Section 194IA: TDS on Property Sale Above ₹50 Lakhs
- PRITI SIRDESHMUKH
- 2 hours ago
- 10 min read
When a property transaction in India exceeds ₹50 lakhs, the buyer must deduct tax at source before making payment to the seller. This deduction, governed by Section 194IA of the Income Tax Act, ensures tax compliance in high-value real estate transactions. The rule applies to residential and commercial properties, excluding agricultural land. By mandating TDS on such sales, the government ensures transparency and curbs tax evasion in real estate deals.
Table of Contents
Understanding Section 194IA of the Income Tax Act
Section 194IA was introduced to ensure that tax is collected at the source during high-value property transactions. It applies to the sale or transfer of immovable property such as land or building (excluding agricultural land) where the total consideration exceeds ₹50 lakhs. The section mandates that the buyer deduct 1% of the total sale value as TDS before making payment to the seller. This deducted amount must then be deposited with the government within a specified period. The provision promotes transparency in real estate transactions and helps prevent tax evasion by ensuring traceability of large property deals.
Applicability of Section 194IA – Who Must Deduct TDS
The responsibility to deduct TDS lies with the buyer of the property. This rule applies to both individuals and entities purchasing property, regardless of whether they are required to get their accounts audited. The seller must be a resident of India for Section 194IA to apply. If the seller is a non-resident, the transaction falls under Section 195, which prescribes different rates and compliance procedures. The TDS must be deducted at the time of payment or at the time of crediting the amount to the seller’s account, whichever occurs first. Even in joint ownership cases, the limit of ₹50 lakhs is considered for the total property value, not for each buyer or seller individually.
TDS Rate and Threshold Limit under Section 194IA
The TDS rate under Section 194IA is fixed at 1% of the total sale consideration. This applies to property transactions exceeding ₹50 lakhs. For instance, if the sale price of a property is ₹75 lakhs, the buyer must deduct ₹75,000 as TDS before paying the balance to the seller. If the seller fails to provide a valid PAN, the deduction rate increases to 20%. The threshold limit of ₹50 lakhs is calculated on the total consideration agreed between the parties, including incidental charges such as club membership fees, parking, and maintenance charges if they form part of the sale agreement.
Step-by-Step Process to Pay TDS on Property Sale
The buyer must first deduct 1% TDS from the total sale amount before transferring payment to the seller.
Visit the TIN NSDL website and fill out Form 26QBÂ online with details of the buyer, seller, and property.
Pay the deducted TDS amount either through net banking or by generating a challan for offline payment at an authorized bank.
Once payment is made, a confirmation screen will be generated, which can be printed for records.
The buyer should download and issue Form 16B (TDS certificate) to the seller within 15 days of filing Form 26QB.
The seller can then check the TDS credit in Form 26AS or AIS available on the Income Tax portal.
This step-by-step process ensures compliance and helps avoid penalties for late payment or wrong filing.
Due Date and Forms for Depositing TDS (Form 26QB & Form 16B)
TDS deducted under Section 194IA must be deposited within 30 days from the end of the month in which the deduction is made. The payment should be made using Form 26QB, which acts as a combined challan-cum-statement for reporting and depositing the TDS. After payment, the buyer must issue Form 16B, which serves as a TDS certificate, to the seller within 15 days from the due date of Form 26QB filing. These documents are essential proofs of tax deduction and must be retained for future reference during assessments or property transfers.
Exemptions and Non-Applicability under Section 194IA
Section 194IA does not apply to all property transactions. It is exempted in the following cases:
When the property being sold is agricultural land as defined under the Income Tax Act.
When the total sale consideration is ₹50 lakhs or less.
When the transaction involves transfer between government entities or other exempt institutions. It is also important to note that TDS is applicable on the total sale consideration, not on individual share values in the case of joint property owners.
Consequences of Non-Compliance and Penalties
Failure to deduct or deposit TDS under Section 194IA can attract multiple penalties and interest. If the buyer fails to deduct TDS, interest at 1% per month applies from the date of payment to the seller until the date of deduction. If deducted but not deposited, interest at 1.5% per month is levied from the date of deduction until the date of deposit. Additionally, late filing fees under Section 234EÂ and penalties under Section 271H may apply. These can be substantial and create complications during future property or tax assessments.
How to Claim TDS Credit for Property Transactions
The seller can claim the TDS credit while filing their income tax return for the respective assessment year. Once the buyer deposits the TDS using Form 26QB, the deducted amount is reflected in the seller’s Form 26AS and Annual Information Statement (AIS). The seller must ensure that the TDS details are correctly mentioned in these records. During ITR filing, the TDS credit can be adjusted against the total tax liability, reducing the overall amount payable.
Role of TaxBuddy in Simplifying Property Sale TDS Filing
Filing TDS on property transactions can be time-consuming and confusing, especially for first-time buyers. TaxBuddy simplifies this process through automation and expert support. Its platform auto-fills Form 26QB, validates PAN details of both buyer and seller, and generates accurate challans. The mobile app provides a guided workflow to ensure every compliance step—from deduction to Form 16B download—is completed correctly and on time. By using TaxBuddy, users can avoid manual errors and penalties while ensuring a seamless TDS filing experience.
Common Mistakes to Avoid While Filing TDS on Property Sale
Failing to deduct TDS before transferring the payment to the seller.
Entering incorrect PAN details of the buyer or seller in Form 26QB.
Missing the 30-day deadline for TDS deposit.
Not issuing Form 16B to the seller after payment.
Calculating TDS incorrectly by excluding incidental charges included in the sale value. Avoiding these common mistakes helps maintain compliance and reduces the chances of notice or penalty from the Income Tax Department.
Latest Updates and Notifications Related to Section 194IA
Recent updates from the Central Board of Direct Taxes (CBDT) have clarified that TDS under Section 194IA is to be deducted on the full sale consideration, including charges incidental to the transfer such as parking, maintenance, and clubhouse fees. Budget 2025 also reinforced digital compliance by simplifying the TDS reporting process and integrating Form 26QB with PAN-based validation to prevent mismatched entries. These refinements aim to make compliance more efficient for taxpayers while ensuring data accuracy in property transactions.
Conclusion
Section 194IA ensures fair tax collection and transparency in real estate transactions by mandating buyers to deduct and deposit TDS for property sales exceeding ₹50 lakhs. Understanding the applicable rate, timelines, and process helps both buyers and sellers remain compliant. For taxpayers seeking guidance or wanting to file TDS seamlessly, platforms like TaxBuddy offer AI-driven tools and expert support for quick, accurate, and compliant submissions.
For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy offers both self-filing and expert-assisted options to cater to different types of taxpayers. The self-filing plan is ideal for individuals with straightforward tax profiles, such as salaried employees or single-income earners, where automation handles most of the data entry through AI-driven pre-filling. For those involved in complex financial activities, such as property transactions under Section 194IA, business income, or capital gains, the expert-assisted plan provides professional guidance. In this plan, TaxBuddy’s tax experts review each filing, ensure proper deductions are claimed, and help in resolving any compliance queries from the tax department.
Q2. Which is the best site to file ITR?
While the official government portal (incometax.gov.in) is the statutory platform for filing returns, many taxpayers prefer using AI-driven platforms like TaxBuddy for their accuracy and ease of use. TaxBuddy ensures every form—whether ITR 1, ITR 2, or ITR 3—is automatically populated using verified data from PAN, Aadhaar, Form 16, and Form 26AS. This eliminates manual errors, which are common in high-value filings such as property sales. The platform’s built-in audit checks and expert verification make it one of the most reliable sites for ITR filing in India.
Q3. Where to file an income tax return?
An income tax return can be filed directly on the Income Tax Department’s official e-filing portal or through secure online platforms like TaxBuddy. While the government portal allows manual data entry, platforms like TaxBuddy simplify the experience by offering automation, step-by-step assistance, and expert validation before submission. TaxBuddy also provides post-filing support, including rectification requests, refund tracking, and notice handling—features that most users find valuable, especially when dealing with complex cases like TDS on property transactions.
Q4. Is TDS applicable on property purchases below ₹50 lakhs?
No, TDS under Section 194IA is applicable only when the sale consideration exceeds ₹50 lakhs. This threshold applies to the entire value of the property and not to individual shares in the case of joint ownership. For instance, if two buyers jointly purchase a property worth ₹60 lakhs, the transaction still attracts TDS since the total value crosses the ₹50 lakh limit, even though each buyer’s share is ₹30 lakhs. If the value is exactly ₹50 lakhs or less, no TDS deduction is required from the buyer’s side.
Q5. What is the TDS rate under Section 194IA?
The TDS rate under Section 194IA is 1% of the total sale consideration of the property, provided the seller furnishes a valid PAN. If the seller fails to provide PAN, the rate increases to 20% as per Section 206AA. The deduction must be made at the time of payment or at the time of crediting the amount to the seller’s account, whichever happens first. This deduction ensures that the government receives tax revenue from high-value real estate transactions before the income is disclosed by the seller in their annual return.
Q6. Who is responsible for deducting TDS under Section 194IA?
The responsibility for deducting and depositing TDS lies entirely with the buyer of the property. Even if the buyer is an individual not required to get accounts audited, compliance under Section 194IA still applies. The buyer must ensure that TDS is deducted at the time of making payment and that the deducted amount is deposited to the government within 30 days. In case of multiple buyers, each must deduct TDS proportionate to their share in the property value. This ensures accountability and traceability in every transaction.
Q7. How can TDS be paid for property purchases?
TDS on property purchases can be paid online using Form 26QB, which serves as both a payment challan and a statement. The process involves entering buyer and seller details, property information, and the TDS amount on the TIN NSDL website. After submission, payment can be made through net banking or by generating a challan for offline payment at an authorized bank. Once the payment is confirmed, the buyer must download Form 16B, which acts as the TDS certificate, and provide it to the seller within 15 days. This document helps the seller claim TDS credit in their ITR.
Q8. What happens if TDS is not deducted or deposited on time?
Failure to deduct or deposit TDS within the prescribed period can lead to penalties, interest, and even prosecution. If the buyer fails to deduct TDS, interest at 1% per month applies from the date of payment to the seller until the date of deduction. If the TDS is deducted but not deposited, the interest increases to 1.5% per month until the date of deposit. Additional penalties under Sections 234E and 271H may apply for late filing or incorrect information in Form 26QB. Timely compliance helps avoid these costs and ensures smooth property registration in the future.
Q9. Can TDS under Section 194IA be claimed by the seller?
Yes. The seller can claim credit for the TDS deducted under Section 194IA when filing their income tax return. Once the buyer deposits the TDS amount using Form 26QB, the seller can verify the credit in Form 26AS or Annual Information Statement (AIS) available on the Income Tax portal. During ITR filing, this TDS credit reduces the seller’s overall tax liability. If excess TDS has been deducted, the seller can claim a refund from the Income Tax Department after proper verification.
Q10. What documents are needed to file TDS under Section 194IA?
The following documents are essential for deducting and depositing TDS on property transactions:
PAN details of both buyer and seller
Property sale deed or agreement copy
Complete address of the property and parties involved
Payment details (bank transfer or cheque number)
Valid email ID and contact number of both buyer and seller
Form 26QB acknowledgment and payment proof
Bank account details used for TDS payment These documents ensure proper verification and smooth processing of the TDS payment and credit claims.
Q11. Does TDS apply to under-construction property purchases?
Yes, TDS under Section 194IA applies even to under-construction properties if the total sale consideration exceeds ₹50 lakhs. The buyer must deduct TDS at the time of making each installment payment to the builder. The total transaction value is considered, not individual payments. For instance, if the total agreement value is ₹70 lakhs and payments are made in parts, TDS must be deducted on every installment proportionately. This ensures that compliance is maintained throughout the payment period, not just at possession or registration.
Q12. How does TaxBuddy help with property TDS compliance?
TaxBuddy simplifies property TDS filing through AI-driven automation and expert guidance. The platform automatically calculates the exact TDS amount, pre-fills Form 26QB with buyer and seller details, and validates PAN information to prevent errors. It also assists in generating and downloading Form 16B for the seller, ensuring full compliance. TaxBuddy’s experts guide users through each step, from deduction to deposit, and handle any post-filing clarifications or notices from the Income Tax Department. This makes property TDS compliance seamless, accurate, and stress-free for buyers.
