TDS on Immovable Property Purchase: Resident vs. NRI Sellers — Full Compliance Guide for Tax Year 2026-27

Purchasing real estate in India carries a compliance obligation that many buyers overlook until it is too late — the legal duty to deduct TDS before handing over payment to the seller. Whether the seller lives down the street or is an NRI settled abroad, the responsibility of withholding tax falls squarely on the buyer. Missing this step can lead to interest demands, penalties, and the uncomfortable status of being declared an assessee in default by the Income Tax Department.

With the Income Tax Act, 2025 replacing the Income Tax Act, 1961 effective 1st April 2026, the TDS framework on immovable property has been recast under new section numbers and updated forms — though the underlying logic remains consistent. This guide provides a comprehensive walkthrough of TDS obligations on property purchases for Tax Year 2026-27, covering transactions with both resident and non-resident sellers.

Quick Reference — Essential Points

  • Purchases from a resident seller at ₹50 lakh or above attract TDS @ 1% under Section 393(1) [Table: Sl. No. 3(i)] of the Income Tax Act, 2025
  • TDS base = higher of actual consideration paid OR stamp duty value
  • Purchases from a non-resident seller fall under Section 393(2) [Table: Sl. No. 17] — rates in force apply with no minimum threshold
  • TDS must be deposited via Form No. 141 (Challan-cum-Statement) within 30 days from end of the month of deduction
  • 'Consideration' under Section 26(9) includes parking charges, club membership fees, maintenance charges, and all similar incidental amounts
  • Agricultural land is fully excluded — no TDS obligation applies on its purchase

Why Is the Buyer Responsible for TDS?

The intuitive assumption is that the seller handles their own tax. However, in high-value property transactions, the Government places the deduction obligation on the buyer. The rationale is straightforward — real estate deals are frequently under-reported, and capital gains arising to sellers often escape tax. By requiring the buyer to withhold tax before payment, a verifiable paper trail is established, ensuring the seller's income is brought within the tax net.

This approach is not a new innovation. Under the old Income Tax Act, 1961, Section 194-IA performed the same function. Under the Income Tax Act, 2025, the equivalent provision for resident sellers is Section 393(1) [Table: Sl. No. 3(i)]. The substance of the law is unchanged — only section references and form designations have been updated.

Part A: TDS When Buying Property from a Resident Seller

Who Bears the Deduction Obligation?

Any person — whether an individual, HUF, company, firm, or any other entity — making payment for the transfer of immovable property to a resident seller is obligated to deduct TDS. The buyer's category or size is irrelevant; if the conditions are met, the obligation applies.

One notable exception: acquisitions through compulsory acquisition under law are handled separately under Section 393(1) [Table: Sl. No. 3(iii)], which prescribes TDS at 10% and does not fall within the scope of Sl. No. 3(i).

Which Properties Fall Under This Provision?

Section 26(19) of the Income Tax Act, 2025 defines immovable property as "any land (other than agricultural land) or any building or part of a building." Accordingly, TDS under Section 393(1) [Table: Sl. No. 3(i)] applies to:

  • Residential apartments and housing units
  • Independent bungalows and villas
  • Commercial offices, retail shops, and showrooms
  • Non-agricultural plots and land parcels
  • Industrial sheds, warehouses, and factory premises

Agricultural land is explicitly excluded. A buyer purchasing agricultural land from a resident, regardless of the transaction value, has no TDS obligation under this provision.

TDS Rate and the ₹50 Lakh Threshold

The applicable rate under Section 393(1) [Table: Sl. No. 3(i)] is 1%, but understanding the base on which this applies is critical:

TDS is deducted on the higher of (a) actual consideration paid, or (b) stamp duty value of the property.

As per Note 3 to Section 393(1) [Table: Sl. No. 3], TDS is triggered when either the actual consideration or the stamp duty value equals or exceeds ₹50 lakh. If both figures fall below this threshold, no TDS obligation arises.

Note 1 under Table Sl. No. 3 further clarifies the treatment in joint transactions: where multiple buyers or multiple sellers are involved, the ₹50 lakh threshold is tested against the aggregate consideration for the entire property — not each buyer's individual share. Each buyer then deducts TDS proportionate to their share of the purchase.

What Constitutes 'Consideration' Under the New Law?

Section 26(9) of the Income Tax Act, 2025 provides an expanded definition of consideration for property transfers. It explicitly includes:

  • Club membership fees
  • Car parking charges
  • Electricity and water connection fees
  • Maintenance charges
  • Advance fees
  • Any other charges of a similar nature incidental to the transfer

Practical illustration: Mr. Sharma purchases a flat from Mr. Verma for ₹62 lakh. The builder additionally charges ₹2.50 lakh for a dedicated car parking slot and ₹1.25 lakh towards club membership. Although these are billed separately, they form part of the 'consideration' under Section 26(9). The TDS base is therefore ₹65.75 lakh, not ₹62 lakh. Many buyers miscalculate by omitting these amounts.

Is TAN Required for the Buyer?

No. This is one area where property TDS differs from most other TDS transactions. Under Section 397(1)(c)(i) of the Income Tax Act, 2025, buyers deducting tax under Section 393(1) [Table: Sl. No. 3(i)] are specifically exempted from the requirement to obtain a TAN (Tax Deduction and Collection Account Number). The buyer's PAN is sufficient for filing and deposit purposes.

Depositing TDS — Form No. 141 (Challan-cum-Statement)

Under the Income Tax Rules, 2026, TDS on property purchases from resident sellers is deposited using Form No. 141, which serves as both the payment challan and the TDS statement simultaneously. This replaces the old Form 26QB under the Income Tax Act, 1961.

**Key deadlines under Rule 218(3)(b) and Rule 219(5)(b)😗*

  • TDS must be deposited within 30 days from the end of the month in which the deduction is made
  • Form No. 141 must be filed within the same 30-day window