Section 194IA: TDS Applicable on Property Sales

Introduction

Tax Deducted at Source (TDS) applies to the sale of immovable property—such as land or buildings—under Section 194IA of the Income Tax Act. When purchasing such property, the buyer must deduct TDS before making payment to the seller, in accordance with the applicable rules. Understanding these TDS provisions is essential for both buyers and deductors to ensure full legal compliance.

This article explains the TDS rate under Section 194IA, outlines who is responsible for deducting TDS on property purchases, and details the procedure for filing TDS on the sale of immovable property.

Section 194IA of the Income Tax Act – Overview

Section 194IA of the Income Tax Act lays down the TDS (Tax Deducted at Source) requirements on transactions involving the transfer of immovable property. Under this section, any person making a payment to a resident seller for the purchase of immovable property must deduct tax at source. The Act also specifies the TDS rate under Section 194IA and mandates the buyer to file a statement reporting the details of the payment and tax deduction. These requirements promote transparency and ensure tax compliance during property transactions.

Understanding TDS on Sale of Immovable Property Under Section 194IA

Introduced on June 1, 2013, Section 194IA makes TDS mandatory when the value of an immovable property transaction exceeds ₹50 lakh.

When purchasing immovable property worth ₹50 lakh or more, the buyer must deduct 1% TDS from the transaction value as per the provisions of TDS on property purchase. The deducted tax must be deposited with the Central Government through Form 26QB within seven days from the end of the month in which the deduction is made.

Both buyer and seller must provide their PAN details while completing the online form (available on the NSDL portal). After payment, the buyer must download Form 16B from the CPC (TDS) portal and issue it to the seller as proof of TDS deduction.

When Is TDS on Property Purchase Required?

TDS must be deducted on all transactions involving the transfer of immovable property (land or building), except agricultural land.

TDS is not applicable in the following cases:

The property being transferred is rural agricultural land.
The property is compulsorily acquired by the government under any law.
The total sale consideration is below ₹50 lakh.

In all other cases, TDS must be deducted according to the TDS on immovable property rules.

194IA TDS Rate on Sale of Property

The applicable TDS rate under Section 194IA is 1% of the total transaction value, and it is the responsibility of the buyer—not the seller—to deduct the tax.

If the seller does not provide their PAN, the TDS rate increases to 20%. No surcharge or cess is added; the deduction is made simply on the transaction amount. TDS must be deducted at the time of payment to the seller.

Key Provisions of Section 194IA – TDS on Property Transactions

Below are the major requirements under Section 194IA:

Threshold Limit: TDS applies only if the purchase value is ₹50 lakh or more.
Installment Payments: If payments are made in installments, TDS must be deducted on each installment.
No TAN Required: Buyers do not need a TAN; their PAN can be used to deposit TDS.
Time of Deduction: TDS should be deducted at the time each payment is made.
TDS Deposit & Certificates:
- TDS must be deposited using Form 26QB within 30 days from the end of the month of deduction.
- The buyer must then download and issue Form 16B to the seller, usually available within 10–15 days of payment.

Note: Since 1 September 2019, additional charges such as club membership fees, maintenance charges, car parking, and other incidental costs must be included in the property value for TDS calculation.
Example: If a property priced at ₹55 lakh includes ₹4 lakh in additional charges, TDS must be calculated on ₹59 lakh.

TDS on Purchase of Property – Section 194IA

TDS obligations apply not only during the sale of property but also during its purchase. While the seller is liable for capital gains tax, the buyer must deduct TDS under Section 194IA if the property value is ₹50 lakh or more, excluding agricultural land.

TDS rate: 1% of the transaction value
Deduction: At the time of payment
Deposit timeline: Within 30 days using Form 26QB
TDS certificate: Buyer must issue Form 16B to seller

TDS on Property Sales by NRIs

When NRIs sell property in India, TDS applies differently:

The seller is liable for capital gains tax on the sale.
For inherited property, the original owner’s purchase date and cost are used to determine long-term or short-term capital gains.
The buyer must deduct TDS and deposit it with the Income Tax Department.
After deduction, the buyer must file Form 27Q.

TDS Rates for NRIs:

20% for long-term capital gains
Slab rates for short-term capital gains (based on the NRI’s taxable income in India)

Introduction to Form 26QB and Form 16B

Form 26QB – Challan-cum-Statement for TDS on Property

Form 26QB is the online challan used by the buyer to deduct and deposit TDS on the purchase of immovable property. It must be filed whenever TDS is applicable under Section 194IA.

Form 16B – TDS Certificate for Property Transactions

Form 16B is the TDS certificate issued by the buyer to the seller after depositing the TDS. It serves as proof that tax has been correctly deducted and paid to the government.

Documents Required for Filing TDS on Immovable Property

To file TDS correctly under Section 194IA, the following documents are required:

Registered Sale Agreement for calculating TDS
Property details (location, size, age, etc.)
PAN cards of both buyer and seller
Aadhaar numbers of all relevant parties (as per recent legal requirements)

Steps to File TDS on Sale of Property – Filing Form 26QB

Follow the steps below to correctly pay Tax Deducted at Source (TDS) using Challan 26QB and obtain Form 16B for the seller.

A. Online Payment through Challan 26QB

Step 1:

Step 2:

Click ‘+ New Payment’.

Step 3:

Select ‘26QB – TDS on Property’.

You will now be prompted to enter:

Buyer’s details
Seller’s details
Property transfer details
Payment information

Step 4:

Review and enter the buyer’s details. These may be auto-filled but can be edited if required.
Click ‘Continue’.

Step 5:

Provide the seller’s details, including PAN and address.

Step 6:

Enter the property details—property type, address, date of agreement, and sale value.
The system will automatically calculate the applicable TDS.
Click ‘Continue’.

Step 7:

Choose your preferred payment method and complete the transaction.
A challan will be generated upon successful payment.

B. Registering on TRACES

Step 8:

If you are a first-time user, register on TRACES as a taxpayer using your PAN and challan details.
After registration, you will be able to download Form 16B (TDS Certificate) and provide it to the seller.

It is advisable to check your Form 26AS after 7 days to verify that the TDS details appear under:
“Details of Tax Deducted at Source on Sale of Immovable Property u/s 194(IA)”
(Part F will show the TDS certificate number, deductee details, transaction amount, acknowledgment number, deposit date, and TDS amount.)

C. Downloading Form 16B

Step 9:

To download Form 16B:

Log in to TRACES.
Go to ‘Downloads’ → ‘Form 16B (For Buyer)’.
Enter the seller’s PAN and the acknowledgement number for the transaction.
Review and confirm the details, then submit the request.
Go to ‘Requested Downloads’ under the Downloads tab.
If the status shows ‘Available’, download the .zip file.
- The file is password-protected.
- Password = Buyer’s date of birth (DDMMYYYY).
Extract and open the PDF, and print your Form 16B.

Notice for Non-Compliance with Form 26QB Filing Requirements

The Income Tax Department receives an Annual Information Return (AIR) from the registrar/sub-registrar’s office, which contains details of all property transactions. This information enables the department to track purchases and sales of immovable property valued at more than ₹50 lakh.

If a buyer does not deduct the mandatory 1% TDS on such transactions or fails to file Form 26QB within the prescribed timeline, the Income Tax Department may issue a notice for non-compliance.

Penalties for Non-Filing of TDS on Sale of Property

Failure to deduct or deposit TDS on a property transaction can result in significant consequences for both the buyer and the seller. Under Section 194-IA, any TDS deducted must be deposited with the government within seven days from the end of the month in which the deduction was made.

Below is a detailed overview of the penalties associated with non-compliance:

Implications for Buyers

1. Late Filing Fee (Section 234E)
A fee of ₹200 per day is charged for late submission of Form 26QB. This continues until the total fee equals the TDS amount payable.

2. Interest on Late Deduction and Payment

1% per month (or part of a month) if TDS is not deducted on time.
1.5% per month (or part of a month) if TDS is deducted but not deposited with the government.
Interest is calculated from the date the tax was deductible to the date it is actually paid.

3. Penalty Under Section 271H
In addition to the late filing fee, the Assessing Officer may levy a penalty ranging from ₹10,000 to ₹1,00,000 for either non-filing of the TDS statement or furnishing incorrect details.

Implications for Sellers

1. Inability to Claim TDS Credit
If the buyer fails to file Form 26QB on time, the seller will not be able to claim TDS credit, potentially affecting their income tax return.

2. Ensuring Proper Deposit of TDS
Sellers must verify that the buyer has deposited TDS through an authorised bank branch or via e-tax payment. This ensures seamless credit of TDS in the seller’s Form 26AS.

Key Considerations

Cap on Late Filing Fees: The late filing fee cannot exceed the actual TDS amount required.
Mandatory Filing Even with Zero TDS: Form 26QB must be filed even if no TDS is applicable due to exemptions or lower transaction value.
Combined Penalties: Delays in both deducting and depositing TDS can result in cumulative interest charges, significantly increasing the liability.

Summary of Penalties for Non-Filing of TDS on Sale of Property

Category	Penalty Details
Late Filing Fee	₹200 per day, capped at the TDS amount.
Interest for Delays	1% per month for late deduction; 1.5% per month for late payment.
Additional Penalties	Up to ₹1,00,000 for non-filing or incorrect TDS statements.
Seller’s Risks	Seller cannot claim TDS credit if Form 26QB is not filed on time.
Filing Obligations	Filing Form 26QB is mandatory even when no TDS is deductible.
Combined Penalties	Higher total liability if both deduction and deposit are delayed.

About the Author

Vinod

Vinod is an experienced legal writer who simplifies complex legal concepts into clear, practical guidance. He supports entrepreneurs by helping them understand their legal responsibilities and build confident, compliant, and sustainable businesses.

January 31, 2026