Section 194IA of Income Tax Act

Section 194IA of the Income Tax Act mandates the buyer to deduct 1% TDS on property purchases exceeding Rs. 50 lakhs (excluding agricultural land). The TDS must be deposited within 30 days via Form 26QB, and Form 16B must be issued to the seller as proof. PAN details of both parties are mandatory; failure to provide PAN attracts 20% TDS. No TDS is required if the sale value is Rs. 50 lakhs or below. Non-compliance may result in penalties under the Income Tax Act.
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Section 194IA of Income Tax Act
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2 min read
15 July 2025

Section 194IA of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on the sale of immovable property in India. If a property is sold for ₹50 lakh or more, the buyer must deduct TDS at 1% of the total sale consideration. The deducted amount must be deposited with the government using Form 26QB within 30 days of deduction. The seller can claim this TDS as a tax credit while filing returns. This provision ensures tax compliance in property transactions and applies to all buyers, except in cases where the seller is a non-resident (NRIs fall under Section 195). Proper filing of TDS helps avoid penalties and legal issues.

Section 194 of the Income Tax Act, 1961 outlines various rules for deducting tax at source, commonly known as TDS. Among its sub-sections, Section 194IA and Section 194IB are especially important. These sub-sections deal with TDS requirements for different property-related transactions. Section 194IA applies when a property is bought and ensures that the buyer deducts tax before paying the seller. Section 194IB, on the other hand, applies to rental payments. These rules help ensure timely tax collection and hold the paying party responsible for making the deduction and depositing the amount with the tax department.

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What is Section 194IA of Income Tax Act?

Section 194IA applies when you buy immovable property and ensures that tax is deducted at source (TDS) by the buyer before payment is made to the seller.

Here’s what you need to know:

  • TDS at 1% must be deducted by the buyer—not the seller.
  • This rule is applicable only if the property's sale value is more than Rs. 50 lakhs.
  • The law applies to all types of properties except agricultural land.
  • No additional cess or surcharge is added to the 1% TDS.
  • The buyer must deposit the TDS within 30 days from the end of the month in which the deduction was made.
  • Form 26QB must be submitted along with the TDS, containing PAN details of both buyer and seller.
  • If the seller’s PAN is not available, TDS increases to 20%.
  • The buyer must keep the challan receipt as proof of TDS payment. This includes transaction and CIN details.
  • A TDS certificate (Form 16B) must be issued by the buyer to the seller. It can be downloaded from the TRACES portal.
  • If the seller has not made any capital gains on the property, they can claim a refund while filing their income tax return.

To avoid TDS deduction altogether in such cases, the seller can obtain a certificate from the Assessing Officer confirming that TDS is not applicable.

TDS on sale of immovable property under Section 194-IA of Income Tax Act

As per Section 194IA of the Income Tax Act, any buyer purchasing an immovable property (excluding agricultural land) worth ₹50 lakh or more must deduct TDS at 1% of the sale value. The buyer is responsible for depositing this TDS with the government using Form 26QB within 30 days from the end of the month in which the deduction is made. Failure to comply may result in penalties and interest.

Section 194IA - TDS property sales by NRIs

As per the current Income Tax rules, when a Non-Resident Indian (NRI) sells property in India, they must pay capital gains tax. If the property was inherited, the date and cost of purchase by the original owner are used to decide if the gain is long-term or short-term.

Once decided:

  • Long-term gains (if held for more than 2 years) are taxed at 20%
    and
  • Short-term gains are taxed as per the NRI’s income slab

In this transaction, the buyer must deduct TDS from the sale amount and deposit it with the Income Tax Department. The buyer must also submit Form 27Q to report the TDS deduction and payment.

Section 194IA - Documents required for filing TDS on immovable property sale

To comply with Section 194IA when filing TDS on the sale of immovable property, the buyer must gather essential documents:

  • Registered sale agreement: A certified copy of the sale agreement is necessary for determining the TDS amount.
  • Property details: Details such as the property's location, size, and age are required to accurately establish the applicable TDS rate.
  • PAN card: The PAN numbers of both the buyer and the seller must be included in the TDS documentation.
  • Aadhaar number: In accordance with recent legal requirements, the Aadhaar number of the involved parties must be provided when submitting the TDS return.

Requirements of Section 194IA

As a buyer, you play a pivotal role in adhering to Section 194IA. Here are the key requirements:

  1. TDS deduction: The buyer is responsible for deducting TDS at a rate of 1% of the sale consideration amount. This TDS is to be paid to the government.

  2. TDS payment: TDS should be deducted at the time of payment to the seller. The deducted TDS amount must be deposited with the government using Form 26QB, accessible online through the NSDL portal.

  3. Filing details: You must provide details such as the seller's and buyer's PAN (Permanent Account Number) and specific property information when filing Form 26QB.

Filing Form 26QB

When a property is sold, the buyer must deduct TDS at 1% of the sale value and deposit it with the Income Tax Department using Form 26QB. This is mandatory under Section 194-IA of the Income Tax Act.

Additionally, the buyer must generate Form 16B and provide it to the seller as proof of TDS deduction. Below are some steps to file Form 26QB and generate Form 16B

Step 1: Log in to the Income Tax Portal

Go to the Income Tax e-filing portal and log in. Under the ‘e-File’ menu, select ‘e-Pay Tax’.

Step 2: Start a new payment

Click on ‘+ New Payment’ to begin the process.

Step 3: Select payment type

Choose ‘26QB – TDS on Property’ as the payment type.

Step 4: Fill in buyer details

Enter the buyer’s:

  • PAN
  • Contact details
  • Address

The system may auto-fill these fields if already available.

Step 5: Fill in seller details

Enter the seller’s:

  • PAN
  • Contact details
  • Address

Step 6: Enter property and sale details

  • Input the following details:
    • Property address
    • Type of property
    • Date of sale agreement
    • Sale amount

Once these details are entered, the system will auto-calculate the TDS amount.

Step 7: Make the payment

Choose your preferred payment method (net banking or other options). Once paid, you will receive a Challan 280 as proof of payment.

Step 8: Register on TRACES

Go to TRACES portal and register as a taxpayer using your PAN and challan details. This is needed to download Form 16B.

Step 9: Check Form 26AS

After about 7 days, verify that the TDS details appear correctly in Form 26AS under Part F (TDS on Sale of Property). It will show the seller’s:

  • PAN
  • Transaction date
  • Amount
  • Challan details

Step 10: Download Form 16B

Log in to TRACES and go to the ‘Download’ tab. Here, select ‘Form 16B’ (for Buyer). Next, enter the seller’s:

  • PAN
    and
  • Acknowledgement number from Form 26QB

Now, submit the request. Once available, download the zip file and open it using the buyer’s date of birth (format DDMMYYYY). This form should be handed over to the seller as proof of TDS deduction.

Once you understand the TDS filing process, you can focus on securing the right financing for your dream home. Ready to take the next step in your property journey? now. You may already be eligible, check your home loan offers from Bajaj Finserv by entering your mobile number and OTP.

Example of Section 194IA

Imagine you are buying a property for Rs. 80 lakh. According to Section 194IA, you must deduct 1% TDS on the sale consideration:

TDS Amount = Rs. 80,00,000 × 1% = Rs. 80,000

This Rs. 80,000 should be deducted at the time of payment to the seller and subsequently deposited with the government. Additionally, understanding the Income Tax Slab applicable to you can help you better plan your overall tax liability while ensuring compliance with Section 194IA. With property purchases involving substantial investments, securing the right financing is crucial for your financial planning. Explore home loan options from Bajaj Finserv with interest rates starting from 7.49%* p.a You may already be eligible, check your loan offers by entering your mobile number and OTP.

In conclusion, understanding Section 194IA is essential when engaging in property transactions. Adhering to the requirements of this provision ensures compliance with tax regulations and helps prevent tax evasion. As a buyer, you play a pivotal role in deducting and remitting TDS, making the property transaction process transparent and legally sound. If you have any doubts or require further information, consider consulting a tax expert or referring to official guidelines provided by the Income Tax Department. Additionally, you can calculate the tax payable using the income tax calculator.

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Section 194IA of the Income Tax Act in India pertains to the deduction of Tax Deducted at Source (TDS) on the sale of immovable property, specifically on the consideration paid for the transfer of a property.

Here is an explanation of the payment of TDS under Section 194IA:

1. Applicability:

  • Section 194IA is applicable when a person is responsible for paying any sum to a resident seller for the transfer of any immovable property, other than agricultural land.

2. Threshold limit:

  • TDS under Section 194IA is applicable when the consideration for the property transfer exceeds Rs. 50 lakh. If the consideration is Rs. 50 lakh or less, TDS is not required to be deducted.

3. Rate of TDS:

  • The TDS rate under Section 194IA is 1% of the consideration amount. This amount is deducted by the buyer at the time of making the payment to the seller.

4. Time of deduction:

  • TDS under Section 194IA is deducted at the time of credit of the sum to the account of the seller or at the time of payment, whichever is earlier.

5. Deposit of TDS:

  • The buyer is responsible for deducting TDS and depositing it with the government. The deposited TDS can be done through the online portal of the Income Tax Department.

6. TAN requirement:

  • The buyer is not required to have a Tax Deduction and Collection Account Number (TAN) to deduct TDS under Section 194IA. TDS can be deducted using the PAN of the buyer.

7. Form 26QB:

  • After deducting TDS, the buyer needs to file Form 26QB, providing details of the property transaction and TDS deduction. This form is to be submitted online.

8. Issuance of TDS certificate:

  • The buyer is required to furnish a TDS certificate (Form 16B) to the seller within 15 days from the due date for filing the statement.

9. Non-applicability to agricultural land:

  • It's important to note that TDS under Section 194IA is not applicable to the transfer of agricultural land.

Prerequisites of Section 194 IA TDS

Section 194IA of the Income Tax Act, 1961, pertains to the deduction of TDS (Tax Deducted at Source) on the sale of immovable property. Here are the key prerequisites and details associated with Section 194IA TDS:

  1. Applicability: Section 194IA applies to transactions involving the transfer of immovable property, where the consideration for the transfer exceeds fifty lakh rupees.
  2. Transaction scope: The section covers various types of transactions, including the sale of land, building, apartment, house, or any other immovable property.
  3. Consideration limit: TDS under Section 194IA is applicable when the consideration for the transfer of the property exceeds fifty lakh rupees in a single transaction.
  4. Time of deduction: TDS is required to be deducted at the time of credit or payment, whichever is earlier. This means that the diductor needs to deduct TDS when making the payment to the transferor or when the amount is credited, whichever happens first.
  5. TDS rate: As of my last knowledge update in January 2022, the applicable TDS rate under Section 194IA is 1% of the consideration amount. However, it's advisable to check for any updates or amendments to the tax rates.
  6. PAN of transferee and transferor: Both the transferee (buyer) and transferor (seller) must have a PAN (Permanent Account Number). PAN details of both parties need to be furnished during the TDS deduction process.
  7. TDS payment and reporting: The diductor is required to deposit the TDS amount with the government within the stipulated time frame. Additionally, a TDS return (Form 26QB) needs to be filed online, providing details of the transaction and TDS deduction.
  8. Exemption for agricultural land: Transactions involving agricultural land are generally exempt from TDS under Section 194IA. However, the exact criteria for land to be considered agricultural may vary.

Penalties for non-filing of TDS on sale of property

As per Section 194-IA, when a property is sold:

  • The buyer is required to deduct TDS
    and
  • Deposit it with the government

This TDS must be paid within seven days from the end of the month in which it is deducted. If the buyer fails to comply, there are financial consequences for both the buyer and the seller. Let’s understand them in detail:

Consequences for buyers

  • Late filing fee (Section 234E)
    • If Form 26QB is not submitted on time, a fee of Rs. 200 per day is charged.
    • This continues until the fee amount equals the TDS that was supposed to be deducted.
  • Interest on late deduction and payment
    • 1% per month is charged if TDS was not deducted on time.
    • 1.5% per month is charged if TDS was deducted but not deposited on time.
    • The interest is calculated from the date TDS was due until the date it is actually paid.
  • Additionally, the buyer may also face penalties under Section 271H if TDS statements are not submitted within the prescribed time. The penalty can range between Rs. 10,000 and Rs. 1 lakh, depending on the delay and non-compliance.

Consequences for sellers

  • Cannot claim TDS credit
    • If the buyer fails to file Form 26QB or delays filing, the seller cannot claim the TDS credit in their tax return.
    • If this happens, it might result in a higher tax burden
  • The TDS must be deposited
    • The seller should make sure the buyer has deposited the TDS using an authorised bank or through online tax payment.
    • This ensures the seller can claim the TDS credit without problems.

Some key considerations

  • Cap on late filing fees
    • The late fee cannot be more than the TDS amount that should have been deducted.
  • Filing is required even if no TDS is deducted
    • Even when no TDS is applicable due to a lower transaction value or exemption, Form 26QB must still be filed to report the transaction.
  • Combined penalties possible
    • If there is both a delay in deducting TDS and in depositing it, both types of interest (1% and 1.5%) will apply.
    • This increases the total amount the buyer has to pay.
  • Non-compliance may also reflect in the buyer’s Form 26AS and affect future assessments or refund claims. Therefore, timely compliance is critical.

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Notice for non-compliance with form 26QB filing requirements

When a property is bought or sold for more than Rs. 50 lakh, the registrar’s office sends a report called the Annual Information Return (AIR) to the Income Tax Department. This report includes the details of such property transactions.

Based on this information, the tax department checks whether the buyer has followed the rules under Section 194-IA.

The buyer is required to:

  • Deduct 1% TDS from the sale price
    and
  • Deposit it using Form 26QB within the deadline

If the buyer fails to deduct the tax or does not file Form 26QB on time, the Income Tax Department may send a notice to the buyer. This notice informs the buyer that they have not followed the legal requirement related to TDS on the property purchase.

Difference between Section 194IA and 194IA

Aspect

Section 194IA

Section 194IB

Scope

Applies to the sale of immovable property where the value exceeds Rs. 50 lakhs

Applies to rent payments exceeding Rs. 50,000 per month

TDS rate

1% of the property value

5% of the total rent amount

Applicable to

Buyers of immovable property

Individuals or HUFs paying rent

Time of deduction

At the time of payment or credit, whichever is earlier

At the time of payment or credit of rent for the last month of the year

Non-compliance consequences

May attract penalties, interest, and disallowance of TDS credit

May lead to late fees and penalties similar to Section 194IA

 

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Frequently asked questions

What is the TDS on the sale of the property?

TDS on property transactions, as per Section 194IA, is the tax deducted at the source by the buyer when acquiring immovable property. This is done to ensure that the seller pays the appropriate taxes.

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What happens if I file TDS statements late?

Filing TDS statements late can lead to penalties and interest charges. It is essential to adhere to the specified deadlines to avoid these consequences.

Who is responsible to deduct TDS on the sale of the property?

The buyer of the property is responsible for deducting TDS under Section 194IA.

What if I do not have the seller's PAN to deduct TDS on the sale of the property?

It is crucial to obtain the seller's PAN for TDS deduction. If you cannot obtain it, you may face difficulties in completing the transaction and complying with tax regulations.

What is the TDS limit for Section 194IA?

Section 194IA applies to property transactions with a sale consideration equal to or exceeding Rs. 50 lakh. If the property's value is below this threshold, TDS is not applicable.

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What is 194IA and 194IB?

194IA and 194IB are sections of the Indian Income Tax Act. 194IA deals with TDS (Tax Deducted at Source) on property transactions exceeding Rs. 50 lakh, while 194IB pertains to TDS on rental payments exceeding Rs. 50,000 per month by individuals or HUFs not subject to tax audit.

What is 194IB?

194IB is a provision under the Indian Income Tax Act requiring individuals or Hindu Undivided Families (HUFs) not subject to tax audit to deduct TDS (Tax Deducted at Source) at a rate of 5% on rental payments exceeding Rs. 50,000 per month.

What is 194IC?

194IC is a section of the Indian Income Tax Act pertaining to TDS (Tax Deducted at Source) on payment under the Joint Development Agreement. It requires a deduction of TDS at a specified rate on consideration payable under such agreements for the development of real estate.

What is penalty under section 194IA?

If the buyer does not deduct or deposit TDS on a property purchase, the following penalties apply:

  • A late fee of Rs. 200 per day is charged until it equals the TDS amount.
  • If TDS is not deducted on time, 1% interest per month is charged.
  • If deducted but not paid, 1.5% interest per month is charged until the payment is made to the government.

What is the new rule for TDS on property?

Under Section 194-IA of the Income Tax Act, the buyer must deduct 1% TDS from the sale price of a property if it costs more than Rs. 50 lakh. This applies to all types of properties:

  • Residential
  • Commercial
  • Land

Please note that the buyer (not the seller) is responsible for deducting and depositing the TDS with the Income Tax Department.

What is TDS 194I, 194IA, and 194IB?

Section 194I deals with TDS on rent for amounts above Rs. 2.4 lakh annually, usually applicable to businesses or individuals under audit. Section 194IA covers TDS on property purchases above Rs. 50 lakh, where the buyer deducts 1% TDS. Section 194IB is for individuals or HUFs paying monthly rent above Rs. 50,000, requiring 5% TDS deduction annually.

What is the new rule for TDS on property?

As per Section 194IA, the buyer must deduct 1% TDS when purchasing any immovable property (except agricultural land) worth more than Rs. 50 lakh. The rule applies to residential, commercial, and land transactions. The buyer is responsible for deducting and depositing this TDS within 30 days, along with filing Form 26QB.

What if TDS is not deducted under Section 194IA?

If the buyer fails to deduct TDS as required, they may be liable to pay a penalty equal to the TDS amount. Additionally, interest will be charged for each month or part of a month during which the TDS remains unpaid. Non-deduction can also lead to disallowance of the TDS credit to the seller.

What is the penalty for 194IA interest?

If the buyer deducts TDS but delays depositing it, interest at 1.5% per month (or part of a month) is charged from the date of deduction until the date of actual deposit. This interest is mandatory and must be paid in addition to any penalties under the Income Tax Act.

What is the rent limit for 194IB?

Section 194IB applies when the monthly rent paid to a resident exceeds Rs. 50,000. In such cases, individuals or HUFs must deduct 5% TDS from the total rent amount. The TDS must be deposited along with Form 26QC, and the tenant must provide the TDS certificate (Form 16C) to the landlord.

What is the clarification of 194IA?

Under Section 194IA, the buyer of immovable property must deduct 1% TDS if the sale value is more than Rs. 50 lakh. The deduction must be made at the time of payment. Agricultural land is excluded, and the buyer must file Form 26QB and issue Form 16B to the seller.

What is the golden rule of TDS?

The general principle of TDS is that the person making payment is responsible for deducting tax at the source. The "golden rule" of accounts—debit the receiver, credit the giver—aligns with this, as the one who pays is responsible for ensuring tax compliance at the time of the transaction.

How to claim 194IA?

The seller can claim the TDS credit while filing their income tax return, provided the buyer has deposited the TDS and issued Form 16B. The certificate can be downloaded from the TRACES portal. If the property sale does not attract capital gains, the seller may also seek a refund.

How to avoid TDS on FD?

If your total annual income is below the taxable limit, you can avoid TDS on fixed deposit interest by submitting Form 15G (for individuals) or Form 15H (for senior citizens) to your bank. These forms request the bank not to deduct TDS from your interest income.

Are 26QB and 194IA the same?

Form 26QB is the online form used for reporting TDS under Section 194IA. When a buyer deducts TDS on a property transaction exceeding Rs. 50 lakh, they must file Form 26QB and later issue Form 16B to the seller. This ensures transparency and compliance under Section 194IA.

What is the difference between 194I and 194IA?

Section 194I covers TDS on rental income above Rs. 2.4 lakh per year, while Section 194IA is for property sales above Rs. 50 lakh. The former applies mostly to tenants paying rent, while the latter applies to buyers purchasing immovable property.

Is it mandatory to show sale of property in ITR?

Yes, it is compulsory to report the sale of property in your Income Tax Return (ITR). You must disclose details such as the sale value, capital gains, and TDS deducted. This applies even if there’s no gain. Typically, ITR-2 or ITR-3 forms are used depending on your income type.

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