer-side obligation: the transferee must deduct the tax at the time of credit to the seller’s account or at the time of payment, whichever is earlier. The provision applies to:
- Residential apartments, villas, row houses and independent bungalows
- Commercial offices, retail shops, showrooms and industrial units
- Non-agricultural plots and developed land
- Under-construction property purchased from builders
- Resale transactions and secondary purchases from individual sellers
- Joint-development arrangements where the consideration for the transfer exceeds the threshold
The obligation rests on every category of buyer — resident individuals, HUFs, companies, partnership firms, LLPs, trusts and even co-operative societies. An important simplification preserved from the 1961 Act is that individual and HUF buyers do not need to obtain a Tax Deduction and Collection Account Number (TAN). The buyer deposits the TDS against their own PAN through Form 26QB — making one-off compliance painless for retail property buyers.
Exclusions
- Agricultural land: Rural agricultural land outside municipal limits (not a capital asset) is fully excluded.
- Consideration below ₹50 lakh: Where both the sale consideration and the stamp duty value are under ₹50 lakh, no TDS obligation arises.
- NRI seller: Where the seller is a non-resident, the 1% rule is replaced by the non-resident withholding provision of the 2025 Act.
- Compulsory acquisition: Transfers by compulsory acquisition under any law, with consideration determined by the Central or State Government or a statutory authority, are generally outside the scope of this section.
The ₹50 Lakh Threshold and Sale Consideration Base
The ₹50 lakh threshold is tested against the total sale consideration for the property — not against individual instalments. If the aggregate sale consideration for a flat is ₹60 lakh payable in four equal instalments of ₹15 lakh each, TDS at 1% must be deducted on every instalment (₹15,000 per payment). The threshold is a gate — once crossed, every rupee of payment attracts TDS.
“Sale consideration” for this purpose includes all payments made in connection with the transfer:
- Base price / agreement value
- Car parking charges, club membership, clubhouse fees
- Preferential location charges, floor-rise premium
- Advance maintenance / corpus fund contribution that is adjustable against the sale price
- Any other charges paid to the transferor as part of the transfer
GST is excluded. TDS is not deducted on the GST component of the invoice. Under-construction residential property currently attracts 5% GST (1% for affordable housing) and the CBDT clarification on excluding GST from the TDS base continues to apply under the 2025 Act framework.
Interaction with Stamp Duty Value
The 2025 Act carries forward the stamp-duty-value alignment introduced by Finance Act, 2022. Where the stamp duty value of the property exceeds the actual sale consideration, TDS is computed on the higher of the two. This aligns the buyer’s TDS base with the seller’s capital gains computation under the Section 50C equivalent of the 2025 Act — preventing a situation where the buyer deducts TDS on a lower amount while the seller is taxed on a higher deemed consideration.
| Sale Consideration | Stamp Duty Value | TDS Base | TDS @ 1% |
|---|---|---|---|
| ₹55,00,000 | ₹52,00,000 | ₹55,00,000 | ₹55,000 |
| ₹48,00,000 | ₹55,00,000 | ₹55,00,000 | ₹55,000 |
| ₹48,00,000 | ₹46,00,000 | Below threshold | Nil |
| ₹1,20,00,000 | ₹1,15,00,000 | ₹1,20,00,000 | ₹1,20,000 |
Form 26QB — Filing the Challan-cum-Statement
Form 26QB is the challan-cum-statement for reporting TDS on property purchase. It is filed entirely online through the e-Pay Tax facility on the Income Tax Department’s e-filing portal. Login is not mandatory, making it accessible to one-off retail buyers. The filing process is:
- Access e-Pay Tax: Go to incometax.gov.in and select e-Pay Tax under Quick Links.
- Select the TDS on Property option: Choose Form 26QB (TDS on Sale of Property).
- Enter buyer details: PAN, name, address, category (individual / HUF / company), contact and email.
- Enter seller details: PAN, name, address and category of every seller.
- Enter property details: Full address, type (land / building / flat), date of agreement, total consideration and stamp duty value.
- Enter payment and TDS details: Amount paid/credited in this instalment, date of payment/credit, TDS amount.
- Pay: Pay through net banking, debit card, NEFT/RTGS, or by taking a print to an authorised bank branch.
- Download acknowledgement: Save the CIN and the filed Form 26QB for records and for Form 16B generation.
Deadline — critical. Form 26QB must be filed and the TDS deposited within 30 days from the end of the month in which the deduction is made. A TDS deduction on 15 July 2026 must be deposited by 30 August 2026. Late filing triggers a per-day fee under the equivalent of old Section 234E alongside interest for delay.
Form 16B — The TDS Certificate for the Seller
Once Form 26QB is processed, the buyer must generate and issue Form 16B to the seller. Form 16B is the TDS certificate specific to property transactions and is generated from the TRACES portal (tdscpc.gov.in). Key rules:
- Time limit: Within 15 days from the Form 26QB due date.
- Generation: The buyer registers on TRACES, links their PAN, and downloads Form 16B from the Downloads section.
- Purpose: The seller needs Form 16B to claim the TDS credit in their income-tax return under the 2025 Act. The TDS also reflects in the seller’s Annual Information Statement and pre-filled return data.
- Joint buyers / sellers: Each Form 26QB generates its own Form 16B. If a transaction has multiple filings, multiple certificates are issued.
NRI Sellers — Non-Resident Withholding Instead of 1%
When the seller is a non-resident (including NRIs, OCI cardholders who are not Indian residents, and foreign entities), the 1% TDS rule does not apply. Instead, the buyer must deduct TDS under the non-resident withholding provision of the 2025 Act (successor to old Section 195) at the capital gains rates:
| Nature of Gain | TDS Rate (Non-Resident Seller) |
|---|---|
| Long-term capital gains (property held > 24 months) | 12.5% + surcharge + 4% cess |
| Short-term capital gains (property held ≤ 24 months) | Slab rates for non-residents + surcharge + cess (effectively 30%+ in most cases) |
Two critical practitioner points:
- TDS on full consideration, not just gain: In the absence of a lower-deduction certificate, the buyer must deduct TDS on the full sale consideration, not merely the capital gain. For a property sold at ₹2 crore with an LTCG of ₹60 lakh, the TDS base without a certificate is ₹2 crore — tax of over ₹25 lakh against a true liability of around ₹7.8 lakh. The excess is refunded to the seller only after the ITR is processed.
- Lower-deduction certificate is the solution: The NRI seller should apply for a lower or nil deduction certificate (Section 197 equivalent) from the Assessing Officer in Form 13. The certificate authorises the buyer to deduct TDS on the computed gain only. The buyer must insist on a certified copy before applying any rate below the statutory rate.
- TAN required: Unlike the 1% rule, deducting TDS on payments to non-residents requires the buyer to obtain a TAN. A Form 27Q TDS return must also be filed — this is substantially more onerous than Form 26QB.
Joint Purchases and Under-Construction Property
Joint buyers / sellers
When property is purchased jointly (common for married couples availing joint home loans), each co-buyer must file a separate Form 26QB for their share of the consideration. If two spouses buy a ₹1 crore flat in a 70:30 ratio, the primary buyer files Form 26QB for ₹70 lakh (₹70,000 TDS) and the secondary buyer files for ₹30 lakh (₹30,000 TDS). The ownership ratio in the sale deed determines the split. Where two buyers purchase from three sellers, six Form 26QB filings are required — one for each unique buyer-seller pair.
Under-construction property — the most common mistake
The most frequent compliance failure we see is buyers of under-construction flats deducting TDS only at the final registration, ignoring earlier instalments. The TDS trigger is “at the time of credit or payment, whichever is earlier.” Every demand-letter payment to the builder is a separate taxable event. Each instalment requires a separate Form 26QB within 30 days from the end of the month of payment. Over a 3-4 year construction period, this can mean 12-15 separate filings. A compliance calendar built at the time of booking is essential.
Penalty and Interest for Non-Compliance
The consequences of non-compliance under the Income-tax Act, 2025 track the 1961 Act regime:
| Default | Consequence Under the 2025 Act |
|---|---|
| Failure to deduct TDS | Buyer treated as assessee-in-default; tax recovered from buyer; penalty equal to TDS not deducted |
| Interest — non-deduction | 1% per month from date TDS was deductible to date of actual deduction |
| Interest — non-payment | 1.5% per month from date of deduction to date of deposit |
| Late filing of Form 26QB | ₹200 per day late fee, subject to maximum of TDS amount |
| Wilful failure to deposit deducted tax | Prosecution under Chapter XXII — rigorous imprisonment + fine |
Related Articles
- Tax Audit under the Income-tax Act, 2025 — Applicability and Forms
- Charitable Trust Taxation under the Income-tax Act, 2025
- Founder Personal Tax Planning under the 2025 Act
- Capital Gains Tax under the Income-tax Act, 2025
- TDS and TCS Compliance for Tax Year 2026-27
- NRI Taxation and Property Transactions
Expert Insight
CA V. Viswanathan: The transition to the Income-tax Act, 2025 has not disturbed the substance of property TDS — but it is changing how buyers think about compliance timing and documentation. In my practice at Virtual Auditor, the two most costly mistakes I see are (a) buyers of under-construction flats who treat the property as “one transaction” and file a single Form 26QB at registration, and (b) Indian buyers who discover, days before closing, that the seller is actually an NRI and that the 1% rule does not apply. Both mistakes generate interest, penalty and cash-flow stress. My recommendation: at the time of signing the agreement, write down every expected payment date and align each to a Form 26QB deadline; always verify seller residency (ask for PAN, passport and Form 10F before signing); and if the seller is a non-resident, build in 6-8 weeks of runway for a Form 13 lower-deduction certificate before registration. For NRI vendors, the difference between TDS on the sale consideration and TDS on the actual gain can be 15-20 lakh on a typical Tier-1 city flat — worth the effort of a formal certificate. Finally, for 2026-27 onwards, I urge every buyer to retain a copy of the seller’s PAN, the stamp duty valuation extract, and the Form 16B — these three documents form the complete audit trail a future Assessing Officer will ask for.
Key Takeaways
- The Income-tax Act, 2025 brings forward the 1% TDS on property purchase substantively unchanged from the 1961 Act — applicable from tax year 2026-27.
- Rate is 1% on the full sale consideration; threshold is ₹50 lakh tested against total consideration, not per instalment.
- Individual and HUF buyers do not need TAN; TDS is deposited through Form 26QB using PAN.
- Form 26QB must be filed within 30 days from the end of the month of deduction.
- Form 16B must be issued to the seller within 15 days from the Form 26QB due date.
- Stamp duty value alignment: TDS is computed on the higher of sale consideration and stamp duty value.
- For NRI sellers, the non-resident withholding provision applies instead of the 1% rule — TAN required, Form 27Q filing, higher effective rate.
- For joint buyers, a separate Form 26QB is required for each unique buyer-seller combination.
- Under-construction property requires Form 26QB on every instalment, not only at registration.
- Non-compliance attracts interest at 1% / 1.5% per month plus penalty equal to the TDS not deducted.
Frequently Asked Questions
What is the TDS rate on property purchase under the Income-tax Act, 2025?
The TDS rate on purchase of immovable property (other than agricultural land) is 1% of the sale consideration where the consideration equals or exceeds ₹50 lakh. The 1961 Act provision (old Section 194-IA) has been carried forward substantively into Chapter XIX of the 2025 Act. If the seller does not furnish a PAN, the higher-rate provision applies — making the rate the higher of 2x the prescribed rate or 5%.
Does the buyer need a TAN to deduct TDS on property purchase?
No. The 2025 Act carries forward the TAN exemption for individual property buyers. TDS is deposited using the buyer’s PAN through Form 26QB. The seller’s PAN must still be collected and reported on Form 26QB. TAN is required only when the buyer is deducting TDS on payments to a non-resident seller.
What is the time limit to deposit TDS on property purchase?
TDS must be deposited within 30 days from the end of the month of deduction. A deduction on 15 June 2026 must be deposited by 30 July 2026. Missing this deadline exposes the buyer to interest and per-day late-filing fees.
How is Form 26QB filed?
Form 26QB is filed online through the e-Pay Tax facility on incometax.gov.in. Login is not mandatory. The buyer selects ‘TDS on Sale of Property’, enters buyer and seller PAN, property details, consideration and TDS amount, and pays by net banking, debit card or at an authorised bank.
What is Form 16B and when must it be issued?
Form 16B is the TDS certificate the buyer must issue to the seller. It is generated from the TRACES portal after Form 26QB is processed and must be issued within 15 days from the Form 26QB due date. The seller uses it to claim the TDS credit in their return.
Is TDS payable on agricultural land?
No. The TDS obligation does not apply to the transfer of agricultural land. Rural agricultural land outside municipal limits — which is not a capital asset — is fully excluded. Urban non-agricultural land and plots remain within the TDS net.
What if the seller is an NRI?
When the seller is a non-resident, the 1% rule does NOT apply. Instead, the buyer must deduct TDS under the non-resident withholding provision at capital gains rates — 12.5% (plus surcharge and cess) for LTCG, or slab rates for STCG. TAN is required and Form 27Q is filed. The NRI may apply for a lower or nil deduction certificate to reduce the cash-flow impact.
How is TDS handled for under-construction property instalments?
TDS at 1% must be deducted on each instalment paid to the builder where the total sale consideration exceeds ₹50 lakh. A separate Form 26QB is filed for each instalment within 30 days from the end of the month of payment. GST is excluded from the TDS base.
How does TDS work for joint property purchases?
Each co-buyer files a separate Form 26QB for their share of the consideration based on the ownership ratio in the sale deed. Where two buyers purchase from two sellers, four Form 26QB filings are required — one for each unique buyer-seller pair. Each co-buyer independently generates Form 16B for the seller.
Does TDS apply on the stamp duty value even if it is higher than consideration?
Yes. The 2025 Act carries forward the stamp-duty-value alignment. Where the stamp duty value exceeds the actual sale consideration, TDS is computed on the higher of the two. This ensures the buyer’s TDS base matches the seller’s deemed capital gains base under the Section 50C equivalent.
What is the penalty for not deducting TDS?
Failure to deduct exposes the buyer to (1) recovery of the tax as assessee-in-default, (2) interest at 1% per month from the date TDS was deductible to actual deduction plus 1.5% per month from deduction to deposit, and (3) penalty equal to the TDS not deducted under the penalty framework of the 2025 Act.
Can the seller obtain a lower-deduction certificate?
Yes. The 2025 Act preserves the Section 197 equivalent — a seller can apply for a lower or nil deduction certificate in Form 13 when the actual tax liability is lower (loss transactions, fully-exempt gains under Section 54/54F equivalents, etc.). Once issued, the buyer deducts TDS at the certificate rate instead of 1%.
Is TDS payable on booking amounts and token money?
Yes. TDS is triggered at the time of credit or payment, whichever is earlier. Booking amount, token money and earnest money deposits that will be adjusted against the final consideration all attract TDS once the total consideration threshold of ₹50 lakh is breached. A common mistake is deducting only at final payment.
What does Virtual Auditor charge for property TDS assistance?
Virtual Auditor’s Form 26QB filing assistance starts from ₹2,500 per transaction for standard resident cases. Joint buyers, multi-instalment under-construction transactions and NRI seller cases (requiring non-resident TDS computation and lower-deduction certificate liaison) start from ₹10,000. Contact CA V. Viswanathan at +91 99622 60333 or support@virtualauditor.in.
Virtual Auditor — AI-Powered CA & IBBI Registered Valuer Firm
Valuer: V. VISWANATHAN, FCA, ACS, CFE, IBBI/RV/03/2019/12333
Chennai (HQ): G-131, Phase III, Spencer Plaza, Anna Salai, Chennai 600002
Bangalore: 7th Floor, Mahalakshmi Chambers, 29, MG Road, Bangalore 560001
Mumbai: Workafella, Goregaon West, Mumbai 400062
Phone: +91 99622 60333 | Email: support@virtualauditor.in
Book a Free Consultation