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The 1% every buyer must deduct, the higher-of-circle-value trap, Form 26QB step by step, what changes when the seller is an NRI — and the penalties that make this the most expensive form people forget to file.
TDS on purchase of property in Delhi is 1% of the sale consideration or the stamp-duty (circle) value, whichever is higher, deducted by the buyer when the property is worth ₹50 lakh or more — which means effectively every South Delhi transaction. You deposit it through Form 26QB (no TAN needed, your PAN suffices) within 30 days from the end of the month of deduction, and issue the seller Form 16B. If the seller is an NRI, this regime does not apply at all: Section 195 takes over, there is no threshold, and the rate jumps to the seller’s capital-gains rate — roughly 13–15% on the full price unless a lower-deduction certificate is obtained.
TDS on purchase of property in Delhi is the one tax obligation in a sale that sits on the buyer’s head — and the one most often mishandled, because buyers assume their lawyer, banker or broker “does it”. They usually don’t. The deduction is simple; the traps — the higher-of rule, joint-party thresholds, instalment mechanics and the NRI regime — are where real money gets lost. Here is the complete, current picture.
Section 194-IA of the Income-tax Act (carried into the new Income-tax Act, 2025 framework from 1 April 2026) requires any buyer of immovable property from a resident seller to deduct 1% at the time of payment or credit, whichever is earlier. Three refinements decide most real cases. First, the higher-of rule: since 2022, the 1% applies to the sale consideration or the stamp-duty value, whichever is higher — relevant in Delhi, where circle rates and market prices diverge in both directions by colony. Second, the aggregate threshold: following the October 2024 amendment, the ₹50 lakh test applies to the total consideration for the property — splitting a deal across two buyers or two sellers at ₹40 lakh each no longer escapes TDS. Third, instalments: deduct 1% from each payment, including the token and part payments made before registration, not one lump sum at the deed.
| Situation | What applies |
|---|---|
| Standard resale, resident seller | 1% of higher of consideration or circle value; Form 26QB; Form 16B to seller |
| Joint buyers / joint sellers | ₹50L threshold on the aggregate deal; each buyer files a 26QB for their share paid to each seller |
| Payment in instalments | Deduct 1% on every instalment when paid, including advances before the deed |
| Home-loan funded purchase | TDS obligation stays with the buyer — instruct the bank to disburse 1% short, or deduct from own contribution |
| Seller doesn’t furnish PAN | Rate jumps to 20% under Section 206AA — verify the PAN before token money |
| Seller is an NRI | Section 195, not 194-IA: no ₹50L threshold, deduction at the seller’s capital-gains rate on the full price unless a lower-deduction certificate is produced |
| Under-construction / builder payments | 1% on each progress payment where consideration is ₹50L+ (GST component excluded when separately shown) |
Before any money moves — a wrong or missing PAN means 20% deduction and credit-matching misery later. Confirm the name on the PAN matches the deed.
On the higher of the agreed price or the circle value, from the token onward. Pay the seller 99%; the 1% is theirs too — you’re only routing it to the government against their PAN.
On the Income-tax e-filing portal: buyer and seller PANs, property details, consideration, payment dates. One form per buyer–seller pair. No TAN is needed — this is the rare TDS that runs on PAN alone.
Generated on TRACES about a week after payment. The seller needs it to claim the credit in their return; a courteous buyer hands it over without being chased.
Sub-registrars and the seller’s lawyer will want proof the TDS on purchase of property in Delhi has actually been deposited — it’s now a standard item in the registration file.
This is the single costliest thing to get wrong in South Delhi, where a large share of sellers live abroad. Under Section 195 there is no ₹50 lakh threshold and no flat 1% — the buyer must deduct at the rate applicable to the seller’s gain: for long-term holdings, 12.5% plus surcharge and 4% cess, applied to the entire sale price unless the seller obtains a lower-deduction certificate (Form 13) from their assessing officer authorising deduction on the actual gain. On a ₹10 crore floor that is the difference between depositing ~₹1.4 crore and a fraction of it — which is why NRI sellers should apply for the certificate before signing the agreement. Budget 2026 simplified the buyer’s side: TDS on an NRI purchase is now deposited against the buyer’s PAN rather than requiring a TAN. The full seller-side picture — repatriation, 15CA/CB, the works — is in our NRI guide, and the capital-gains math in our capital gains guide.
Miss the deduction and interest runs at 1% per month; deduct but deposit late and it’s 1.5% per month — plus a late-filing fee of ₹200 per day for the 26QB (capped at the TDS amount) and exposure to penalty. The department traces every registered deed through the sub-registrar’s reporting, so property TDS defaults are found, not overlooked. On an NRI purchase the stakes escalate: the buyer is personally liable for the shortfall. Deduct first, argue later is the only safe rule.
Agreed price ₹10,00,00,000; circle value lower. TDS = ₹10,00,000 (1%). Buyer pays the seller ₹9.9 crore across token, agreement and closing — deducting proportionately on each tranche — files one Form 26QB per payment within 30 days of each month-end, and hands over Form 16B. Same floor, NRI seller with no certificate: deduction becomes roughly ₹1.43 crore (12.5% + surcharge + cess on the full price) — recoverable by the seller only at return-filing, a year’s cash flow lost to one missing Form 13.
The 1% isn’t the buyer’s cost. Getting it wrong is.
The buyer deducts and deposits it, but economically it is the seller’s money: 1% of their sale price routed to the government against their PAN, claimable in their tax return. The compliance burden and the penalties for getting it wrong, however, sit entirely on the buyer.
On whichever is higher. If a floor sells at ₹9 crore but the circle-rate value computes to ₹9.4 crore, TDS is 1% of ₹9.4 crore. In colonies where market prices exceed circle values — most of South Delhi — the actual price governs.
No — since October 2024 the threshold applies to the total consideration for the property. Two buyers at ₹40 lakh each is an ₹80 lakh deal, and TDS applies; each buyer files a 26QB for their share.
No — Form 26QB works on the buyer’s PAN alone for resident-seller deals. Following Budget 2026, even NRI-purchase TDS is deposited against the buyer’s PAN, removing the old TAN requirement.
Within 30 days from the end of the month in which the deduction was made. Deduct on 5 July, deposit by 30 August. Instalment payments each trigger their own clock.
The obligation remains yours. Either instruct the bank to disburse 1% less to the seller so you can deposit it, or fund the TDS from your own contribution. Banks routinely accommodate this — it just has to be arranged before disbursement, as our home loan guide notes.
Ask directly and verify — residency for tax is about days spent in India, not citizenship or an Indian address on the deed. An indemnity clause plus a copy of the seller’s return or residency declaration belongs in the agreement, because if they turn out non-resident, the shortfall is recovered from you.
Yes — the seller applies for a lower-deduction certificate (Form 13) so the buyer deducts on the actual capital gain rather than the full price. It takes time, so it must be initiated before the agreement timeline is locked; without it, the excess is refunded only after the seller files their return.
No — where GST is separately shown in the builder’s demand, TDS applies on the base consideration excluding GST, per CBDT’s clarification. On resale deals there is no GST at all.
The rate becomes 20% under Section 206AA, and the seller’s credit won’t match, creating a dispute you’ll be dragged into. Verifying the PAN against the name on the title is a 2-minute check that belongs before the token cheque.
PAN verification, residency checks, TDS mechanics and the full paper trail — handled with the deal, not after it. Clean deals only.
Positions reflect Section 194-IA and Section 195 of the Income-tax Act as amended (including the October 2024 aggregate-threshold amendment and Budget 2026 changes) and as carried into the Income-tax Act, 2025 framework effective 1 April 2026, per the Income Tax Department at incometax.gov.in. Rates, forms and timelines change by notification; verify with a chartered accountant before relying on them for a transaction. This is general information, not tax advice.
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