Buying Property Over ₹50 Lakhs? You Must Deduct 1% TDS (Section 194IA) or Face a Tax Notice

Buying Property Over ₹50 Lakhs?

Buying a dream home in India is a joyous occasion. You finalize the deal for ₹80 Lakhs, sign the agreement, and transfer the money to the seller.

Six months later, you receive a notice from the Income Tax Department demanding ₹80,000 + Interest + Penalty.

You are shocked. "Why? I paid the full amount to the seller!"

That is exactly the mistake. Under Section 194IA of the Income Tax Act, the responsibility to deduct tax lies with YOU, the buyer, not the seller.

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The Rule: Section 194IA Explained

If you purchase any immovable property (other than agricultural land) for a value of ₹50 Lakhs or more, you strictly cannot pay the full amount to the seller.

• You Must Deduct: 1% of the total sale consideration (or the Stamp Duty Value, whichever is higher).
• Calculation Base: The 1% applies to the ENTIRE amount, not just the amount exceeding ₹50 Lakhs.
• You Must Deposit: This 1% directly to the Government using Form 26QB on the Income Tax Portal.

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A Practical Example (Don't Miss This)

🏠 Scenario: Buying a Flat for ₹80 Lakhs

You are buying a flat from Mr. Sharma.

• Total Value: ₹80,00,000 (₹80 Lakhs)
• TDS to Deduct (1%): ₹80,000
• Payment to Mr. Sharma: ₹79,20,000
• Payment to Govt (Form 26QB): ₹80,000

Crucial Step: After paying the government, you must download Form 16B (TDS Certificate) from the TRACES portal and give it to Mr. Sharma so he can claim this tax credit.

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⚠️ Critical Warning: The "Inoperative PAN" Trap

This is where many buyers get into deep trouble in 2026.

You need the Seller's PAN Card to file Form 26QB. But simply having the number isn't enough.

• The Risk: If the Seller's PAN is not linked with Aadhaar, it is classified as "Inoperative".
• The Consequence: If the PAN is Inoperative (or missing), the TDS rate shoots up from 1% to 20% (Section 206AA).
• Solution: Always verify the status of the Seller's PAN on the e-Filing portal before making the payment.

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Common Mistake: Joint Owners

If you are buying the property jointly (e.g., Husband and Wife) from a seller, you cannot file just one Form 26QB.

The Rule: You must file a separate Form 26QB for each buyer-seller combination. If there are 2 buyers and 1 seller, you must file 2 forms, splitting the tax amount accordingly.

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Protect Your Peace of Mind

Don't blindly trust your property broker or the builder to handle this. It is your PAN card on the line.

Before making the final payment, calculate the 1%, deduct it, and file Form 26QB on the official Income Tax e-Filing Portal (not the old NSDL site). It is a mandatory step to ensure your new home brings happiness, not legal notices.

General Advice Warning: The information provided in this article is for educational purposes only and does not constitute professional tax advice. Tax laws and portals change frequently. Please consult a Chartered Accountant (CA) or tax professional to ensure compliance with the latest provisions of the Income Tax Act.