TDS on Property Purchase : A Comprehensive Guide (2025)

TDS on Property Purchase

If a person buys or sells a property and the value of the property exceeds Rs 50 lakh, TDS on property purchase (tax deduction at source) is applicable as per section 194IA of the Income Tax Act. The buyer has to deduct TDS on the property purchase from the seller’s payment and deposit it. The seller of the property, whether an individual, a firm, HUF, or a company, is eligible for TDS deduction. TDS on property purchases applies to all properties (residential, commercial, industrial, etc.) except agricultural land.

Form 26QB is filed to deposit the TDS on the property purchase. If the buyer fails to do so, the sub-registrar will not register the property, and the buyer may have to pay a penalty and may also receive a notice from the Income Tax Department.

Income Tax rules for TDS on property purchase

If the value of the property is less than Rs 50 lakh, then no TDS rule will apply here. If the value of the property is more than Rs 50 lakh, then the buyer will be responsible for deducting 1% TDS from the property purchase price.

1% TDS has to be deducted on each installment or lump sum amount paid by the buyer to the seller for the property.

Example of lump sum payment: – If the price of the property is 1 crore and the buyer makes a lump sum payment, then the buyer will deduct 1% on 1 crore, i.e., 1 lakh rupees as TDS.

Example of installment payment: – If the buyer pays the price of the property in four installments, then TDS has to be deducted from all the installments. It is assumed here that the price of the property is 1 crore rupees and the buyer wants to pay it in four installments of 25 lakhs each; then 1%, i.e., 25,000 rupees, will be deducted as TDS before all the installments. In this way, a total of 25,000 x 4 = 1 lakh TDS will be deducted for four installments.

If the PAN of the seller is inactive or not linked with Aadhaar at the time of TDS payment, a higher TDS rate of 20% instead of 1% will be applicable under section 206AA of the Income Tax Act.

Due date of Payment of TDS on Property Purchase

The buyer has to deposit the TDS on the property within 30 days from the end of the month in which it was deducted.

Details required for Deposit TDS on Property Purchase

The process of filing Form 26QB for depositing TDS on property purchase consists of four stages.

1. Buyer details:Aadhaar, PAN, email ID, and mobile number.
2. Seller details: Aadhaar, PAN, email ID, and mobile number.
3. Property and payment details: Property type, property address, property value, payment value, payment date, and TDS value.
4. Mode of payment: Net banking, debit card, pay over bank counter, RTGS or NEFT, UPI, and credit card.

Deposit TDS on Property Purchase step-by-step

There are two stages to be completed to deposit TDS on property purchased:

1. File TDS return form 26QB and deposit TDS.
2. Generate TDS certificate form 16B.

Stage-1 # Deposit TDS on Property Purchase

Form 26QB is filed online for the payment of TDS on property purchases. The step-by-step process for online TDS payment is as follows.

Step 1 – Open the official website of Income Tax Department

https://www.incometax.gov.in/iec/foportal/

Step 2 – Register your account (buyer)

If you do not have a login ID, please register using your PAN number and generate a password for further login.

Step 3 – Login to your account

Log in with your PAN number as the user ID and continue. Then click on “Please confirm your secure access message displayed above” and “Continue” to log in to the portal.

Step 4 – Select e-Pay Tax

Go to the “e-File” section and select “e-Pay Tax” from the dropdown menu.

Step 5 – Select New Payment

Once that section loads, click on the “New Payment” button on the right.

Step 6 – Select TDS on the Sale of the Property

Select “26 QB (TDS on Sale of Property) and proceed.

Step 7 – Select TDS on the Sale of the Property

Select “26 QB (TDS on Sale of Property) and proceed. Step 7 – Fill in Buyer Details in Buyer’s Residential Status – Select “Resident”. Fill in you’re (buyer’s) details such as your name, PAN number, address, mobile number, and email ID. If there are multiple buyers, please select “Yes”.

Step 8 – Fill in Seller Details

Fill in Seller Details such as Builder’s PAN number, Builder’s address, mobile number and email ID. You can refer to our demand form for all these details about Marathon. Select “No” to answer the question about “Is there more than one seller”

Step 9 – Fill in Property and Payment Details

As the next step, you need to enter the property address, contract price, date of booking, date of payment, mode of payment (installment or lump sum), total amount paid in previous installments and principal amount paid currently. 

Step 10 – Choose the payment option

In the next step, choose your payment option from the list of options displayed and proceed to the payment gateway. 

Step 11 – Send us the TDS Receipt

After making the payment, you will get a TDS receipt.

Stage 2 # Generate TDS Certificate form 16B

After filing the return Form 26QB for TDS on property purchases, the buyer can download the TDS certificate Form 16B and provide it to the seller. This is considered the last step in the process.

The step-by-step process for downloading the TDS certificate Form 16B is as follows.

Step 1. Log in to TRACES using your PAN

https://www.tdscpc.gov.in/app/login.xhtml?usr=Tpy

Step 2. go to the Downloads section and select Form 16B/16C.

Step 3. Enter the required details:

Step 4. Submit the request.

Step 5. After the submission, a Request Number will be generated.

Step 6. Go to the ‘Downloads’ tab to access requested downloads.

Step 7. Enter the Request Number or Request Date and click ‘View Request’.

Step 8. If the status is ‘Available’, proceed to download the Form 16B PDF file. If it shows ‘Submitted’, wait for 24 to 48 hours for the status to change to ‘Available’.

Step 9. Download the file by clicking the HTTP Download button.

Step 10. The downloaded file will be in zip format. Use the Buyer’s Date of Birth in DDMMYYYY format as the password to open it.

The buyer has to pay TDS on property purchase from his account

When depositing TDS on property purchases, ideally the buyer should deposit it from his account.

Although no law states the buyer has to deposit TDS on property purchases from his account, if the buyer pays TDS from a third-party account, it can create complications for the buyer.

That is, the buyer will have to transfer the money to that third-party account, and then they will have to enter it in their books and show it to the Income Tax department. So, to avoid these complications, the buyer should deposit TDS on property purchase through his account.

TDS on Property Purchase from NRI

NRI means Non-Resident Indian. If a person stays in India for less than 182 days during a tax year, he or she will be considered an NRI.

Income Tax Rules for TDS on Property Purchase from NRI

Long-Term Capital Gain (LTCG)

If the NRI holds his property for a period of more than 2 years, then the gain arising to the NRI is of long-term nature and is calculated as tax as per the table given below without the indexation benefit (plus surcharge and cess).

Short-Term Capital Gain (STCG)

If the NRI holds his property for less than 2 years, then the gain arising to the NRI is of a short-term nature and is calculated as tax according to the Income Tax Slab rates of the seller.

Latest Income Tax Slab

Surcharge & Health & Education Cess

Non-Deduction or Lower Deduction of TDS on Property Purchase from NRI

The Income Tax Department allows NRIs to apply for a non-deduction or lower deduction certificate for TDS. For this, Form-13 must be filed by the NRI.

If the Income Tax Department is satisfied with all the information submitted by the NRI, it can issue a certificate for non-deduction or lesser deduction. This provision provides relief from excessive tax deductions.

Tax Deduction at Source (TDS) helps the Government of India collect tax at the source of income generation.

Deposit TDS on Property Purchase from NRI step-by-step

There are four stages to be completed to deposit TDS on property purchased from an NRI:

1. Apply for TAN
2. Deposit TDS u/s 195
3. File TDS Return form 27Q
4. Generate TDS Certificate Form 16A

Stage-1 # Apply for TAN (Tax Deduction Account Number)

If the person selling the property is an NRI, then the buyer has to first apply for TAN to deposit TDS on the property from an NRI.

The step-by-step process for applying for TAN online is as follows.

Step 1 – Open the official website of TIN-NSDL.

https://tin.tin.nsdl.com/tan2/servlet/NewTanApp

Step 2 – fill out form 49B.

The Applicant file online form 49B based on the information given below.

• Details of Assessing officer code
• Applicant Status
• Applicant Name
• Applicant Address
• Applicant email ID & Mobile Number
• Applicant PAN

Step 3 – fee payment

Fee payment for processing of the TAN application shall be made online (Net Banking/Debit Card/Credit Card/UPI).

Step 4 – Submission of documents

The applicant takes a printout of the filled Form 49B, signs it, and courier it to the TIN-NSDL office.

Step 5 – Allotment of TAN

TAN is allotted by the department within a few days of receiving the application.

Stage-2 # Deposit TDS Under Section 195 of the Income Tax Act

After the TAN is allotted, the buyer will complete the process of depositing TDS on the property from the NRI.

The step-by-step process for depositing TDS is as follows.

Step 1 – Open the official website of the Income Tax Department

https://www.incometax.gov.in/iec/foportal/ 

Step 2 – Register your account via TAN (buyer)

Please register through your TAN number and generate a password for further login.

Step 3 – Login to your account

Log in with your TAN number as the user ID and continue. Then click on “Please confirm your secure access message displayed above” and “Continue” to log in to the portal.

Step 4 – Select e-Pay Tax

Go to the “e-File” section and select “e-Pay Tax” from the dropdown menu.

Step 5 – Select New Payment

Once that section loads, click on the “New Payment” button on the right.

Step 6 – Select other sums

Select “Section 195” and proceed.

Step 7 – Fill Payment Detail

Entry the tax value & click continue.

Step 8 – Choose the payment option

In the next step, choose your payment option from the list of options displayed and proceed to the payment gateway.

Step 9 – TDS Challan

After making the payment, you will get a TDS receipt.

Stage-3 # File TDS Return form 27Q

After depositing TDS on the property purchased from an NRI, the buyer’s Form 27Q can be filled offline through the Return Preparation Utility (RPU) tool.

The step-by-step process for filing the TDS Return Form 27Q is as follows.

Step 1 – Download RPU

Download the free Return Preparation Utility (RPU) through the TIN website: https://www.protean-tinpan.com/services/etds-etcs/etds-rpu.html

Step 2 – Prepare Form 27Q in RPU

You will receive guidance from RPU on how to fill the form electronically. You will have to provide facts about the payer (you), payee (non-resident individual), challan (tax payment challan) and the amount of tax withheld.

Step 3 – Verify the form

After filling the form, generate the File Verification Utility (FVU) file.

Step 4– Submit the file

Log in through TAN on the official income tax website. Go to the e-file page and select Income Tax Forms. Then, go to Form TDS and click on File Now. After selecting Form 27A, choose the financial year and quarter. Upload the generated FVU file and submit it after verifying it through OTP.

Step 5– Download the Receipt

After submitting the file, you will receive a return submission receipt.

Stage-4 # Generate TDS Certificate form 16A

After filing the return Form 27Q for TDS on property purchase from an NRI, the buyer can download the TDS certificate Form 16A and provide it to the seller. This is considered the last step in the process.

The step-by-step process for downloading the TDS certificate Form 16A is as follows.

Step 1- Buyer logs in to TRACES and enters your User ID, Password, TAN, or PAN.

Step 2 – Go to the Downloads tab & Select Form 16/16A.

Step 3 – Enter the details and click on go ​​

Step 4 – Verify the details and click ‘Submit” ​​

Step 5 – Go to downloads and click on Requested Downloads ​​

Step 6 – Enter the request number, click on go and download the certificate ​​

Step 7 – Download the TRACES PDF Generation Utility ​​

Step 8 – Browse the Form 16/16A ZIP file and generate the certificate in PDF ​​

Consequences of Delay or Default in TDS Payment on Property Purchase

The consequences of delay in TDS payment are stated as follows:

It is the legal responsibility of the buyer to deduct and deposit TDS, but failure to do so also affects the NRI seller. If the buyer fails to do so, he will have to pay a penalty equal to the amount of TDS that was not deducted. The buyer will also have to pay interest on the default amount.

• Interest Penalty –If the buyer does not pay TDS by the due date, he will have to pay interest at the rate of 1% per month or part of the month from the date of deduction to the date of payment. For example, if a buyer deducted TDS on 15 January 2025 and paid it on 10 March 2025, he will have to pay interest at the rate of 1% for two months (January and February), i.e., Rs 1,000 for every Rs 1,00,000 of TDS.
• Late Fee – In addition to interest, the buyer will also have to pay a daily late fee of Rs 200 for each day of delay in filing Form 26QB. However, the maximum late fee can be the amount of TDS. For example, if a buyer delays filing Form 26QB by ten days for a TDS amount of Rs 50,000, he will have to pay a late fee of Rs 2,000 (Rs 200 x 10 days), which is less than the TDS amount.
• Penalty –The Income Tax Department can also impose a penalty of Rs 10,000 to Rs 1,00,000 on the buyer for non-payment or delay in payment of TDS under Section 271H of the Income Tax Act. However, this penalty can be avoided if the buyer pays the TDS, interest, and late fee before the expiry of one year from the due date of filing Form 26QB.

Note: One thing that the buyer and seller should always keep in mind is that after buying and selling the property, they must file income tax returns and record the full details of the capital gain or loss of the property. For this, one can file ITR 2 or ITR3.

If you want to complete the entire process of depositing TDS on property purchase through a consultant, then you can contact us at 9958869427.

Also Read: TDS Return Filing Services In India