TDS on Property Purchase in India: What Every Buyer Must Deduct and Deposit
Understand TDS on property purchase in India, the 1% rate above ₹50 lakh, Form 26QB filing, and NRI seller rules before you buy your Mumbai home.
Buying a home in Mumbai involves more than the figure on the brochure. One obligation catches plenty of first-time buyers off guard: the 1% tax deducted at source (TDS) that you, the buyer, must withhold and deposit with the government. Handle it correctly, and it is worry-free. Miss it, and the penalty lands on you, not the seller.
A quick summary:
- TDS on property purchase of 1% kicks in once the property value reaches ₹50 lakh or more, and it is the buyer who deducts it.
- It is worked out on the higher of the agreement value or the stamp duty (ready reckoner) value.
- You deposit it through Form 26QB, then hand the seller Form 16B as proof.
- It is not an extra cost. It is the seller's tax, collected in advance through you.
What is TDS on Property Purchase and Why Does the Buyer Deduct It?
Under Section 194-IA of the Income Tax Act, anyone buying immovable property (other than agricultural land) worth ₹50 lakh or more must deduct 1% of the consideration before paying the seller. In tax language, the buyer is the deductor and the seller is the deductee.
The rule, framed by the Central Board of Direct Taxes, places the duty on the party that controls the payment. But it is not money out of your pocket on top of the price; it is advance tax on the seller's behalf: you route 1% to the government, pay the remaining 99% to the seller, and the seller later claims that 1% as tax already paid.
When Does the 1% TDS Apply to a Mumbai Property?
The trigger is the ₹50 lakh threshold. Once the consideration for the immovable property reaches or crosses it, the 1% applies to the whole amount, not just the slice above ₹50 lakh.
In Mumbai, that threshold is crossed almost by default. An under-construction home such as Rustomjee Privé in the BKC Annexe sits comfortably above ₹50 lakh, so TDS on property purchase is a given rather than a maybe.
On What Value is TDS Calculated: Agreement Value or Stamp Duty Value?
On whichever is higher. TDS is deducted on the greater of the agreement value (your negotiated price) or the stamp duty value, also known as the ready reckoner or circle rate. This distinction matters in Mumbai, where the ready reckoner figure can lift the valuation above the price on paper.
Read Also: Stamp Duty & Registration Charges in Mumbai
How Do You Deposit TDS Using Form 26QB?
Form 26QB is a challan-cum-statement; it reports the deduction and pays it in one go. As per the Income Tax Department of India, the deducted sum must reach the government within 30 days from the end of the month in which the payment was made.
Five steps, start to finish:
- Make the payment to the seller and deduct 1%.
- Log in to the income tax e-filing portal and open Form 26QB.
- Enter both PANs: yours and the seller's. Both are mandatory.
- Pay the 1% online.
- Save the challan and the acknowledgement number.
What is Form 16B and How Does the Seller Claim the Credit?
After Form 26QB is processed, you download Form 16B (the TDS certificate) from the TRACES portal and pass it to the seller. The deduction then appears in the seller's Form 26AS and annual information statement, allowing them to claim the 1% as a tax credit when they file their income tax return.
How is TDS Different When You Buy From an NRI Seller?
Quite different, and the gap is wide. A resident sale runs under Section 194-IA at a flat 1%. An NRI seller falls under Section 195, where the ₹50 lakh cushion disappears, and the rate tracks capital gains rather than a flat percentage.
Read Also: TDS on Sale of Property in 2026
When Are Multiple Buyers or Instalment Payments Involved?
For joint buyers, each co-owner files their own Form 26QB on their proportionate share, which means multiple challans for a single flat. Two equal owners of a ₹1.5 crore home each deduct 1% on their ₹75 lakh share.
For construction-linked payments on an under-construction property, per-instalment TDS applies. You deduct 1% on each payment as it falls due, from allotment onwards. That is exactly how it works at homes like Rustomjee 180 BayView in Matunga and Rustomjee Ashiana in Juhu.
What Happens if You Miss Deducting or Depositing TDS?
The buyer carries the risk here. Here are the common lapses and what they cost:
How Does TDS Fit Alongside Rustomjee's Payment Plan?
Under Rustomjee's developer-funded plan, you pay 10% of the agreement value on booking and a further 10% nearing the Occupancy Certificate date, while a home loan, arranged through lenders such as ICICI Bank or Axis Bank, funds the rest (75% across construction milestones and 5% at the final demand), with no EMI till possession.
TDS on property purchase sits outside that structure. Like GST, stamp duty and registration, it is a self-funded charge, a separate cash outgo, deducted on each payment as you make it, on homes such as Rustomjee Stella in Bandra East and Rustomjee Ocean Vista in Versova.
Frequently Asked Questions
The buyer. Under Section 194-IA, the buyer deducts 1%, deposits it, and issues Form 16B to the seller.
Yes, each co-owner files their own on their proportionate share, producing one challan per buyer.
Section 195 applies, not the flat 1%. Long-term gains attract 12.5% plus surcharge and cess; short-term gains follow slab rates. A TAN and Form 27Q are required.
The seller claims it as tax already paid. Once it reflects in Form 26AS via your Form 16B, it is adjusted against your tax, with any excess refunded.
