Here is the fact most first-time buyers get wrong: when you buy a property in India above the specified threshold, it is you, the buyer, who must deduct tax at source and deposit it with the government — not the seller. The tax is paid out of the seller's money, but the legal obligation, and the penalty for getting it wrong, sits on you.

This is TDS on property, and understanding it protects you from interest, penalties and a very awkward conversation at registration.

Section 194-IA: buying from a resident seller

When you purchase immovable property (other than certain agricultural land) from a resident seller and the consideration crosses the prescribed threshold, Section 194-IA requires you to deduct TDS at the prevailing rate on the sale value and deposit it, then issue the seller a certificate.

The deduction is on the full consideration once the threshold is crossed, not merely the excess, and it applies per transaction. Because both the rate and the threshold are set by law and can change, confirm the current figures before you compute the deduction.

  • You deduct at the prevailing rate on the sale consideration.
  • You deposit it using the prescribed challan-cum-statement (Form 26QB) within the statutory time.
  • You issue the seller a TDS certificate (Form 16B).
  • The seller claims credit for it against their capital-gains tax.

Buying from an NRI seller is a different regime

If the seller is a non-resident, Section 194-IA does not apply; instead TDS is governed by the rules for payments to non-residents, and the rate is materially higher and linked to the nature of the gain rather than a flat rate on the sale price.

This trips up many buyers. Deducting the resident rate when the seller is actually an NRI leaves you exposed to a large shortfall plus interest. Always confirm the seller's residential status in writing, and where the correct deduction would be excessive relative to the seller's actual gain, the seller can apply for a lower-deduction certificate.

The paperwork and timeline

  • Obtain and verify both parties' PAN — TDS on property is PAN-driven.
  • Deduct at the time of payment or credit, including on instalments.
  • Deposit within the prescribed period to avoid interest.
  • File the challan-cum-statement and download the seller's certificate.
  • Keep proof — the seller needs it, and so do you if questioned.

Where buyers get burned

  • Not deducting because they assumed the seller handles their own tax.
  • Missing that the seller is an NRI, and under-deducting badly.
  • Deducting on the excess over the threshold instead of the full value.
  • Splitting payments across co-buyers or instalments and forgetting each still needs correct TDS.
  • Depositing late and incurring interest, or entering a wrong PAN so the seller cannot claim credit.

The honest bottom line

TDS on property is not optional and not the seller's job — it is a compliance duty the law puts on the buyer, with real penalties for default. Confirm the seller's residential status, use the correct regime, deduct on the right base, and deposit on time. It is routine when handled at the payment stage and expensive when discovered afterwards.

This article is general information, not tax or legal advice. Tax rates, thresholds and provisions change and depend on your specific facts — verify the current position with a qualified chartered accountant or advisor before acting.