What is TDS on Sale of Property? Rates, Procedures, and Filing Requirements

Tax Deducted at Source (TDS) is a critical component of the Indian taxation system, ensuring timely tax collection during financial transactions. Regarding purchasing immovable property, the provisions under Section 194-IA of the Income Tax Act, 1961 establish clear guidelines for buyers. These rules promote transparency and ensure compliance in high-value property transactions. Per the latest regulations, buyers must deduct TDS on the Sale of Property consideration exceeds ₹50 lakh. The deduction rate is 1% of the total sale consideration, encompassing additional charges such as club membership, parking fees, and maintenance costs. However, no TDS is applicable for properties below this threshold. For installment-based payments, TDS is deducted proportionally with each payment.

The buyer and seller must furnish their PAN details, as failing to do so may result in higher tax implications. After deducting TDS, buyers must deposit the amount with the government and provide the seller with Form 16B as proof of deduction. Understanding these rules is vital for all stakeholders involved in the real estate market.

What are the TDS on Sale of Property Rates in 2025?

As of 2025, the TDS rate for property sales in India remains at 1% for individuals and Hindu Undivided Families (HUFs) and 2% for companies and other entities.

Whenever you are buying a property (a building or a single flat in a residential apartment) with a value of more than 50 lakhs, you are obligated by law to deduct a specific percentage of tax while paying the seller. This is known as TDS on the Sale of Property.

• Section 206AB: Doubles TDS rate if the taxpayer has TDS of over 50,000 in the last two years without filing an income tax return.
• Section 206CCA: Imposes a TDS rate of 5% or double the current rate, whichever is higher.
• Section 194Q Applies to individuals with an annual turnover exceeding 10 crores, requiring a 0.1% TDS for transactions above 50 lakhs.
• New Section 194S: A TDS of 1% applies to the transfer of virtual digital assets at the time of payment.
• Sale of immovable property under Section 194-IA: Proposed amendment to TDS calculation, with tax at 1% to be deducted on the higher of the sum paid/credited or the stamp duty value.
• New Section 194R: TDS rate of 10% for individuals providing perks or benefits to residents involved in business or profession, whether convertible into money or not. 

Immovable property, as defined, includes buildings, parts of buildings, and non-agricultural barren land. Under Section 194-IA of the Income Tax Act, here are the key details regarding TDS on land sale:

• TDS Rate: The buyer deducts 1% of the total sale value as TDS.
• Property Valuation: No TDS deduction is required if the property's value is below 50 lakhs. However, each instalment payment requires a TDS deduction.
• Inclusive Charges: The sale amount encompasses additional charges like club membership, parking fees, utilities, maintenance, or advance fees related to immovable property transfer. This rule applies to purchases made since September 2019.

What is TDS on Property Purchase Above ₹50 Lakhs as per Section 194IA?

Section 194IA of the Income Tax Act deals with TDS on property purchases above 50 lakhs. Here's a summary of what this section entails:

TDS Rate and Applicability:

• For Resident Sellers: When purchasing immovable property (excluding agricultural land) valued at over ₹50 lakh, the buyer must deduct TDS at 1% of the total sale consideration.
• For Non-Resident Indian (NRI) Sellers: The TDS rates differ based on the nature of capital gains:
• Long-Term Capital Gains (property held for more than 24 months): TDS is applicable at 20% plus applicable surcharge and cess.
• Short-Term Capital Gains (property held for 24 months or less): TDS is deducted as per the applicable income tax slab rates for the seller. 
• Calculation: TDS is deducted on the entire sale amount exceeding Rs: 50 lakh, not just the amount above the threshold. If the property costs Rs. 60 lakh, TDS is calculated on Rs. 60 lakh, not Rs. 10 lakh.

Key Considerations:

• Threshold Limit: No TDS is required if the sale consideration is less than ₹50 lakh.
• Payment in Installments: If the payment is made in installments, TDS must be deducted from each installment.
• Additional Charges: The sale consideration includes club membership, parking fees, utilities, maintenance, or any advance fees related to the property.
• Compliance for Buyers: Buyers are responsible for deducting the TDS and depositing it with the government within 30 days from the end of the month the deduction is made. They must also furnish the TDS certificate to the seller.

Can a Seller Pay TDS on Property on Behalf of the Buyer?

No, the seller cannot pay the TDS on the property on behalf of the buyer. Under Section 194IA of the Income Tax Act in India, the responsibility to deduct TDS on property purchases falls entirely on the buyer. Here's why:

• Legislative Requirement: The law specifies that the buyer is responsible for deducting TDS at source (TDS) on property exceeding Rs. 50 lakh.
• Tax Compliance: The buyer acts as a tax collection agent for the government by deducting TDS from the seller's payment.
• Record Keeping: The buyer must deposit the deducted TDS with the government and furnish the seller with a TDS certificate (Form 16B) as proof.

While the seller cannot directly pay the TDS, they can certainly:

• Inform the buyer: Remind the buyer about their obligation to deduct TDS to avoid any last-minute complications.
• Provide Documents: Assist the buyer with the necessary documents like their PAN (Permanent Account Number) for smooth TDS processing.

What is TDS on Property Purchase for Immovable Assets?

Now, what is defined as an immovable property? It can be a building, a part of the building or any barren land other than agricultural land. Here are the required details as mentioned under Section 194-IA of the Income Tax Act regarding TDS on the sale of land:

• The buyer will deduct TDS with a TDS percentage of 1% of the total sale value.
• If the property valuation is less than 50 lakhs, then there is no deduction in the TDS payment on the sale of the property. The buyer can also pay in instalments. In that case, TDS should be deducted with every instalment. To comply with TDS regulations on the sale of immovable property, the buyer must deduct 1% of the sale consideration exceeding Rs. 50 lakh.
• The sale amount agreed upon shall also include charges such as club membership fees, car parking fees, electricity and water charges, maintenance fees, or any advance fee associated with the transfer of immovable property. This rule applies to properties purchased on or after September 2019.
• TDS will be based on the amount mentioned in the Sale Deed and not on Capital Gains (the profit). For example, if the purchase value of a house you buy is 75 lakhs and the original sale price is Rs 69 lakhs, then the seller pays TDS of 75 lakhs and not six lakhs. This will also be applicable for properties with joint sellers or joint buyers. Post 2019 budget convention, the agreed-upon sale amount/ sale consideration amount will be Rs 75+1.5lakhs (Parking Fee) + 2 lakhs (Electricity and water fee) +1 lakh (membership fee) = Rs 79.5 lakhs.

What are the Guidelines for TDS on Sale of Immovable Property?

TDS on the Sale of Immovable Property is a tax deduction applicable to transferring immovable assets like land or houses. Under the sale of property TDS section, buyers must deduct 1% of the transaction value exceeding ₹50 lakhs and deposit it with the Government. However, can the seller pay TDS on the property on behalf of the buyer? This option is rare and requires mutual agreement. The TDS on the sale of land also includes capital gain TDS sections. Knowing how to mention TDS in the sale deed ensures legal compliance for TDS on resale property. 

Key Points to Remember When It Comes to TDS on Property Transactions

• TAN (Tax Deduction Account Number) for buyers is unnecessary for TDS. You can pay using your PAN card.
• The buyer should have the seller's PAN. Otherwise, TDS is deducted at 20% (the average rate for TDS on Salary).
• TDS is deducted during monthly instalments or every time the seller is credited, whichever is earlier.
• TDS has to be paid within 30 days of tax deduction.
• Form 16B and the TDS certificate must be issued to the seller. The buyer can generate and download Form 16B from their TRACES website.

How to Download Form 16B from TRACES for TDS Certificate Issuance?

When it comes to TDS (Tax Deducted at Source) on property purchase, it is important to understand the issuance process of TDS certificates. The TDS certificate in Form 16B, which acts as proof of TDS deduction, can be easily downloaded from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website.

This certificate is necessary for the buyer of the property to claim a tax credit for the TDS deducted from the sale of the property. The issuance of TDS certificates in Form 16B from TRACES ensures a transparent and efficient process for TDS deduction and reporting on property purchase transactions.

It is also important to note that the TDS on property purchase must be paid using the 26QB challan and can be easily filed through the 26QB TDS return online. To ensure compliance with TDS regulations and to avoid any penalties, it is essential to keep track of TDS on property purchases and to have a clear understanding of the 26QB online payment process, 194IA TDS, and the full form of TDS.

TDS on Sale of Property in Case of Joint Owners

TDS on the sale of property in India in the case of joint sellers is a tax provision that applies only when multiple individuals jointly sell a property. When multiple owners jointly sell a property, the TDS liability is calculated based on their respective ownership shares. Each co-owner's share of the sale proceeds is considered separately for TDS purposes.

The buyer is responsible for deducting TDS on the total sale consideration at the applicable TDS rate (usually 1%) for the seller's share. If the property's sale value exceeds 50 lakhs, TDS is required.

For example, if two individuals jointly own a property and sell it for 1 crore with equal ownership shares, the buyer must deduct TDS of 50 lakhs for each seller, totalling 1% of 50 lakhs for each co-owner.

Co-sellers must coordinate and ensure that the TDS is correctly deducted and deposited with the tax authorities. They can also claim credit for the TDS deducted while filing their income tax returns to avoid double taxation.

The TDS must be paid proportionately to Capital Gains or the Considered sale value. Each seller is liable to pay TDS based on the values mentioned above.

TDS on Sale of Property in Case of Joint Sellers

The TDS has to be paid in proportion to Capital Gains or the Considered sale value. Each seller is liable to pay TDS based on the values mentioned above.

TDS on Property Sales by NRIs 

TDS on the Sale of Property is key when NRIs sell immovable assets in India. Under Section 195 of the Income Tax Act, buyers must deduct TDS on the sale of immovable property at the prescribed rate, ranging from 20% to 30%, depending on capital gains (long-term or short-term). The seller can’t avoid TDS, though buyers may deduct it before payment. Additionally, NRIs must obtain a Tax Clearance Certificate for compliance. Ensure the buyer deposits TDS in a timely to avoid penalties. The sale of house property TDS is also applicable to resale transactions, and it is computed based on the TDS rate of the land purchased.

How to Pay TDS on Sale of Property Online?

Follow these steps to pay TDS on the sale of land or property:

• Visit the official website
• Search for the TDS on Property (Form 26QB) and click on Proceed.
• A window appears where you have to fill in all the required details. Select “TDS on Sale of Property” as the applicable challan.
• After filling in the details, you will receive a confirmation of your details. You can keep this form for future acknowledgement.
• If you wish to pay online, click on Submit to the Bank and then pay through secure net banking channels.

How to Claim TDS on Sale of Property (Filing 26QB TDS Return Online)

As mandated by Section 194IA of the Income Tax Act, for the sale of property of more than 50 lakhs, the buyer must deduct tax at source before making any payment to the seller. The buyer must obtain Form 16B and issue this to the seller. The property seller then takes the following steps:

• Furnish his PAN to the buyer so that he can fill out the form online for submission to the Income Tax Department.
• Verify the deposit of Taxes deducted from the sale consideration. This will be reflected in the Form 26AS Annual Tax Statement.
• Generate Form 16B and deposit TDS on Sale of Property.

How to Mention TDS in Sale Deed?

Properly mentioning TDS in a sale deed is crucial for smooth transactions.  The TDS provisions relating to the sale of unmovable assets must be provided within the deed, specifying the amount deducted, the date of deposit, and the purpose of the challan. This makes everything above board in case of TDS on sale of property compliance. Add a clause about who is responsible for paying TDS on property sales to eliminate any misunderstandings. Sellers have the option to authorise buyers to pay TDS on their behalf.

Incorporating TDS details into a sale deed is essential for ensuring compliance with legal and taxation requirements. Below is a step-by-step guide on how to mention TDS in a sale deed:

Step 1. Acknowledge the TDS Requirement: Clearly state in the sale deed that TDS is applicable as per Section 194-IA of the Income Tax Act, 1961. It applies if the property value exceeds ₹50 lakh, and the buyer is responsible for deducting the tax.

Example Clause: "The purchaser shall deduct 1% of the total sale consideration as Tax Deducted at Source (TDS) under Section 194-IA of the Income Tax Act, 1961, and deposit the same with the government."

Step 2. Specify the Amount of TDS: Include the exact amount of TDS being deducted from the sale consideration. This ensures clarity for both parties regarding the net payment to the seller.

Example Statement: "The total sale consideration is ₹80,00,000, and a TDS of ₹80,000 (1%) shall be deducted by the purchaser and deposited with the Income Tax Department."

Step 3. Provide the Buyer’s Obligation: Outline the buyer’s obligation to deposit the TDS within the stipulated time (30 days from the end of the month the deduction was made) and file the necessary forms.

Example Clause: "The purchaser agrees to deposit the deducted TDS amount using Form 26QB within the specified timeframe and provide the seller with Form 16B as proof of tax deduction."

Step 4. Mention the Seller’s PAN: Include the seller’s Permanent Account Number (PAN) in the sale deed, as required for depositing the TDS and filing Form 26QB.

Example Statement: "The Permanent Account Number (PAN) of the seller, [PAN Number], shall be used for the TDS filing process."

Step 5. Include Proof of TDS Deduction: After depositing the TDS, the buyer will provide the seller with Form 16B (TDS certificate).

Example Clause: "The purchaser shall furnish Form 16B to the seller as proof of TDS deduction within 15 days of depositing the tax with the government."

Step 6. Ensure Compliance for Installment Payments: If the payment is made in instalments, specify that TDS will be deducted proportionally on each instalment and deposited accordingly.

Example Statement: "In instalment payments, the TDS shall be deducted on each instalment and deposited within the applicable timeframe."

Step 7. Add a Declaration Clause: Both parties should declare that they understand the TDS provisions and agree to comply.

Example Clause: "Both the purchaser and seller acknowledge the provisions of Section 194-IA and agree to adhere to the TDS regulations as stated in this deed."

Step 8. Attach Supporting Documents: Attach a copy of Form 26QB and proof of TDS payment as annexures to the sale deed for documentation purposes.

Example Statement: "Copies of Form 26QB and the TDS payment receipt are annexed herewith as supporting documents."

What is the Punishment for Non-Deduction or Non-Deposit of TDS on Property?

If the TDS has still not been deducted from the property's purchase price, the buyer will be obliged to pay interest at one per cent per month on the amount that has not been deducted. If the tax withholding obligation has been satisfied but the tax itself will not be paid, an interest charge equal to 1.5% of the outstanding balance will be applied each month.

Also, a late deposit of tax deducted at the source on the property may result in a penalty. Income tax officers may additionally assess a penalty of up to one lakh rupees for the late deposit of tax deducted at the source on the property.

Finally, the penalty for failure to file Form 26QB if the TDS Return is filed late a fine in the amount of Rs. 200 each day would be charged. Nevertheless, the penalty shouldn't be more than the amount of tax withholding that this form hasn't been submitted.

Type of Default	Interest/Fee/Penalty
Interest on Non-Deduction	1% per month or part thereof from the due date until the actual deduction.
Interest on Late Deduction	1% per month or part thereof from the due date until the actual deduction.
Interest on Late Payment	1.5% per month or part thereof from the date of deduction to the date of payment.
Late Filing Fee (Sec 234E)	₹200 per day for delayed submission of Form 26QB, not exceeding the TDS amount.
Penalty (Sec 271H)	₹10,000 to ₹1,00,000; no penalty if TDS is paid with interest and fee, and the statement is filed within 1 year.

Can TDS Be Paid in Instalments for Property Sales?

TDS (Tax Deducted at Source) under Section 194IA is applicable at the time of payment, regardless of the transfer date. It should be deducted when paying the seller, including advance payments and installment payments made to the developer by the buyer, not the bank. In cases where the bank pays on behalf of the buyer, the buyer is responsible for TDS deduction, not the bank.

How Can NoBroker Help Navigate TDS Complexities on Property?

Whether buying a house or selling a property, it is vital to know the TDS on the sale of property and how they are calculated. The above guide will surely help you. If you don’t want to deal with the hassle of dealing with paperwork when buying or selling a house, let the NoBroker experts help! Click the link below to see how the legal team at NoBroker can help you buy a house the stress-free way. 

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