TDS on Property Purchase in India 2026: The 1% Rule, New Form 141, and NRI Sellers

Here is a cost of buying property that catches people off guard: you, the buyer, have to deduct tax from the payment to the seller and deposit it with the government. Miss it and you face interest and penalty, on your own purchase. It is called TDS on property, and in 2026 the forms changed. This guide explains the 1% rule, the new Form 141, and the heavier rules when you buy from an NRI, in plain language.

Quick view

• If you buy a property of ₹50 lakh or more from a resident seller, you must deduct 1% TDS and deposit it.
• From tax year 2026-27, this is reported through the new Form 141 (Challan-cum-Statement), which replaces the old Form 26QB. The certificate to the seller is now Form 132, replacing Form 16B.
• Deposit the TDS within 30 days from the end of the month you deducted it.
• Buying from an NRI is completely different and much heavier, do not use the 1% resident route. Get a CA involved.

The 1% rule for resident sellers

Under Section 194-IA, if you buy an immovable property (other than farm land) worth ₹50 lakh or more from a resident, you deduct 1% of the sale value as TDS and pay it to the government. A few points people get wrong:

• The 1% is on the higher of the sale price or the stamp duty (circle rate) value.
• The ₹50 lakh threshold is on the property value, and TDS applies to the whole amount, not just the part above 50 lakh.
• If there are multiple buyers or sellers, each pair's share is handled, but the total property value still decides whether the threshold is crossed.
• You deduct it from the payment to the seller, so the seller receives 99%, and you deposit the 1% on their behalf.

The new Form 141 (was Form 26QB)

This is the 2026 change to know. For years, buyers filed Form 26QB to report and pay property TDS. From tax year 2026-27, under the new Income Tax Rules, this moves to Form 141, a Challan-cum-Statement that does the same job. The TDS certificate you give the seller, earlier Form 16B, is now Form 132. The process is otherwise similar:

1. Deduct 1% from the payment to the seller.
2. File Form 141 online and pay the TDS within 30 days from the end of the month of deduction.
3. Download Form 132 (the certificate) and give it to the seller as proof.

You need the PAN of both buyer and seller. A wrong or missing PAN causes problems later, so confirm it before you pay.

Buying from an NRI: a different, heavier world

This is where buyers get badly caught. If the seller is an NRI, the 1% resident rule and Form 141 do not apply. NRI sales fall under the non-resident TDS framework, which is much heavier:

• If the NRI held the property for more than 24 months (long-term), TDS is 12.5% plus surcharge and 4% cess, deducted on the sale value.
• If sold within 24 months (short-term), TDS is deducted at the NRI's income tax slab rates, which can be higher still.
• The buyer usually needs a TAN (a tax deduction account number) to handle this, not just a PAN.

Because the rates are high and the compliance is strict, always confirm the seller's residential status before you agree a deal, and get a CA to handle the TDS on an NRI purchase. Our NRI property guide covers the seller side.

A worked example

Numbers make it clear. You buy a flat for ₹80 lakh from a resident seller. The stamp duty (circle rate) value is ₹78 lakh, so TDS is on the higher figure, ₹80 lakh. You deduct 1%, which is ₹80,000, from your payment. The seller receives ₹79,20,000, and you deposit ₹80,000 with the government through Form 141 within 30 days of the month-end, then hand the seller the Form 132 certificate. That is the whole process. Now say the same seller was an NRI who had held the flat for three years. TDS would be 12.5% plus surcharge and cess, well over ₹10 lakh on the same deal, and you would need a TAN and a CA to handle it. Same flat, completely different tax mechanics. That is why confirming the seller's residential status upfront is not a formality, it changes your cost and compliance entirely.

How to lower the pain (legally)

You cannot avoid TDS, but you can avoid the mistakes that turn it into a headache. Get the seller's PAN and residential status in writing before you agree the deal. If the seller is an NRI, the tax is heavy but they can apply to the income tax department for a lower-deduction certificate if their actual capital gain is small, this can reduce the TDS legitimately, so ask whether they have one before you deduct the full rate. Budget the TDS into your total purchase cost from the start, alongside stamp duty and registration, so it is not a surprise. And keep every challan and certificate with your property file, you will need them at resale and for your own tax records. Our NRI property guide and capital gains guide cover the seller-side detail.

What happens if you skip TDS

The liability is on you, the buyer. If you fail to deduct or deposit the TDS, you face interest on the amount and a penalty, and it can hold up the property's clean transfer. This is not the seller's problem to fix, it is yours. So treat the TDS as a fixed step in every purchase over ₹50 lakh, budgeted and done on time, not an afterthought. Keep the challan and the Form 132 certificate with your property papers, banks and future buyers ask for them.

Step by step: how to deduct and deposit property TDS

1. Confirm the seller's status and PAN. Resident or NRI? Get the PAN in writing. This determines everything, the 1% resident route or the heavier NRI route.
2. Check the threshold. Is the property ₹50 lakh or more (on price or stamp duty value, whichever is higher)? If yes, TDS applies.
3. Deduct at the right point. Deduct 1% from the payment to a resident seller. If you pay in installments, deduct on each installment.
4. File Form 141 and pay. File the Challan-cum-Statement (the new Form 141, replacing 26QB) online and deposit the TDS within 30 days from the end of the month of deduction.
5. Give the seller Form 132. Download the TDS certificate (the new Form 132, replacing 16B) and hand it to the seller as proof.
6. Keep everything. Store the challan and certificate with your property papers, banks and future buyers ask for them.

Miss the deadline and you, the buyer, face interest and penalty, so treat this as a fixed step in every eligible purchase.

TDS when there are multiple buyers or sellers

Joint purchases and joint sales confuse people, so here is the rule. The ₹50 lakh threshold applies to the total property value, not to each person's share. So if two buyers purchase a ₹80 lakh flat together, the property crosses ₹50 lakh, and TDS applies, even though each buyer's share is ₹40 lakh. Each buyer-seller pair handles the TDS on their respective share, so the paperwork multiplies with the number of parties, but the threshold is judged on the whole property. The same logic applies with joint sellers: the total consideration decides whether TDS applies, and it is apportioned among the sellers. When a joint home loan and joint ownership are involved (common for couples), make sure the TDS is handled correctly for each owner, our joint home loan guide covers the ownership side. Getting this wrong on a joint purchase is a common mistake, so if your deal has multiple names on either side, take a moment to get the TDS split right, or ask a CA.

Common TDS mistakes buyers make

• Forgetting TDS entirely. Many buyers do not realise they, not the seller, must deduct and deposit it. Missing it brings interest and penalty on you.
• Assuming it is only on the amount above ₹50 lakh. Once the property crosses ₹50 lakh, TDS is 1% on the whole value, not just the excess.
• Using the resident route for an NRI seller. The single most expensive mistake. NRI sales need the heavier non-resident TDS (12.5%-plus) and a TAN, not the 1% Form 141 route. Get a CA.
• Wrong or missing PAN. A missing seller PAN can push the TDS rate much higher. Confirm the PAN before you pay.
• Depositing late. The 30-day window from the month-end is firm; late deposit attracts interest.
• Not giving the seller the certificate. The seller needs Form 132 to claim credit for the TDS. Hand it over.

Each of these is avoidable with a little care, and the cost of getting them wrong falls on you, the buyer.

How TDS fits your total purchase cost

Think of TDS as one line in the full cost of buying, so it never surprises you. On a ₹80 lakh flat from a resident, you deduct ₹80,000 as TDS, but note that this is not an extra cost to you, it is part of the price, deducted from what you pay the seller and routed to the government on their behalf. Your extra costs are the stamp duty and registration (5 to 7 percent), any GST on under-construction, and the usual charges. So TDS is a compliance step, not an added expense, the seller bears it, you just handle the paperwork. Where it becomes your cost is if you get it wrong: miss it, and you pay interest and penalty out of your own pocket. So the smart approach is to budget the whole purchase, price, stamp duty, registration, GST, and treat the TDS as a fixed procedural step you complete on time. Confirm the seller's status early, deduct correctly, file Form 141 within the deadline, and keep the certificate. Done right, TDS is a ten-minute task; done wrong, it is a costly headache. Our stamp duty guide covers the other transaction costs.

FAQ

Who deducts TDS on a property purchase, the buyer or seller?

The buyer. You deduct 1% from the payment to a resident seller (on property worth ₹50 lakh or more) and deposit it with the government.

What is Form 141?

The new Challan-cum-Statement for property TDS from tax year 2026-27, replacing the old Form 26QB. The seller's certificate is now Form 132, replacing Form 16B.

Is TDS on the whole property value or just above 50 lakh?

On the whole value, once the property crosses ₹50 lakh. The 1% applies to the entire sale (or stamp duty value, whichever is higher), not only the part above 50 lakh.

What is the TDS rate when buying from an NRI?

Much higher: 12.5% plus surcharge and cess for long-term (held over 24 months), or slab rates for short-term. The 1% resident rule does not apply, and the buyer usually needs a TAN. Use a CA.

What if I forget to deduct TDS?

You, the buyer, face interest and penalty, and it can complicate the transfer. Always do it within 30 days of the month of deduction and keep the certificate.

Buying a property and unsure about the TDS or the seller's status? We help buyers get the paperwork right before they pay. Browse our listings or reach out with your deal.

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What is mutation and why is it important?

Mutation updates the ownership in municipal and revenue records after a sale. Without it the property tax and records still point to the old owner, so get it done.

What credit score do I need for a home loan?

Lenders prefer a healthy score, usually in the mid-700s and above, for the best rates. A lower score can still get a loan but often at a higher rate.

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