The 1% Tax That Costs You 20%: TDS on Property Purchase Guide (2025)

It is the most common "expensive mistake" for first-time homebuyers in the ₹50L+ segment.

You negotiated the price. You paid the stamp duty. You signed the registry. Six months later, you get a notice from the Income Tax Department demanding 20% of the deal value plus interest.

Why? Because you thought the "TDS clause" in the sale agreement was the builder's job. It is not. It is yours.

Under Section 194IA, the responsibility to deduct tax rests 100% with the buyer, not the seller. Here is how to navigate this without getting burnt in 2025.

The Rule: 1% Deduction on Deals >₹50 Lakhs

If the "Consideration Value" (or Stamp Duty Value, whichever is higher) of the property exceeds ₹50,00,000, you must deduct 1% from the payment to the seller and deposit it with the government.

• Example: Deal Value = ₹80 Lakhs.
• You Pay Seller: ₹79.20 Lakhs.
• You Deposit to Gov: ₹80,000 (via Form 26QB).

Crucial 2025 Updates

1. It's NOT Just "Sale Price" Anymore: As of recent amendments, the threshold includes "incidental charges" like Club Membership, Car Parking fee, Electricity fee, and Maintenance advance. If your flat is ₹48L but parking+club takes it to ₹52L, TDS applies on the full ₹52L.
2. Aggregate Value Rule: If there are multiple buyers (e.g., Husband + Wife) buying a ₹80L flat (₹40L share each), you CANNOT say "my share is under ₹50L". TDS applies on the total property value.

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The "Active PAN" Trap (The 20% Nightmare)

This is where buyers get destroyed. Section 206AA mandates that if the seller does not provide a PAN, or provides an Inoperative PAN (not linked with Aadhaar), the TDS rate jumps from 1% to 20%.

The Scenario: You pay the builder/seller 99% (₹79.2L) and deduct 1% (₹80k). When you go to file Form 26QB, the portal rejects the seller's PAN as "Inoperative". Liability: You are now liable for the remaining 19% (₹15.2 Lakhs). If you already paid the seller, good luck getting that money back.

Pro Tip: ALWAYS verify the seller's PAN status on the Income Tax portal before releasing the first cheque.

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Process: How to File Form 26QB

You do not need a TAN (Tax Deduction Account Number). Your PAN is sufficient.

1. Deduct: Keep 1% back from every installment (for under-construction) or the final payment (for resale).
2. Deposit: Go to the Income Tax Portal > e-Pay Tax. Select Form 26QB.
3. Timeline: You must deposit the TDS within 30 days from the end of the month in which deduction was made.
   • Deducted on Sep 15th? Deadline is Oct 30th.
4. Certificate: Generate Form 16B and give it to the seller as proof.

Penalties: Why You Can't "Fix It Later"

The IT Department is ruthless with Section 194IA because it tracks black money.

1. Late Fee (Sec 234E): ₹200 per day of delay.
2. Interest: 1% - 1.5% per month on the unpaid tax.
3. Penalty (Sec 271H): Up to ₹1 Lakh for non-compliance.

The Asymmetric Risk: The seller gets their money and leaves. The government chases the property. The liability is on the asset you just bought.

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Summary Checklist for 2025 Buyers

1. Check Total Value: Add parking, club, and maintenance. Is it >₹50L?
2. Verify Seller PAN: Is it linked to Aadhaar and 'Active'?
3. Deduct Per Payments: Don't wait for the end. Deduct 1% from every installment.
4. File 26QB: Within 30 days of standard deduction.

Buying in a new market? Government rules vary by state, but TDS is Central. Whether you buy in Goa or Dehradun, this 1% rule follows you everywhere.