Buying Property Above ₹50 Lakh? Know The TDS Rules

For a buyer purchasing a flat, shop, office, or other immovable property from a builder,  developer or any other seller in India, he needs to know whether tax must be deducted at source (TDS) and if so when it should be deducted and what is the value of property to be considered for this purpose. While buyers generally focus on the cost of the property, home loans, stamp duty and registration charges, an equally important compliance requirement is the deduction of Tax Deducted at Source (TDS) on the purchase of immovable property. The Government has introduced TDS provisions to ensure transparency in high-value property transactions and to widen the tax base by bringing property transactions within the reporting mechanism of the Income Tax Department. Under these provisions, the responsibility for deducting and depositing TDS rests primarily with the purchaser and not the seller.

This article explains the applicability of TDS, the rate of deduction, the procedure for payment, reporting requirements and common mistakes that home buyers should avoid.

1. Applicability of Section

Under the earlier Income-tax Act, 1961, Section 194-IA provided for deduction of TDS on the purchase of immovable property. Under the Income-tax Act, 2025, effective from 1 April 2026, the corresponding provision is contained in Section 393(1). TDS is generally required if the consideration for the property or its stamp duty value is Rs. 50 lakh or more. The threshold is not applied separately to every instalment. It is determined by reference to the aggregate consideration for the property, including amounts payable by all buyers to all sellers. A property does not escape TDS merely because the agreement value is below Rs.50 lakh if the applicable stamp duty value reaches the threshold.

2. Who is responsible for deducting TDS?

The buyer of the property is responsible for deducting TDS and depositing the same to the government account. For example, if an individual books an under-construction flat from a resident builder, the individual buyer is responsible for TDS compliance.

3. What is the time limit for deduction and payment of TDS?

TDS must be deducted at the time of payment of the consideration to the seller's account. For an instalment-based builder payment plan, TDS should be deducted on every payment of instalment. Under the current Form 141 procedure, the deducted amount must be deposited with the Central Government, along with the challan-cum-statement, within 30 days from the end of the month in which TDS is deducted. The compliance procedure has been simplified for individual purchasers, and obtaining a separate Tax Deduction and Collection Account Number (TAN) is not necessary for this purpose.

4. Is TDS calculated on the agreement value or stamp duty value?

TDS is calculated at 1% of the higher of the applicable consideration for transfer or stamp duty value, subject to the threshold rules. For e.g: If the agreement value is Rs.80 Lakh and stamp duty value is Rs.90 Lakh, TDS must be deducted on Rs.90 Lakh being higher of the two. It is important to note that the TDS provision is not restricted to the basic price of the flat. Charges incidental to the transfer, such as car parking charges, club membership fees, electricity and water facility charges, maintenance charges and advance fees, are also included in the consideration for this purpose. The substance of the charge and its connection with the transfer of the property matters while deciding what must be value for the purpose of TDS.

5. Issue of TDS certificate to the seller

After successful payment and reporting of TDS, the purchaser should ensure that the seller receives the prescribed TDS certificate. For transactions under the earlier provisions, the purchaser was required to download and issue Form 16B to the seller within the prescribed time. Under the new Income-tax Act, 2025, the corresponding certificate is Form No. 132, which can be downloaded through the TRACES facility after processing. The seller can claim credit for the TDS amount against his or her income-tax liability while filing the income-tax return. Therefore, the purchaser should ensure that the correct PAN of the seller is entered while filing the TDS statement.

6. TDS in cases involving joint purchasers or joint sellers

It is common for a house property to be purchased jointly by husband and wife or by other family members. Similarly, a property may be owned by more than one seller. With effect from 1 October 2024, the threshold limit of ₹50 lakh is determined by aggregating the consideration payable by all purchasers to all sellers in respect of the property. Therefore, the threshold cannot be applied separately to each purchaser's share to avoid TDS. For example, if a flat costing ₹90 lakh is purchased jointly by a husband and wife, each having a 50% share, the transaction attracts TDS even though the individual share of each purchaser is only ₹45 lakh. The purchasers should ensure that the TDS is correctly apportioned and reported with reference to the respective shares of the purchasers and sellers. Separate reporting may be required for the relevant purchaser-seller combinations, as prescribed by the filing system.

7. What happens if the seller is a non-resident Indian (NRI)?

An important distinction needs to be made where the property is purchased from a seller who is a non-resident under the Income-tax Act. The normal 1% TDS provision applicable to purchases from resident sellers does not apply to such transactions. Instead, the provisions governing payments to non-residents are applicable, and the rate of deduction depends upon the nature of the capital gains, applicable tax provisions and other relevant factors. Under the Income-tax Act, 2025, Section 393(2) deals with the relevant non-resident withholding provision. There has also been a procedural change from 1 October 2026. A resident individual or HUF purchasing property from a non-resident can report the transaction through Schedule E of Form 141, subject to the prescribed conditions. This removes the earlier requirement of obtaining a separate TAN for such transactions by eligible purchasers. Purchasers dealing with NRI sellers should obtain professional tax advice before making payments, since the applicable TDS rate may be substantially different from 1%.

8. Consequences of non-deduction or delayed payment of TDS

Many individual home buyers are unaware that the responsibility for TDS compliance rests with them. Failure to deduct or deposit TDS within the prescribed time may result in financial consequences. The purchaser may be liable for interest for failure to deduct TDS within the prescribed time, interest for failure to deposit the deducted amount with the Government, late filing fees for delay in furnishing the prescribed statement and applicable penalties for non-compliance.

9. Conclusion

The requirement to deduct TDS on the purchase of immovable property is an important compliance responsibility of every purchaser. Although the rate of deduction is only 1% in the case of purchases from resident sellers, failure to comply with the prescribed procedure may result in interest, fees and penalties. The introduction of this provision has helped the Income Tax Department obtain information about high-value property transactions and improve the reporting of property-related financial transactions. It also facilitates the reconciliation of property transactions with the income-tax returns filed by sellers. With the introduction of the Income-tax Act, 2025 and the consolidated Form No. 141 from 1 April 2026, the reporting procedure has been further streamlined. Home buyers should therefore familiarise themselves with the applicable provisions and ensure that TDS is deducted, deposited and reported within the prescribed time. Builders and property developers can also play a constructive role by informing purchasers about their TDS obligations at the time of booking and issuing payment schedules that facilitate timely compliance. Awareness and timely compliance by both purchasers and sellers will contribute to greater transparency in property transactions and reduce avoidable tax disputes.

(Authors: Venugopal Bhandary and CA Parag Jain. Venugopal Bhandary is a Senior Audit Officer in C&AG of India (Retd) and Parag Jain is proprietor of M/s Parag Indermal & Associates, Chartered Accountants, Mumbai)