Section 194IA Explained: TDS Rules for Buying and Selling Property in India

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Section 194IA of the Income Tax Act deals with tax deduction at source (TDS) on property transactions in India. It sets out the obligations of buyers and the rights of sellers in such deals. Complying with this provision helps prevent penalties and tax mismatches. This article explains the main rules, procedures, and impact of Section 194IA.

What is Section 194IA?

Section 194IA of the Income Tax Act requires the buyer of immovable property in India to deduct 1% Tax Deducted at Source (TDS) on the total sale consideration if the property’s value exceeds INR 50 lakh. This rule applies to all types of immovable property, including residential, commercial, and land, but excludes agricultural land.

When to Deduct TDS Under Section 194IA?

The Section 194IA TDS section mandates deduction during:

Crediting the sale amount to the seller’s account, or
Actual payment to the seller, by cash, cheque, draft, or any other mode.

If the payment is made in instalments, TDS should be deducted on each payment as it is made.

Threshold Limit Under Section 194IA

The Section 194IA TDS section provision applies only if the total sale consideration is INR 50 lakh or more. This threshold includes all charges related to the property, such as parking fees, maintenance charges, and club membership fees.

Payment of TDS Under Section 194IA

The buyer must deposit the deducted TDS with the government using Form 26QB. The payment should be made within 30 days from the end of the month in which the deduction is made.

Documents Required for Filing TDS on Immovable Property Sale

To file Form 26QB, the buyer needs:

Permanent Account Number (PAN) of both buyer and seller
Details of the property transaction, including the sale amount and date

Things to Remember When Claiming TDS Under Section 194IA

TDS Certificate (Form 16B): After depositing the TDS through Form 26QB, the buyer must issue Form 16B to the seller. This certificate, available for download from the TRACES portal after about 10–15 days, serves as proof that TDS has been deducted and deposited with the government. The seller should collect and retain this certificate, as it is essential for claiming TDS credit when filing their income tax return.
No GST on TDS: Goods and Services Tax (GST) is not included in the TDS calculation.
No TAN Required: The buyer does not need a Tax Deduction Account Number (TAN) to deduct and deposit TDS under this section.

What Can Happen to a Taxpayer (Transferee) Who Fails to Deduct TDS in a Property Buy Transaction?

When a buyer does not deduct or deposit TDS as required:

Interest: 1% per month is charged from the date the TDS was due until the date it is paid.
Penalty: A penalty equal to the amount of TDS not deducted may be levied.
Deemed Assesses in Default: The buyer may be treated as an assesses in default, leading to further legal consequences.

Implication for Sellers

Sellers need to confirm that the buyer has deducted and deposited TDS correctly. If this is not done, the seller cannot claim the TDS credit while filing their income tax return. This may lead to a mismatch in Form 26AS or Annual Information Statement (AIS), and the seller may end up paying higher tax out of pocket.

In addition, the Income Tax Department may treat the transaction as non-compliant until the TDS is deposited. This can delay refunds or increase the risk of scrutiny during assessment. To manage such tax credits smoothly, sellers often link refunds to a premium savings account for easier tracking. Sellers are advised to obtain Form 16B (TDS certificate) from the buyer, which serves as proof that TDS has been deducted and paid to the government.

What is Form 26QB?

Form 26QB is a challan-cum-statement that buyers must file when deducting TDS on the purchase of immovable property under Section 194IA. It combines the process of both challan (payment) and statement (reporting), so buyers do not need to file a separate TDS return.

This form includes:

PAN details of both buyer and seller
Complete property address and transaction details
Total sale consideration and the amount of TDS deducted
Mode of payment used to pay TDS

Form 26QB must be filed online within 30 days from the end of the month in which TDS is deducted. Once filed and the payment is made, the buyer can download the acknowledgment receipt. Later, the seller can view the credit of this TDS in their Form 26AS.

How to Make TDS Payment Online (Form 26QB)

The Income Tax portal allows buyers to pay TDS on property transactions directly online. Follow these steps to complete the process:

Step 1: Visit the Income Tax e-Filing portal at https://www.incometax.gov.in.

Step 2: Click on e-File and select e-Pay Tax.

Step 3: Click New Payment and choose TDS on Sale of Property (Section 194IA).

Step 4: Enter the PAN of the buyer and seller, assessment year, property details, sale amount, and TDS amount (1% of sale consideration).

Step 5: Select a payment mode and make the payment.

Step 6: Save the acknowledgment receipt once the payment is successful.

Steps to Download Form 26QB

Step 1: Log in to https://www.incometax.gov.in.

Step 2: Click on e-File, then select e-Pay Tax, and click Payment History.

Step 3: Locate the TDS payment for the property and click Download to save the Form 26QB receipt.

Conclusion

Section 194IA ensures property transactions above INR 50 lakh remain transparent and tax compliant. The buyer must deduct and deposit TDS through Form 26QB and issue Form 16B to the seller, while the seller should verify credit in Form 26AS. Timely compliance prevents penalties, refund delays, and disputes, safeguarding both parties and ensuring the transaction is legally sound under the Income Tax Act. Buyers may also consider maintaining a wealth account to handle large property-related payments in an organised manner.