Tax Deducted at Source (TDS) is a mechanism where tax is collected at the point of certain payments and deposited with the government on the recipient's behalf. Section 194IA of the Income-tax Act governs TDS on sale of immovable property.
This guide sets out the TDS rate under Section 194IA, the threshold that triggers deduction, who must deduct, and the deposit and return-filing compliance that follows.
What is Section 194IA?
Section 194IA requires the buyer of immovable property to deduct TDS on the sale consideration paid to a resident seller.
Rate, threshold and who deducts
| Nature of payment | Sale of immovable property |
|---|---|
| TDS rate | 1% of the consideration or stamp duty value, whichever is higher |
| Threshold | Consideration of ₹50,00,000 or more |
| Who deducts (deductor) | Buyer of the property |
| Whose income (deductee) | Resident seller |
| Time of deduction | At the time of payment or credit |
Key points
- The buyer files Form 26QB and issues Form 16B to the seller. No TAN is required for the buyer.
Compliance for the deductor
- Deduct at the right time. Deduct TDS on sale of immovable property at the time of payment or credit.
- Deposit to the government. Pay the deducted tax by the 7th of the following month (special dates apply for March and for Form 26QB).
- File the TDS return. Report the deduction in the quarterly TDS return (Form 24Q/26Q/27Q as applicable) on the TRACES/e-filing system.
- Issue the TDS certificate. Give the deductee Form 16/16A so they can claim credit in their return.
How the deductee claims credit
TDS deducted under Section 194IA appears in the deductee's Form 26AS and Annual Information Statement (AIS). It is adjusted against the final tax liability when the deductee files their income tax return, and any excess is refunded.
Frequently asked questions
Who deducts TDS when buying a flat?
The buyer deducts 1% and deposits it using Form 26QB when the value is ₹50 lakh or more.
What happens if TDS is not deducted?
The payer can face disallowance of the expense, interest at 1%–1.5% per month, and penalties. It is important to deduct and deposit on time.
By when must TDS be deposited?
Generally by the 7th of the month following deduction (30 April for amounts deducted in March), with separate rules for property-related challans.