The buyer is the deductor — and the buyer carries the liability
Every Pune flat sale of ₹50 lakh or more comes with a quiet but binding compliance step for the buyer. Under Section 194-IA of the Income-tax Act, 1961, the buyer must deduct 1% TDS from the payment to the seller, pay it to the Central Government through Form 26QB, and issue Form 16B to the seller. The interest, penalty and compounding exposure for missing any step is on the buyer — not the builder, not the broker.
This guide explains who must deduct, when, how, and where the rules sit alongside other parts of the transaction.
Who must deduct
Any person buying immovable property — other than rural agricultural land — from a resident seller must deduct TDS under Section 194-IA, if the consideration or the stamp duty value of the property is ₹50 lakh or more. The rule covers individuals, HUFs, companies, firms — any buyer.
A few important boundaries:
- NRI seller — Section 194-IA does not apply. Instead, Section 195 applies, with TDS at much higher rates on the gross consideration unless the seller has a Section 197 lower-deduction certificate. See our Section 197 NRI lower-TDS certificate guide.
- Rural agricultural land — outside Section 194-IA.
- Multiple buyers / multiple sellers — each pair is examined separately; the 1% applies on each buyer's share of consideration, with the 26QB filed by each buyer for each seller.
- Joint loan / joint purchase — TDS is deducted on each instalment by each buyer in their share.
What rate, on what amount
The deduction is 1% of the sale consideration or the stamp duty value, whichever is higher. The higher-of-two rule was introduced to plug an under-pricing gap — buyers were structuring agreements at consideration below the stamp duty value to escape TDS.
If the property is ₹85 lakh by agreement but ₹95 lakh by stamp duty (ready reckoner), the TDS base is ₹95 lakh — so 1% = ₹95,000.
The 1% TDS is over the threshold; below ₹50 lakh, no TDS applies under Section 194-IA (a different chapter applies for rentals under 194-IB).
When to deduct — on payment, not on agreement
TDS is deducted at the earlier of credit to the seller's account or payment. In practice, this means every instalment the buyer pays — booking amount, slab-stage payments, possession-linked payments — attracts TDS at 1% on that instalment when paid (computed on the gross consideration or stamp duty value, but settled instalment-wise).
For under-construction properties paid in instalments over a year, the buyer makes multiple 26QB filings — one per instalment per seller.
Form 26QB — the challan-cum-statement
Section 194-IA TDS is not deposited via standard TDS challan 281. It uses Form 26QB, a special challan-cum-statement filed on the TIN-NSDL portal (now Protean) or via the income-tax e-filing portal:
- Fill the form with buyer's PAN, seller's PAN, property details, consideration, instalment amount, and the TDS at 1%.
- Pay the TDS online (net banking or selected payment modes) or generate a challan for offline payment within a window.
- The system generates an acknowledgement.
Due date — the TDS is to be deposited (and Form 26QB filed) within 30 days from the end of the month in which the TDS was deducted. A TDS deducted on 15 July must be deposited via 26QB by 30 August.
Form 16B — the certificate to the seller
After Form 26QB is processed, the buyer must download Form 16B from the TRACES portal and issue it to the seller within 15 days of the due date of furnishing the 26QB statement. Form 16B is the seller's proof of TDS deducted, which they claim as a credit in their own ITR.
For a Pune buyer paying instalments over 12 months, that means 12 cycles of 26QB filing and 12 Form 16Bs issued to the seller.
What happens if you don't deduct or don't file
The compliance failures and their consequences:
- Failure to deduct — interest under Section 201(1A) at 1% per month from the date TDS was deductible till the date it ought to have been deducted, plus disallowance of the corresponding expense (relevant where the buyer is a business).
- Failure to deposit after deduction — interest at 1.5% per month from deduction to deposit, plus possible prosecution under Section 276B.
- Late filing of 26QB — late fee under Section 234E at ₹200 per day, capped at the TDS amount.
- Late issue of Form 16B — separate penalty exposure under Section 272A.
The buyer is liable for all of these, even if the seller has paid the full tax in their own return.
Practical workflow for a Pune flat buyer
For an under-construction flat in Hinjewadi at ₹1.2 crore, paid as 10% on booking, 30% on three slab stages, 10% on possession:
- Booking ₹12 lakh — deduct ₹12,000 (1% of ₹12 lakh) via 26QB within 30 days of the month-end; download 16B; hand to seller.
- Slab stage 1 ₹36 lakh — deduct ₹36,000 via 26QB; download 16B.
- Slab stage 2, 3 — same drill, each as a separate 26QB.
- Possession ₹12 lakh — final 26QB and 16B.
If the stamp duty value is higher than ₹1.2 crore, the 1% is calculated on the higher value, but applied proportionally to each instalment paid.
What about ready-to-move-in property?
Same TDS regime — Section 194-IA applies on payment to a resident seller. A 100% single-instalment payment on registration generates one 26QB filing with the TDS on the whole consideration (or stamp duty value, whichever is higher).
The buyer typically pays TDS first, then the net amount to the seller; both transactions are documented in the sale deed.
TDS on NRI-seller sale — different chapter
For a Pune flat purchased from an NRI seller, Section 194-IA does not apply. Instead, Section 195 applies at the long-term capital-gains rate plus surcharge and cess — typically around 20%+ on the gross consideration. An NRI seller with a Section 197 lower-deduction certificate reduces this to the certified rate. The buyer in this case files Form 27Q for TDS, not 26QB.
The interaction between an NRI sale and the GST position on under-construction flats (see GST on Real Estate Transactions 2026) often produces high-value coordination work — the certificate, the TDS, the GST and the repatriation all sit together.
Pune note: TDS is part of the closing checklist
At RDA Tax Advisory Services, Baner, Section 194-IA compliance is built into every property-purchase advisory. We compute the TDS at 1% on the higher of consideration and stamp duty value, prepare the 26QB filings per instalment, download Form 16B from TRACES and hand them to the seller, and reconcile against the buyer's 26AS so the TDS is captured in the right financial year. For NRI-seller transactions, we coordinate the Section 197 lower-deduction certificate and the Form 27Q TDS chain. Office No. 102, Snehraj Apartment, Baner, Pune 411045 · call +91 77570 45059.
Don't carry the seller's tax exposure
Buying a Pune flat at ₹50 lakh or more? RDA handles the Section 194-IA / 26QB / 16B compliance per instalment, so the buyer's exposure is closed at closing. Book a property purchase consult at rdatax.in or call +91 77570 45059 — RDA Tax Advisory Services, Baner, Pune.
Verification note: Material legal positions — Section 194-IA Income-tax Act (1% TDS on the higher of consideration or stamp duty value where either is ≥ ₹50 lakh, excluding rural agricultural land, from a resident seller); the Form 26QB challan-cum-statement; the 30-day deposit window (within 30 days from the end of the month of deduction); the Form 16B certificate downloaded from TRACES and issued within 15 days of the 26QB due date; the Section 195 alternative regime for NRI-seller transactions; the interest provisions of Sections 201 / 234E and prosecution exposure under Section 276B — are sourced from the Income Tax Department portal (incometaxindia.gov.in). Confirm specific deals with your CA.
