Buying a property involves more than just arranging funds and executing the sale deed. Under the Income-tax Act, 2025, a buyer may also be required to deduct Tax Deducted at Source (TDS) before making payment to the seller. Non-compliance can lead to interest, late filing fees, penalties, and even prosecution in certain cases.

This guide explains when TDS is applicable, the applicable rates, compliance requirements, prescribed forms, and the consequences of non-compliance.

1. Which Properties Are Covered?

Section 393(1) of the Income-tax Act, 2025 (earlier Section 194-IA of the Income-tax Act, 1961) applies to the purchase of Immovable Property, including:

• Residential flats

• Independent houses

• Commercial offices

• Shops

• Industrial properties

• Non-agricultural land

The provisions do not apply to agricultural land as defined under the Income-tax Act.

2. When is TDS Applicable?

The buyer must deduct TDS where the sale consideration or the stamp duty value of the property is ₹50 lakh or more, whichever is higher.

TDS is required to be deducted at the time of payment or credit to the seller, whichever is earlier. This applies whether payment is made in a single payment, through instalments, by cheque, bank transfer or housing loan disbursement.

3. Applicable TDS Rates

• Resident seller furnishing PAN – 1%

• Resident seller not furnishing PAN – 20% (Section 397(2) [Earlier Section 206AA])

• Non-resident seller – Section 393(2) (Earlier Section 195) applies. Separate TDS provisions and compliance requirements are applicable.

4. Who is Responsible for Compliance?

The buyer is responsible for deducting TDS, depositing it with the Government, filing the prescribed statement and issuing the TDS certificate. TAN is not required for compliance under Section 393(1).

5. Compliance Process

Step 1 – Deduct TDS while making payment.

Step 2 – Deposit TDS through Form 141 – Schedule B (Earlier Form 26QB) within 30 days from the end of the month in which TDS is deducted.

Step 3 – Download Form 132 (Earlier Form 16B).

Step 4 – Issue Form 132 (Earlier Form 16B) to the seller within 15 days from the due date of filing Form 141.

6. Forms Required

• Form 141 – Schedule B (Earlier Form 26QB): Challan-cum-Statement for payment of TDS.

• Form 132 (Earlier Form 16B): TDS Certificate issued by the buyer.

7. Consequences of Non-Compliance

Interest under Section 398 (Earlier Section 201(1A)):

• 1% per month or part thereof for failure to deduct.

• 1.5% per month or part thereof for failure to deposit after deduction.

Late Filing Fee: Section 427 (Earlier Section 234E): ₹200 per day, restricted to the amount of TDS.

Penalty: Section 448 (Earlier Section 271C): Penalty up to the amount of TDS. Failure to file or incorrect filing of Form 141 may also attract a penalty of ₹10,000 to ₹1,00,000.

Prosecution may also be initiated where TDS is deducted but not deposited.

8. Practical Points Buyers Should Remember

• Verify the seller's PAN.

• Check the ₹50 lakh threshold.

• Deduct TDS before payment.

• Deposit TDS within time.

• File Form 141 – Schedule B.

• Issue Form 132.

• Preserve all records.

9. Illustrative Examples

Example 1: One Buyer and Two Sellers

Property Value: ₹80,00,000

Compliance: Two separate Form 141 – Schedule B (Earlier Form 26QB) are required, one for each seller. Separate Form 132 (Earlier Form 16B) must be issued to each seller.

Example 2: Two Buyers and One Seller

Property Value: ₹1,20,00,000

Compliance: Each buyer files a separate Form 141 – Schedule B and issues a separate Form 132 to the seller.

Example 3: Purchase Through Instalments

Property Value: ₹90,00,000

Compliance: TDS must be deducted at the time of each payment or credit, whichever is earlier, and deposited within the prescribed due date.

10. Summary at a Glance

Conclusion

TDS compliance while purchasing Immovable Property is a statutory responsibility. Timely deduction, filing of Form 141 – Schedule B and issuance of Form 132 help buyers avoid interest, fees, penalties and litigation.