The provisions relating to TDS on purchase of immovable property have been restructured under the Income-tax Act, 2025. The earlier Section 194IA of the Income-tax Act, 1961 is now covered under Section 393(1) [Table: Sl. No. 3(i)], effective from 1st April, 2026.
This restructuring retains the requirement to deduct tax at source on specified property transactions while incorporating updated provisions to ensure proper tax compliance and prevent avoidance in high-value transactions.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 393(1)
- Table Reference: Table: Sl. No. 3(i)
- Nature of Payment: Consideration for transfer of immovable property (other than agricultural land)
- Earlier Section (IT Act 1961): Section 194IA
- Return Form: 26QB
- Code (for return filing): 1012
- Rate: 1%
- Threshold Limit: ₹50 lakh
Applicability of TDS under Section 194IA
TDS is required to be deducted on payment made for the transfer of immovable property, other than rural agricultural land, where the total consideration for such property is ₹50 lakh or more. The provisions apply irrespective of whether the property is held as a capital asset or stock-in-trade.
The responsibility to deduct tax lies with the buyer of the property, and the provisions apply where the seller is a resident. In cases where the seller is a non-resident, the provisions of Section 195 shall apply instead of this section.
Meaning of Key Terms
Immovable Property:
Immovable property includes any land, building, or part of a building. It also includes any rights in or with respect to such property. Where the property is transferred along with machinery, plant, furniture, fittings or similar items, such items shall also be treated as part of the immovable property.
Consideration:
The term “consideration for transfer of immovable property” includes not only the basic sale price but also incidental charges such as club membership fees, car parking fees, electricity and water facility charges, maintenance fees, advance payments, and any other similar charges associated with the transfer.
Time of Deduction
TDS is required to be deducted at the time of credit of such amount to the account of the seller or at the time of payment, whichever is earlier. In cases where payment is made in installments, TDS is required to be deducted on each installment.
Rate of TDS
TDS shall be deducted at the rate of 1% on the total consideration for transfer of immovable property. In cases where the seller does not furnish PAN, tax shall be deducted at a higher rate as per applicable provisions.
Cases Where TDS is Not Applicable
TDS under this section shall not be deducted in the following cases:
- Where the immovable property qualifies as rural agricultural land
- Where the total sale consideration of the property is less than ₹50 lakh
Important Points to Note
- Where the property is acquired under compulsory acquisition by law, the provisions relating to compensation on compulsory acquisition of immovable property under Section 393(1) [Table: Sl. No. 3(iii)] shall apply instead of this section
- TDS is required to be deducted even if the property is located outside India
- The provisions apply irrespective of the nature of holding of property (capital asset or stock-in-trade)
Revised Applicability in Case of Multiple Buyers or Sellers
With effect from 1st October 2024, the applicability of TDS has been expanded to cover cases involving multiple buyers or sellers.
If the total value of the property is ₹50 lakh or more, TDS shall be applicable even where the individual share of each buyer or seller is less than ₹50 lakh. This ensures that the threshold is evaluated based on the total transaction value rather than individual contributions.
Impact of the Revised Provision
The revised provision ensures that high-value property transactions cannot avoid TDS merely by splitting the transaction among multiple parties.
For example, where two buyers jointly purchase a property valued at ₹60 lakh and each contributes ₹30 lakh, TDS shall still be applicable. Similarly, where a property valued at ₹55 lakh is sold by two sellers receiving ₹27.5 lakh each, TDS shall be required to be deducted.
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