How to Pay 1% TDS on Property Purchase in India – A Step-by-Step Guide

You have just signed the papers. You are holding the keys to your new home. It is a moment of pure joy. But wait. Did you remember your tax duty?

Many new property buyers miss a crucial step. A step that is their legal responsibility. It is the payment of a 1% Tax Deducted at Source, or TDS.

Forget this, and you could face painful penalties later. The good news? The process is straightforward when you know how. This guide will walk you through every single step. We will use simple language, clear examples, and tell you exactly what to click.

Let us get you from confused to compliant.

What is TDS on Property Purchase?

Think of TDS as a small security deposit for the government.

When you buy a property above a certain price, the law says you must cut a small percentage of the payment. You then deposit this amount directly to the Income Tax Department. It is not an extra tax. It is an advance tax payment on behalf of the property seller.

Why does this exist? It ensures the government gets its tax revenue from big property deals right away. It applies to almost all property types. Flats, houses, plots of land, and even under-construction properties.

The key exception? Agricultural land. If you are buying farmland, these rules typically do not apply.

TDS on Property Purchase Section – Section 194-IA

This is the rule book. Section 194-IA of the Income Tax Act is what you need to remember.

It has two simple conditions:

1. The Property Value: The agreement value or sale consideration must be ₹50 lakhs or more.
2. The TDS Rate: You must deduct 1% of the total sale value.

It does not matter how you pay. Full cash, home loan, or a combination. If the price is ₹50 lakhs or above, this rule kicks in.

Who Pays TDS on Property Purchase – Buyer or Seller?

This is the most common point of confusion. Let us be crystal clear.

The buyer deducts and deposits the TDS. The seller receives the payment after this deduction.

You, the purchaser, are legally responsible for this task. You cannot ask the seller to do it. You cannot ignore it. It is your duty. Think of yourself as a tax collector for that one transaction. You collect 1% from the payment to the seller and send it to the government.

When to Deduct TDS on Property Purchase?

Timing is everything. You do not wait until the very end.

You must deduct this 1% TDS at the time of making the payment. Or, if you sign the sale agreement and pay later, you deduct it at the time of the agreement. Basically, the moment money is due or changes hands, the TDS gets calculated.

For example, you pay an advance of ₹10 lakhs on a ₹80 lakh flat. You must deduct 1% of ₹10 lakhs (which is ₹10,000) right then and deposit it.

TDS on Property Purchase Due Date

You deducted the tax. Now you must deposit it. How long do you have?

The law gives you 30 days from the end of the month in which you deducted the tax.

Let me give you an example. You made a payment and deducted TDS on June 15th. The month of June ends on June 30th. You have until July 30th to deposit that TDS online.

Miss this date? You will attract interest and penalties. We will talk about that scary part later. For now, just remember: 30 days from the month-end.

How Much TDS to Deduct?

The calculation is simple. It is 1% of the total sale consideration.

But be careful. The “sale consideration” is the value stated in your agreement. It typically excludes charges like GST or stamp duty. You pay GST separately to the builder. You pay stamp duty to the state government. Do not add them into your TDS calculation.

Here is a simple table:

What about optional charges like parking or maintenance deposits? If they are part of the sale agreement and the total price, they are included. If they are separate contracts, they may not be. When in doubt, a quick chat with a CA can save you headaches.

The Step-by-Step Online Payment Process

This is the heart of the guide. The actual “how to” you came for. Follow these steps closely.

Documents Needed Before You Start

Have this information ready before you sit down to pay. It will make the process smooth.

• Your PAN Card: The buyer’s PAN.
• Seller’s PAN Card: You must have the seller’s correct PAN.
• Property Details: Full address.
• Sale Agreement Details: Total sale value, date of agreement/payment.
• Payment Ready: Net banking or debit card details for the tax payment.

How to Pay TDS on Property Purchase Online (Form 26QB)

Step 1: Go to the Income Tax e-Payment Portal.

Open your browser and go to the official website: https://www.tin-nsdl.com. Look for the ‘Services’ tab and click on ‘e-payment: Pay Taxes Online’.

Step 2: Select “TDS on Property (Form 26QB)”.

You will see a list of payment options. Do not get confused. Scroll and find the one that says “TDS on Property (Form 26QB)”. This is the only form you need for this transaction. Click on it.

Step 3: Fill Buyer & Seller PAN Details.

A form will open. You will enter details in two clear sections:

• Deductor Details: That is you, the buyer. Enter your PAN.
• Deductee Details: That is the seller. Enter their PAN. Double-check the PANs. A single wrong digit can create a major problem for the seller when they claim their refund.

Step 4: Enter Property & Payment Details.

Now, fill in:

• Complete Property Address.
• Total Sale Value: The full amount from your agreement.
• Date of Agreement/Purchase: The date you signed.
• Date of Payment: The date you are making this payment (or the date you deducted the tax).
• Amount Paid/credited: Enter the amount on which you are deducting TDS. For a single lump sum payment, this is the full sale value. For an installment, it is that installment amount.
• TDS Amount: The system will auto-calculate 1% for you. Verify it.

Step 5: Submit & Confirm.

Review every single field. Breathe. Then hit ‘Submit’. You will get a confirmation screen. This generates a unique Challan Identification Number (CIN). Note this down. It is your receipt number.

Step 6: Make the Payment Online.

You will be redirected to the net banking page. Choose your bank, log in, and authorize the payment for the TDS amount. The money moves from your account to the government.

And that is it. The main task is done.

How to Download TDS Challan / Receipt

Right after payment, download the Challan 280 receipt. It contains your CIN, payment details, and acts as your proof of deposit. Save it digitally and take a printout. File it safely with your property papers.

How to Download Form 16B (TDS Certificate)

Paying the tax is only half your job. You must give a certificate to the seller. This is Form 16B.

You get it from the TRACES portal (https://www.tdscpc.gov.in). You need to register (if it is your first time), log in, and request Form 16B for the CIN you just generated. You must do this. The law says you must provide Form 16B to the seller within 15 days from the due date of filing Form 26QB.

Why is this so important? Because the seller uses this Form 16B to claim the credit for the tax you paid on their behalf. Without it, they are stuck.

TDS on Property Purchase from a Builder

The rule is the same. But the process is repeated. When you buy from a builder, you pay in installments linked to construction stages.

You must deduct 1% TDS on every installment you pay. And for each payment, you must file a separate Form 26QB. It is more work, but it is mandatory.

TDS on Under Construction Property

This follows the builder payment rule above. Each payment to the builder for the construction stage triggers the TDS deduction and a new Form 26QB.

TDS on Joint Property Purchase

This trips up many people. If two people are buying a property from one seller, you cannot file one Form 26QB.

You need to file separate forms for each buyer-seller combination. If Buyer A and Buyer B are purchasing from Seller C, then Buyer A files a 26QB for their share of the payment to Seller C. Buyer B does the same for their share. It seems tedious, but it is the correct legal way.

TDS on Purchase of Land

Yes, it applies. If you are buying a plot, a non-agricultural land parcel for ₹50 lakhs or more, you must follow the same 1% TDS process.

How the Seller Can Claim TDS Credit in ITR

Once you have done your part and given the seller Form 16B, their job begins. The TDS you deposited will reflect in the seller’s Form 26AS. This is their annual tax statement.

When they file their Income Tax Return (ITR), they will show the full property sale value as income. Then, they will claim the TDS amount you paid as a “tax already paid.” It reduces their final tax bill. Your correct action helps them avoid paying double tax.

How You, the Buyer, Should Report TDS

You are not claiming a credit. But you must keep perfect records. Create a property file. In it, keep:

1. The printed Challan 280 (payment receipt).
2. The downloaded Form 16B (acknowledge you gave it to seller).
3. A copy of the submitted Form 26QB. Keep these for at least 7 years. If the Income Tax Department ever has a question, this file is your proof of compliance.

Penalty for Late TDS Payment on Property Purchase

Delay has a cost. A heavy one.

The penalties can stack up quickly. A delay of a few months can add thousands to your cost. Paying on time is the easiest way to save money.

Common Mistakes Buyers Make

I have seen these errors happen again and again. Do not be that person.

• Not deducting TDS at all: Usually an honest mistake, but the penalties do not care.
• Using the wrong PAN for seller: A typo here means the seller cannot claim the tax. They will come back to you, distressed.
• Paying TDS late: The interest and penalties are a silent budget killer.
• Filing one Form 26QB for joint buyers: As explained, this is incorrect. File separately per share.
• Forgetting to generate and give Form 16B: This is a critical part of the process. Not doing it leaves the seller in a lurch.

Conclusion

Paying 1% TDS on your property purchase is a legal checkbox. It feels bureaucratic, but it is simple when you break it down. Remember the sequence: Deduct at payment > Deposit within 30 days > Give Form 16B to the seller.

Do this, and you fulfill your duty. You protect yourself from penalties. You also help the seller settle their taxes smoothly. It is a final, responsible step in your property buying journey.

Now, take that checklist of documents, follow the steps, and complete your compliance. Then you can truly enjoy your new home, with peace of mind.

FAQs