TDS on Property Purchase in India: Rules for Buyers

TDS, tax deducted at source, is money the buyer must hold back from the seller and pay to the government. For a resident Indian seller it is governed by Section 194-IA. If the property is worth Rs 50 lakh or more, you deduct 1 percent of the sale price, or of the stamp-duty value (the Haryana circle rate or collector rate), whichever is higher. The 1 percent applies to the whole amount, not just the part above Rs 50 lakh. In Gurgaon almost every luxury villa, builder floor, plot or apartment deal clears Rs 50 lakh, so this rule applies to nearly all of them.

You do not need a TAN for this. File Form 26QB using your PAN and the seller's PAN within 30 days from the end of the month in which you pay, and this applies to each instalment and booking advance separately. Then download Form 16B and hand it to the seller as proof. If the seller's PAN is missing or inoperative, you must deduct 20 percent instead of 1 percent. Since 1 October 2024 the Rs 50 lakh test is applied to the total property value, so joint buyers or multiple sellers cannot split a deal to dodge TDS, and a separate Form 26QB is filed for each buyer and seller pair.

Buying from an NRI seller is a different and heavier regime under Section 195. TDS is charged on the full sale consideration, not just the profit, and at much higher rates: roughly 12.5 percent plus surcharge and cess for long-term gains (property held over 24 months and transferred on or after 23 July 2024), and about 30 percent plus surcharge and cess for short-term gains. Here the buyer must obtain a TAN, deposit the tax, file Form 27Q and issue Form 16A. Many Gurgaon sellers are NRIs, so confirm residency early. The NRI can apply for a lower-deduction certificate under Section 197 so that tax is computed on the actual gain rather than the whole price, which frees up a large part of the buyer's payment.

Keep TDS separate in your head from Haryana stamp duty and registration charges, which are a different cost paid to the state at the registry. TDS is not an extra tax on you, it is the seller's income tax that you collect and deposit, and it is adjusted in the seller's return. But the legal duty, and the penalty for getting it wrong, sit with you as the buyer, so deduct it before releasing the final payment and file on time. For high-value or NRI deals, have your conveyancing lawyer or CA confirm the exact rate and paperwork before you sign.