TDS on Property Purchase: When, How Much, and How to Pay

Introduction

When you buy property above ₹50 lakh from a resident seller, you must deduct 1% TDS (Tax Deducted at Source) from the payment. For NRI sellers, TDS rates are much higher. Understanding TDS compliance protects you from penalties.

TDS Rules for Property Purchase

When TDS Applies

What Counts Toward ₹50 Lakh

• Property value
• All components (main unit, parking, etc.)
• Total consideration, not per installment

TDS on Purchase from Resident Seller

Rate: 1%

Calculation:

Property Value: ₹80 lakh
TDS at 1%: ₹80,000

Amount payable to seller: ₹80 lakh - ₹80,000 = ₹79,20,000

When to Deduct

• At time of each payment
• Credit, whichever is earlier
• On each installment if staggered

When NOT to Deduct

• Property value ₹50 lakh or less
• Agricultural land purchase
• Purchase from NRI (different rules apply)

TDS on Purchase from NRI

Rates

Effective Rates (including surcharge and cess)

TDS on Entire Sale Value

For NRI, TDS is on full sale consideration (not just gains).

Example:

• Sale value: ₹1 crore
• TDS at 20.8%: ₹20.8 lakh

Lower TDS Certificate for NRI

NRI sellers can apply for lower TDS certificate if actual tax liability is lower.

Process:

1. NRI applies to Assessing Officer
2. Submits capital gains calculation
3. Gets certificate with lower rate
4. Provides to buyer before sale

How to Deposit TDS

Form 26QB

What is it: Online form for paying TDS on property purchase

Who files: Buyer (person deducting TDS)

Step-by-Step Process

Step 1: Visit TIN-NSDL website

• Go to tin.tin.nsdl.com
• Navigate to TDS on Sale of Property

Step 2: Fill Form 26QB

• Buyer details (PAN, address)
• Seller details (PAN, address)
• Property details
• Payment details
• TDS amount

Step 3: Make Payment

• Net banking
• Debit card
• Pay at authorized banks

Step 4: Download Acknowledgment

• Keep for records
• Needed for Form 16B

Timeline

Form 16B: TDS Certificate

What is It?

Certificate issued by buyer to seller confirming TDS deduction and deposit.

How to Generate

1. Visit TRACES website (tdscpc.gov.in)
2. Login with PAN
3. Go to 'Downloads'
4. Select Form 16B
5. Enter acknowledgment number
6. Download and provide to seller

What Seller Gets

• Proof of TDS deducted
• Can use for ITR filing
• Can claim credit for TDS

TDS on Multiple Sellers/Buyers

Joint Sellers

• Divide TDS proportionally
• File separate 26QB for each seller
• Each seller's PAN required

Joint Buyers

• Any one buyer can deduct/deposit
• Or divide responsibility
• All buyers' PAN needed

Example: Two Sellers

Property: ₹80 lakh Sellers: A (60%), B (40%)

File two Form 26QB separately.

Penalties for Non-Compliance

Late Payment of TDS

Serious Non-Compliance

• Penalty equal to TDS amount
• Prosecution in extreme cases
• Property registration may be blocked

Impact on Buyer and Seller

For Buyer

• TDS is part of payment to seller
• Not an additional cost
• Compliance burden on buyer
• Penalties if not deposited

For Seller

• Receives payment minus TDS
• TDS is advance tax credit
• Adjust in ITR filing
• May get refund if TDS exceeds liability

Special Situations

Builder Property (Under-Construction)

• TDS on each milestone payment
• If total exceeds ₹50 lakh
• Apply on post-threshold payments

Resale Property

• Same rules apply
• TDS on entire sale value
• Even if bought at lower price

Instalments Straddling ₹50 Lakh

Example:

• Total: ₹60 lakh
• First payment: ₹30 lakh (no TDS)
• Second payment: ₹30 lakh (TDS on ₹30 lakh)

Once total crosses ₹50 lakh, TDS on subsequent payments.

TDS Refund for Seller

When Applicable

• Seller's actual tax liability < TDS
• Capital gains exemptions claimed
• Losses set off against gains

How to Claim

1. File ITR
2. Show TDS as per 26AS/AIS
3. Calculate actual tax liability
4. Claim refund if TDS > liability

Timeline

• Refund processed after ITR processing
• Usually within 3-6 months

Buyer's Checklist

Before Payment

• Verify seller's PAN
• Confirm property value vs ₹50 lakh
• Determine seller type (resident/NRI)
• Calculate TDS amount

At Payment

• Deduct TDS from payment
• File Form 26QB within 30 days
• Make TDS payment

After Payment

• Download acknowledgment
• Generate Form 16B from TRACES
• Provide Form 16B to seller
• Keep copies for records

Conclusion

TDS on property purchase is a compliance requirement that protects tax revenue. As a buyer, ensure timely deduction and deposit to avoid penalties. For NRI purchases, the stakes are higher with higher TDS rates. Proper documentation and timely filing keep both buyer and seller protected.