TDS on sale of Property in India

TDS on Sale of Property in India: Rates, Rules & Buyer Responsibilities

Buying property in India? Crack the TDS code: Know the rules, rates & risks before you seal the deal. Tax-smart moves start here!

Written by : Knowledge Centre Team

2026-07-24

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8 minutes read

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During the purchase or sale of immovable property in India, various tax implications must be considered, one of which is TDS (Tax Deducted at Source) under Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025 (earlier known as Section 194IA of the Income-tax Act, 1961). This section requires a mandatory TDS deduction on property transactions exceeding ₹50 lakh. 

Both buyers and sellers must be well-equipped to fulfil their duties to ensure easy compliance. It is important to know how TDS operates in real estate transactions, particularly for first-time homebuyers. Effective financial planning, such as investments in market-linked or guaranteed savings plans, can help optimise post-sale tax outgo and support long-term wealth creation.

Key Takeaways

  • TDS at 1% is mandatory on the sale of property above ₹50 lakh under Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025 (earlier known as Section 194IA of the Income Tax Act, 1961)

  • Buyers, not sellers, are responsible for deducting and depositing TDS using Form 141 earlier Form 26QB within 30 days

  • NRIs face higher TDS rates of up to 23.92%

  • Missing Form 26QB filing invites a ₹200/day penalty, interest, and possible prosecution for non-compliance

  • Form 16B must be issued by buyers to sellers as proof of TDS payment, available via the TRACES portal

Property Sales: Quick Guide to Section 194IA (Now Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025)

The Income Tax Act has Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025 (earlier known as Section 194IA of the Income Tax Act, 1961, which requires a 1% deduction of TDS when you buy immovable property. This does not include agricultural land and applies only to properties valued at ₹50 lakh or more. This applies regardless of whether multiple buyers and sellers are involved and the aggregate transaction value exceeds the threshold. You should fill out Form 141 (earlier known as Form 26QB) for TDS deduction to the government within 30 days of making the payment.

It’s important to note that the responsibility lies solely with the buyer to deduct and pay the TDS, not the seller. The seller can, however, check the TDS refund status using their PAN. Whether you’re buying for personal use or as an investment, factoring in this obligation helps you avoid penalties.

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TDS on Property Sale Explained: Section 393(1) (Previously Section 194IA)

When purchasing property in India, buyers must be aware of the tax obligations under Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025 (earlier known as Section 194IA of the Income Tax Act, 1961). This section ensures that tax is collected in advance on high-value property transactions, minimising evasion and improving compliance. Whether you’re a salaried individual or an investor, understanding the scope of this provision helps avoid errors during property registration or payment.

  • Transaction Value: TDS on the sale of immovable property applies only if the total sale consideration or the stamp duty value, whichever is higher, exceeds ₹50 lakh

  • Timing of Deduction: The deduction for TDS must be made during the payment or credit of the amount to the seller's account, whichever is earlier

  • Payment Deadline for Deducted TDS: It should be paid through Form 141 (earlier known as Form 26QB) within  30 days of the end of the month in which the deduction was made

Who Has to Deduct TDS Under Section 393(1) (Previously 194IA)?

It is important to know who is liable for TDS deduction, as a default would result in penalties for the buyer. It is not based on the seller's tax status but on the buyer's role in the transaction and the value of the property involved. 

  • Buyer's Responsibility: The buyer, whether an individual or a business organisation, is liable for TDS deduction, not the seller

  • Joint Buyers: If the aggregate value exceeds ₹50 lakh, all such buyers must deduct and deposit their proportionate share of TDS.

Applicable TDS Rate on Property Sales

The TDS rate applicable to property sales varies depending on where the seller resides, meaning Indian residents and Non-Resident Indians have different rates. This differentiation is important because the tax rate, required forms, and compliance rate vary significantly between the two.

Buyers must compute TDS on the sale consideration or stamp duty value of the property, whichever is higher, not just the amount paid. Failing to obtain the seller's PAN or to assess the seller's accurate residential status can lead to excess deductions or penalties.

  • TDS Rate: TDS on the sale of property is charged for resident Indian sellers at 1% of the overall sale consideration

  • No PAN Penalty: If the seller does not provide a valid PAN, TDS shall be deducted at 20% under Section 397(2)(b) of the Income Tax Act, 2025 (earlier known as Section 206AA of the Income Tax Act, 1961)

The table below compares the rates applicable:

Seller Type

TDS Rate

PAN Mandatory?

Threshold

Resident Indian

1%

Yes

₹50 lakh and above

Non-Resident (NRI)

20%*

Yes

Any amount

*Subject to surcharge and cess. TDS on the sale of property by an NRI can be up to 23.92%, depending on the transaction.

TDS Rules for Buyers Purchasing Property Under Section 393(1) (Previously Under Section 194IA)

Buyers must deduct TDS on each payment or instalment made to the seller, not on the total consideration at the end. Form 141 (earlier known as Form 26QB) must be filed for each such deduction, and the TDS deposited within 30 days from the end of the month in which the deduction was made. The deduction should also be reported in the seller's Form 132 (earlier known as Form 16B). The buyer should ensure compliance with TDS obligations even when a home loan is being taken, as loan disbursements made directly to the seller are also treated as payments and are subject to TDS deduction.

NRI Selling Property in India: TDS Rules Applicable 

If you are someone who lives abroad and holds the status of a Non-Resident Indian (NRI), and wish to sell property in India, the TDS is deducted differently for you. The rate is 20% plus surcharge and cess as per the applicable rates. This does not vary depending on the value of the transaction. As per the updated rules effective from Budget 2026, buyers purchasing property from an NRI are no longer required to obtain a Tax Deduction Account Number (TAN). The TDS deduction and deposit can now be completed using the PAN-based facility available on the Income Tax e-filing portal. NRIs can also approach the Income Tax Department for a lower TDS certificate, which can help avoid over-deduction.

Do you know

Did You Know?

From July 23 2024, TDS on property sales by NRIs dropped to 12.5% (plus surcharge & 4% cess) if held long‑term vs the previous 20%+ rate
 

Source: ET

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What You Need to Know About TDS on Property Sales?

TDS on property sales is not something that happens once. Every payment made to the seller, including instalments, triggers a fresh TDS obligation. Hence, even a minor mistake, such as entering incorrect PAN details or failing to deposit TDS within the specified time limit, may result in notices or penalties. Furthermore, sellers must also remain aware that TDS is reflected in their tax records and affects refund eligibility and TDS refund status.

  • PAN Linking: The seller and buyer both need to have active PANs, and the buyer is required to mention the seller's PAN in Form 141 (earlier known as Form 26QB)

  • TDS Form 16B (Form 132) Certificate: It is the responsibility of the buyer to deliver Form 16B (Form 132) to the seller within 15 days from the date of downloading it from the TRACES portal

  • Claiming Refunds: In case of excess TDS deduction, the seller can claim a refund while filing their ITR and check the TDS refund status through the income tax portal

Form 141 (previously Form 26QB) & Form 132 (previously 16B): TDS Compliance in Property Transactions

Form 141 (earlier known as Form 26QB) is a challan-cum-statement used to deposit TDS on the sale of immovable property. It must be submitted within 30 days from the end of the month in which TDS was deducted. Upon submission, the buyer must download Form 16B from the TRACES portal and furnish it to the seller as proof of TDS deduction.

List of Documents Required to File TDS on Property:

Proper documentation is necessary to ensure precise TDS filing and to prevent errors when submitting Form 141 (earlier known as Form 26QB). These documents assist in verifying the transaction, specifying the parties involved, and facilitating successful payment and record creation.

  • Buyer & Seller PAN Cards: For accurate deduction and reporting of TDS

  • Property Sale Agreement: Verifies the sale price and date of transaction

  • Buyer's Bank Details: For online TDS payment through net banking

  • Form 141 (earlier known as Form 26QB) Details: Contains property value, PAN information, and payment dates

How to File Form 141 (previously Form 26QB) for Property TDS?

Filing Form 141 (previously Form 26QB) is a mandatory compliance step once TDS is deducted on property purchases. The form serves as a payment challan and a declaration of TDS deducted, and needs to be filed within 30 days from the end of the month in which the deduction was made. Adhering to the correct filing procedure ensures the transaction is tax-compliant and avoids penalties.

  • Go to the Income Tax e-filing portal at incometax.gov.in

  • Select e-File > e-Pay Tax > click on '+ New Payment' and proceed to the tab for TDS on Property

  • Enter buyer and seller details, property information, and sale consideration accurately

  • Choose your bank for payment and make the payment through net banking

  • Save the acknowledgement receipt and allow 5-10 working days before downloading Form 132 (previously 16B) from the TRACES portal

What Happens If You Skip Filing Form 141 (earlier known as Form 26QB)?

It is mandatory to file Form 141 (earlier known as Form 26QB) within the prescribed time. This is a statutory requirement under the Income Tax Act, 125, for the buyer. Failure to do so will incur monetary penalties, interest, and even prosecution in extreme circumstances. Early filing keeps both seller and buyer tax-compliant and out of trouble in the future.

  • Penalty under Chapter XIX of the Income Tax Act, 2025 (earlier known as Section 234E of the Income Tax Act, 1961): ₹200 per day until the default is removed, subject to the TDS value

  • Interest under Chapter XIX of the Income Tax Act, 2025 (earlier known as Section 201 of the Income Tax Act, 1961): 1% per month for delay in deduction, 1.5% per month for delay in deposit

  • Prosecution Risk: Continuous default may result in legal penalties and prosecution under the provisions of the Income Tax Act, 2025

Latest Updates on TDS Rules for Property Sales Tax Year 2026-27

Effective from Tax Year 2026-27, TDS on property transactions is now governed by the Income Tax Act, 2025, which replaced the Income Tax Act, 1961. The provisions of Section 194IA are now covered under Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025. The government has further strengthened digital compliance by mandating the e-filing of Form 141 (earlier known as Form 26QB) and releasing Form 132 (previously 16B) only through the TRACES portal. Offline filing is no longer permitted, making digital PAN verification mandatory.

The threshold for TDS deduction remains ₹50 lakh for resident vendors, but the government is implementing enhanced scrutiny of several small transactions to prevent tax evasion. As per the Budget 2026 update, buyers purchasing property from an NRI no longer need to obtain a TAN; TDS can now be deducted and deposited using the PAN-based facility on the Income Tax e-filing portal. With greater integration of property registries and income tax records, non-compliance will increasingly result in a notice. Timely filing and correct entry of vendor details by buyers are obligatory.

Wrapping It Up!

Knowledge of TDS on the sale of property is essential in every property deal valued at ₹50 lakh. Buyers are required to deduct and deposit 1% TDS using Form 141 (earlier known as Form 26QB) and furnish Form 132 (previously 16B) to the sellers. These obligations are now governed under Section 393(1) [Table: Sl. No. 3(i) of the Income Tax Act, 2025 (earlier known as Section 194IA of the Income Tax Act, 1961). For NRIs, the provisions differ, with higher TDS rates and additional compliance requirements. Failure can lead to penalties, interest, or prosecution. Investing in property is a significant financial decision; ensure full TDS compliance to safeguard the interests of both buyers and sellers.

Glossary

  1. Tax Deduction Account Number: Mandatory for buyers purchasing property from NRIs to deposit TDS
  2. Form 141: New TDS challan-cum-statement under ITA 2025 for reporting and depositing TDS on property transactions
  3. Stamp Duty Value: Government-assessed value of a property used for stamp duty; TDS is computed on this or the sale price
  4. Challan: Official payment document used to deposit tax with the government; Form 141 acts as both a challan and a TDS statement
  5. Tax Year: 12-month period (April-March) for which income is assessed and taxes computed under the Income Tax Act, 2025
Glossary book
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FAQs

The buyer must deduct 1% TDS on the property purchase above ₹50 lakhs, based on the total sale consideration or stamp duty value, whichever is higher, and deposit it using Form 141 (earlier known as Form 26QB) on the Income Tax e-filing portal. The deposit must be made within 30 days from the end of the month in which the deduction was made.

TDS on the purchase of property is calculated at 1% of the sale consideration or the stamp duty value, whichever is higher, provided the transaction value is ₹50 lakh or above. In the absence of a valid PAN from the seller, TDS is deducted at 20% under Section 397(2)(b) of the Income Tax Act, 2025 (earlier known as Section 206AA of the Income Tax Act, 1961).

TDS for property sale is deducted from the seller's sale proceeds, and if the deduction exceeds the seller's actual tax liability, the excess amount can be claimed as a refund by the seller while filing their Income Tax Return (ITR). The buyer, however, is not entitled to a TDS refund as the deduction is made on behalf of the seller.

Form 141 (earlier known as Form 26QB) is a challan-cum-statement used to report and deposit TDS on the sale of property above ₹50 lakhs, filed online through the Income Tax e-filing portal at incometax.gov.in. The buyer must fill in the property, buyer, and seller details, complete payment via net banking, and file it within 30 days from the end of the month in which TDS was deducted.

Form 16B is a TDS certificate issued by the buyer to the seller as proof that the TDS deducted on the sale of the property has been deposited with the government. It is available for download from the TRACES portal within 10–15 working days of the TDS deposit. It is significant for the seller, as it enables them to claim TDS credit when filing their ITR and to verify the deduction reflected in their tax records.

Yes, TDS on land purchase is applicable under the TDS on property purchase above ₹50 lakhs section, Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025 (earlier known as Section 194IA of the Income Tax Act, 1961), provided the transaction value meets or exceeds ₹50 lakh. However, this does not apply to agricultural land, which is explicitly excluded from the definition of immovable property under the Act.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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