TDS on Property Purchase — The Buyer’s Responsibility

When you buy property in India, the responsibility for deducting tax at source often sits with you, the buyer — not the seller. This surprises many first-time purchasers, but the law places the compliance burden on the person paying for the property, and getting it wrong can lead to interest and penalties, so it is worth understanding before you make the payment.

For purchases from a resident seller, tax is generally required to be deducted at source under Section 194-IA where the consideration for the property is at or above a specified threshold — indicatively fifty lakh rupees. The buyer deducts a small percentage of the amount paid, commonly cited as one percent, and pays the balance to the seller. Confirm the current threshold and rate, as these can be revised.

The mechanics are specific. The buyer typically deposits the deducted tax to the government using the prescribed challan-cum-statement, commonly Form 26QB, within the required time after payment, and then issues the seller a TDS certificate, commonly Form 16B, as proof. Where there are multiple buyers or sellers, or payments are made in instalments, the filing has to be handled correctly for each, so follow the exact procedure rather than improvising.

The situation is materially different when the seller is an NRI. In that case deduction generally falls under a different provision, Section 195, often at higher rates and computed on the gains or sale value as applicable, and the buyer may need to obtain a TAN to comply. The seller can sometimes apply for a lower or nil deduction certificate. Because the stakes and rates are higher here, do not treat an NRI purchase like an ordinary one.

A few practical points help you stay clean. Collect the seller’s PAN and verify it, because a missing or incorrect PAN can attract a much higher deduction rate; deduct at the time of payment rather than after; deposit on time; and hand over the TDS certificate promptly so the seller can claim credit. Keep every acknowledgement, since these are your proof of compliance.

TDS thresholds, rates, forms and procedures change from time to time, and the rules for NRI sellers are particularly nuanced. Treat the figures here as indicative, and confirm the current requirements — and, for any NRI or high-value transaction, work with a tax professional — before you make the payment.