Tax
TDS on Property Sale in India
The tax the buyer has to deduct — and the one that goes badly wrong when the seller turns out to be an NRI, because the liability lands on the buyer.
The short answer
If you buy property worth ₹50 lakh or more from a RESIDENT, you must deduct 1% TDS and pay it to the government. Not the seller — you.
If the seller is an NRI, everything changes. The rate is far higher, it applies to the whole sale price rather than the gain, you need a TAN, and if you get it wrong the department comes after YOU — not the seller who has left the country.
Buying from a resident — the simple case
| When it applies | Consideration of ₹50 lakh or more |
|---|---|
| Rate | 1% |
| On what | The higher of the sale consideration or the stamp duty value |
| Who deducts | The buyer |
| How to pay | Form 26QB, within 30 days of the end of the month of payment |
| Certificate to the seller | Form 16B |
| Do you need a TAN? | No — PAN is enough for 194-IA |
| If the seller has no PAN | Deduct at a much higher rate. Get their PAN. |
The Rs 50 lakh threshold is on the total consideration for the property, not on each buyer's or seller's share. Two buyers splitting a Rs 90 lakh flat cannot each claim to be under Rs 50 lakh — TDS still applies.
This is the ordinary case, and it is manageable. You deduct 1%, you pay it with Form 26QB, you give the seller Form 16B, and the seller claims the credit in their return.
Buying from an NRI — everything changes
If the seller is a non-resident, Section 194-IA does not apply. Section 195 does. And it is a different animal entirely:
• There is no ₹50 lakh threshold. TDS applies from the first rupee.
• The rate is far higher — the applicable LTCG rate (12.5%) plus surcharge and cess, or slab rates for a short-term gain.
• It applies to the WHOLE SALE CONSIDERATION, not just the gain — unless the seller obtains a Lower Deduction Certificate.
• You need a TAN — a Tax Deduction Account Number. PAN is not enough.
• You file Form 27Q, not 26QB.
The difference, on a ₹2 crore flat
- Seller is a RESIDENT
- TDS @ 1% of ₹2 crore
- ₹2,00,000
- Seller is an NRI — no LDC obtained
- TDS on the whole ₹2 crore, at LTCG rate + surcharge + cess
- ₹26,00,000+
- The difference
- ₹24 lakh+
Figures illustrative — the exact rate depends on surcharge, which depends on the consideration. The point is the order of magnitude, and the fact that it is charged on the whole sale price rather than the gain.
The buyer's liability — and why it matters so much
The obligation to deduct is the buyer's. Not the seller's.
If you deduct 1% because you assumed the seller was a resident, and they turn out to be an NRI — you are liable for the shortfall. Plus interest. Plus penalty.
And the seller, by then, is in Dubai. Or Toronto. And has your money.
This has ruined transactions. It is one of the most serious risks a private property buyer in India runs, and almost nobody is warned about it.
Not 'they seem Indian'. Not 'they have an Aadhaar'. Residential status for tax purposes is a technical question, and it depends on days spent in India — not on citizenship, not on where they were born.
A person can hold an Indian passport, own an Indian flat, and still be a non-resident for tax.
Get a written declaration of residential status from the seller. Get a copy of their passport. If there is any doubt, get a CA to confirm it — before you pay a rupee.
The Lower Deduction Certificate — the seller's remedy
The default position for an NRI seller is brutal: TDS on the whole sale price, when the actual tax is only on the gain. The seller is out of pocket, sometimes by tens of lakhs, until they file a return and claim a refund — which can take a year or more.
The fix is a Lower Deduction Certificate (Section 197), obtained from the Income Tax Department. It directs the buyer to deduct TDS on the actual gain rather than the whole consideration.
- The SELLER applies — the buyer cannot do it for them.
- Apply on the TRACES portal.
- Provide the computation of the actual capital gain.
- It takes weeks. Sometimes months.
- The certificate is issued to a specific buyer, for a specific transaction.
Not after. Not while the buyer waits.
Because without it, your buyer must deduct TDS on the entire sale price — and you will not see that money again until you have filed a return and waited for a refund.
On a ₹2 crore sale, that can be ₹25 lakh of your own money, sitting with the government for a year, for no reason other than that nobody applied for a certificate in time.
How to actually pay it
Resident seller — Form 26QB
- Deduct 1% from the payment to the seller.
- File Form 26QB online — it is a challan-cum-statement — within 30 days of the end of the month in which the deduction was made.
- You will need: both PANs, the property details, the consideration, the date of agreement and payment.
- Pay the TDS.
- Download Form 16B from TRACES a few days later, and give it to the seller. They need it to claim the credit.
- Instalments: if you are paying in stages, deduct and file 26QB on each instalment, not once at the end.
NRI seller — Form 27Q
- Get a TAN. Apply well in advance.
- Deduct at the rate specified in the Lower Deduction Certificate — or, if there isn't one, on the whole consideration at the applicable rate.
- Deposit the TDS.
- File Form 27Q quarterly.
- Issue Form 16A to the seller.
- Use a CA. This is not a form to fill in by yourself with a browser tab open.
We have written this against the current position and checked it carefully. But tax turns entirely on your specific facts: your residential status, when you bought, when you sell, which regime you are on, and what else is in your return.
Note also that the Income Tax Act, 2025 now replaces the 1961 Act, and section numbering is changing even where the substance is not. We use the familiar numbers — 54, 54F, 24(b), 80C — because those are what people search for and what CAs still say. Confirm the current section references with your accountant.
Before you sell a property, pay a CA. On a transaction this size it is the best-value fee you will ever pay, and the cost of getting it wrong runs to lakhs.
Frequently asked questions
What is TDS on property purchase in India?
If you buy property worth Rs 50 lakh or more from a resident, you must deduct 1% TDS under Section 194-IA and pay it to the government using Form 26QB. The obligation is the buyer's, not the seller's.
What is the TDS rate when buying property from an NRI?
Far higher, and it works differently. Section 195 applies instead of 194-IA: there is no Rs 50 lakh threshold, the rate is the applicable capital gains rate plus surcharge and cess, and it applies to the WHOLE SALE CONSIDERATION rather than the gain — unless the seller has obtained a Lower Deduction Certificate. The buyer also needs a TAN.
What happens if I deduct the wrong TDS?
The liability is yours, as the buyer. If you deduct 1% assuming the seller is a resident and they turn out to be an NRI, YOU are liable for the shortfall, plus interest and penalty — and the seller is by then abroad, with your money. Establish the seller's residential status in writing, with a passport copy, before you pay anything.
What is a Lower Deduction Certificate?
A certificate under Section 197 that an NRI seller obtains from the Income Tax Department, directing the buyer to deduct TDS on the actual capital gain rather than the whole sale consideration. Without it, TDS is deducted on the full sale price — potentially tens of lakhs of the seller's money, held by the government until they file a return and claim a refund. Apply for it BEFORE agreeing the sale.
Is TDS applicable if the property is under Rs 50 lakh?
Not under Section 194-IA, where the seller is a resident. But if the seller is an NRI, Section 195 applies and there is no threshold at all — TDS is due from the first rupee.
Do I need a TAN to deduct TDS on property?
Not for Section 194-IA, where the seller is a resident — your PAN is enough, and you file Form 26QB. But for an NRI seller, under Section 195, you do need a TAN, and you file Form 27Q. Apply for it well in advance.