TDS on property purchase under the Income-tax Act, 2025
Buying property worth ₹50 lakh or more means you must deduct tax at source. What changed on 1 April 2026, the 1% rule for resident sellers, the NRI seller rules and how to deposit it.
3 min read · Published 2026-10-31 · Last reviewed 2026-10-31
When you buy property in India the law makes you, the buyer, a tax collector. If the price is ₹50 lakh or more you must hold back a slice of the payment, deposit it with the government in the seller's name, and give the seller a certificate. Get it wrong and the penalty and interest fall on you, not the seller. This guide explains the rule as it stands after the Income-tax Act, 2025 came into force.
What changed on 1 April 2026
The Income-tax Act, 1961 was replaced by the Income-tax Act, 2025. The new Act did not change the economics of property TDS, but it changed the labels you will see on forms and in your bank's paperwork:
- Section 194-IA became Section 393(1), Table Sl. 3(i). All TDS provisions now sit under one section, with a table listing each type of payment.
- Section 195 for payments to non-residents is also folded into Section 393.
- "Previous year" and "assessment year" became a single "tax year." The purchase you make in 2026-27 is reported for tax year 2026-27.
- Forms are being renumbered. The familiar Form 26QB challan-cum-statement is being replaced under the new rules. Check the e-filing portal for the current form before paying rather than relying on an older guide.
Resident seller: the 1% rule
If the seller is an Indian resident and the consideration is ₹50 lakh or more, deduct 1% of the higher of the agreed price and the stamp duty value. Three details trip people up:
- The threshold is on the whole property, not your share. Two buyers paying ₹30 lakh each for a ₹60 lakh flat must each deduct 1% on their ₹30 lakh. Likewise two sellers receiving ₹30 lakh each from one buyer: TDS applies because the property is worth ₹60 lakh.
- Instalments count. Deduct 1% from every instalment, including the token, once the total crosses ₹50 lakh.
- Agricultural land is exempt, but only land that meets the Act's definition of rural agricultural land. A farmhouse plot on a city's edge usually does not qualify.
You do not need a Tax Deduction Account Number. The challan-cum-statement uses your PAN and the seller's PAN. If the seller does not give you a PAN, the rate jumps to 20%, so collect it before paying the token.
NRI seller: a different regime
If the seller is a non-resident, the ₹50 lakh threshold does not apply and the rate is much higher because the tax is on the seller's capital gain, collected through you:
- Long-term (held more than 24 months): 12.5% plus 4% cess on the full consideration, unless the seller obtains a lower-deduction certificate from the assessing officer that limits TDS to the actual gain.
- Short-term: 30% plus cess.
- Surcharge may also apply depending on the seller's income.
For NRI sellers you do need a TAN, you file the non-resident statement, and most buyers route the payment through a chartered accountant. Insist on seeing the lower-deduction certificate before agreeing to deduct less than the full rate; the liability for a shortfall is yours.
How to deposit and report
- Deduct at the time of payment or credit, whichever is earlier.
- Deposit within 30 days from the end of the month of deduction through the e-filing portal, using the current challan-cum-statement.
- Download the TDS certificate and give it to the seller within 15 days of the due date. The seller sees the credit in their annual tax statement and adjusts it against their capital gains tax.
If you have a home loan, the bank disburses the net amount to the seller but does not file the TDS for you. Ask the bank for the disbursement schedule so each tranche's TDS is deposited on time.
Penalties for getting it wrong
Interest of 1% a month for failing to deduct and 1.5% a month for deducting but not depositing, a late-filing fee of ₹200 a day capped at the TDS amount, and a possible penalty equal to the tax. The seller cannot be made to pay these; the buyer carries them.
Worked example
Resident seller, ₹75 lakh flat: deduct ₹75,000, pay the seller ₹74.25 lakh, deposit ₹75,000 by the end of the following month. If the stamp duty value were ₹80 lakh, deduct 1% of ₹80 lakh instead, which is ₹80,000.
Run your own numbers with the property TDS calculator, and if you are the seller, estimate the tax that TDS is prepaying with the capital gains calculator.
Sources
This guide is general information, not financial, tax or legal advice. Rules change; the review date above tells you when it was last checked. See our editorial policy.