One of the most commonly missed compliance steps in resale property transactions above Rs 50 lakh is TDS under Section 194-IA of the Income Tax Act, and the responsibility for getting it right sits with the buyer, not the seller. We flag this in nearly every high-value resale due diligence we do, because getting it wrong creates a problem for the buyer, not the seller, months or years after the deal closes.
When Section 194-IA Applies
Section 194-IA applies when you buy immovable property (other than agricultural land) from a resident Indian seller, where the total sale consideration or the stamp duty value, whichever is higher, is Rs 50 lakh or more. The buyer must deduct TDS at 1% of that amount and deposit it with the Income Tax Department, using Form 26QB, within 30 days from the end of the month in which the payment was made.
This applies to every instalment, not just the final one. If you are paying Rs 75 lakh in five instalments, TDS is deducted from each instalment, not only from the instalments that push the cumulative total past Rs 50 lakh.
Important: This Is for Resident Sellers Only
Section 194-IA specifically applies to purchases from resident sellers. If you are buying from an NRI seller, a different provision, Section 195, applies instead, at a materially higher deduction rate tied to capital gains, and the compliance process is more involved. We've covered that separately in our guide on TDS obligations when buying from an NRI seller. Confirming your seller's residential status correctly, before you calculate TDS, is the first step, and it is not always obvious from documents alone.
What Buyers Need to Do
- Obtain the seller's PAN. Form 26QB cannot be filed without it, and TDS at a much higher rate applies if PAN is unavailable.
- File Form 26QB on the income tax e-filing portal within 30 days of the end of the month of payment, this also serves as the TDS return, no separate TAN is required for this specific transaction.
- Issue Form 16B to the seller as proof of TDS deducted and deposited, generated after 26QB is filed and payment is reflected.
- Keep the challan and Form 16B with your property file. Buyers frequently need to produce this years later, at resale, refinancing, or if the sale is scrutinised.
What Happens If You Get This Wrong
Failure to deduct or deposit TDS under Section 194-IA exposes the buyer to interest on the shortfall and penalty proceedings, and can also complicate the seller's own tax filings if the deduction was never reflected against their PAN. We have seen buyers discover this gap only when refinancing or reselling, at which point correcting historical TDS compliance is considerably more work than doing it right at the time of purchase.
Where This Fits Into Due Diligence
TDS compliance is not something our standard title and document verification automatically covers, since it depends on the transaction structure and payment schedule, but we flag the requirement and the correct classification (194-IA vs 195) for every resale transaction we review above the threshold, as part of the legal opinion delivered with our due diligence report. If you are closing a resale purchase above Rs 50 lakh, get this right before you make the first payment. Talk to us about your specific transaction.