TDS on property purchase: the 1 percent rule for a new flat

3.8.1 What is TDS on property purchase, and when does it apply?

TDS on property purchase is income tax that the buyer deducts at source from the price of a property and pays to the Central Government. For a new flat, the builder is the seller, and you are the person who deducts. From 1 April 2026, the Income-tax Act, 2025 replaces the Income-tax Act, 1961. Section 393(1), Table serial 3(i), now sets the rule. It applies to any consideration for the transfer of immovable property other than agricultural land. The rate is 1 percent. The threshold is ₹50 lakh. Note 1 to the Table adds the payments of all buyers together to test that threshold. So two co-buyers of a ₹70 lakh flat are both covered. The Form 141 FAQ, questions 7 and 8, names the buyer as the deductor and the seller as the deductee. If your flat costs more than ₹50 lakh, plan for this tax from the first payment. The rule has the same core as the old section 194-IA, which most buyers still search for.

Item	Old name (Income-tax Act, 1961)	New name (Income-tax Act, 2025)
The rule	Section 194-IA	Section 393(1), Table serial 3(i)
Payment and statement form	Form 26QB	Form 141, Schedule B
TDS certificate to the seller	Form 16B	Form 132
No TAN needed	Section 194-IA(3)	Section 397(1)(c)(i)
Higher rate without PAN	Section 206AA	Section 397(2)

The threshold text needs one note. Section 393(1)(a) applies the tax where the amount “exceeds” the threshold. The Table also points to Note 3, which uses “equal to or greater than fifty lakh rupees”. But Note 3 names serial 3(iii), the compulsory acquisition row. The Form 141 user manual says TDS is due “only if value exceeds INR 50 Lakh”. If your price or stamp duty value is close to ₹50 lakh, ask a chartered accountant.

3.8.2 On what amount do you deduct 1 percent?

You deduct 1 percent of the consideration or of the stamp duty value of the flat, whichever is higher. The Table in section 393(1), serial 3(i), states this rate in column D. Section 2(105) defines stamp duty value as the value that a State Government authority adopts or assesses for stamp duty. In Bangalore, that authority is the Sub-Registrar, who works through the Kaveri system. The Kaveri 2 FAQ of IGR Karnataka, question 16, says the Sub-Registrar fixes the market value from the guidance value that the Government publishes. So if the government value of your flat is higher than your price, the TDS base can be higher than your price. The consideration also includes extra charges. Section 402(9) says it includes club membership fee, car parking fee, electricity or water facility fee, maintenance fee and advance fee. It also includes other similar charges that are incidental to the transfer. So add these lines from your cost sheet to the base price before you calculate the tax.

Part of the price	In the TDS base?	Source
Base price of the flat	Yes	Section 393(1), Table serial 3(i)
Club membership fee	Yes	Section 402(9)(a)
Car parking fee	Yes	Section 402(9)(b)
Electricity or water facility fee	Yes	Section 402(9)(c)
Maintenance fee	Yes	Section 402(9)(d)
Advance fee	Yes	Section 402(9)(e)
Stamp duty value, if higher than the price	Yes, it replaces the price as the base	Section 393(1), Table serial 3(i), column D

Example: your flat has a total consideration of ₹1.2 crore. TDS is 1 percent, so ₹1.2 lakh in total across all payments. Sachi has not checked how GST in a builder’s invoice is treated in the TDS base. Ask a chartered accountant before you deduct on an invoice that includes GST. To learn how the government value of a flat is set, read the guidance value guide.

3.8.3 Does each instalment to the builder attract TDS?

Yes. Each payment that you make to the builder carries its own 1 percent deduction. Section 393(1)(c) says you deduct the tax at the time of credit or at the time of payment, whichever is earlier. Payment can be in cash, by cheque, by draft or by any other mode. In a construction-linked plan, you pay the builder several times, so you deduct and pay TDS several times. Form 141 supports this. In Schedule B, you choose “Lumpsum” or “Instalments” as the mode of payment. For instalments, you then choose “First Instalment”, “Subsequent Instalment” or “Last Instalment”. For a subsequent or last instalment, you enter the acknowledgement number of the previous Form 141 for the same flat. For the last instalment, the form asks for the total consideration paid so far. Keep every acknowledgement number from the first payment, because each later form needs the one before it.

1. Read the demand letter and note the amount due for the stage.
2. Calculate 1 percent of that amount.
3. Pay the builder the amount minus the TDS.
4. Pay the TDS through Form 141 within the due date.
5. Save the Form 141 acknowledgement number for the next instalment.

At the last instalment or a lump-sum payment, the stamp duty value comes in. The Form 141 user manual says the system then pre-fills an amount. It picks the higher of your share of the stamp duty value and the payment amount. The manual’s formula is not fully clear. So check the pre-filled amount on the last form before you pay. The Form 141 FAQ, question 7, names the buyer as the deductor. If your bank pays the builder from your home loan, decide with the bank, before each disbursal, how you will pay the 1 percent. The payment plans guide explains how disbursal follows the construction stages.

3.8.4 How do you pay TDS on a flat purchase with Form 141?

You pay TDS on a flat with Form 141, which you file from your own PAN login on the e-filing portal. Form 141 is a challan-cum-statement, so one form both pays the tax and reports the deduction. The Form 141 FAQ says it replaced Form 26QB, Form 26QC, Form 26QD and Form 26QE. Schedule B covers TDS on transfer of immovable property under section 393(1), Table serial 3(i). The FAQ, question 11, says you must pay the tax within 30 days from the end of the month in which you deducted it. You do not need a TAN. Section 397(1)(c)(i) removes the TAN rule for this deduction. Each buyer files a separate form for their own share, as FAQ question 5 says. A separate form is also needed for each month of deduction, as FAQ question 15 says. If you make a mistake, you correct it on the TDS-TRACES portal, not on the e-filing portal.

1. Get the builder’s PAN and the company name before your first payment.
2. Log in to the e-filing portal with your PAN, then go to e-File, then e-Pay Tax.
3. Select the Income-tax Act, 2025, click New Payment, then choose the Form 141 tile.
4. Select “Corporate Deductee” if the fourth character of the builder’s PAN is “C”. Otherwise, select “Non-Corporate Deductee”.
5. Choose Schedule B and enter the flat address, agreement date, stamp duty value, total consideration and payment mode.
6. Enter the builder’s PAN, the amount paid now and the date of deduction, then pay through your bank.
7. Download the challan receipt and keep the acknowledgement number.
8. Download Form 132 from TRACES and give it to the builder.

Form 132 is the TDS certificate. It replaced Form 16B. The Form 132 FAQ says you must issue it within 15 days from the due date for filing Form 141. It also says that a certificate made in any other way is not a valid TDS certificate. Section 395(4) of the Income-tax Act, 2025 requires every deductor to issue this certificate.

3.8.5 What happens if you pay TDS late, or the builder has no PAN?

If you pay TDS late, you owe interest, a daily fee and possibly a penalty, and the Act treats you as an assessee in default. Section 398(1) says a person who does not deduct, or deducts and does not pay, is an assessee in default for that tax. Section 398(3)(a) sets simple interest of 1 percent for every month or part of a month. It runs from the date the tax was deductible to the date you deduct it. It sets 1.5 percent for every month or part of a month, from the date you deduct it to the date you pay it. Section 427 adds a fee of ₹200 for every day that the statement is late, up to the amount of the tax. Section 461 allows a penalty of ₹10,000 to ₹1,00,000 for a late or wrong statement. Section 461(2) removes the penalty for delay if you pay the tax, fee and interest, and file within one month after the due time.

Event	What the Income-tax Act, 2025 says	Section
You do not deduct on time	Interest of 1 percent for every month or part of a month	398(3)(a)(i)
You deduct but pay late	Interest of 1.5 percent for every month or part of a month	398(3)(a)(ii)
You file the statement late	Fee of ₹200 for every day, up to the tax amount	427
You file late or with wrong data	Penalty of ₹10,000 to ₹1,00,000. Section 461(2) can remove it for delay only	461
The builder gives no valid PAN	Rate becomes the higher of the normal rate, the rate in force, or 20 percent	397(2)

The PAN rule matters for a flat. Section 397(2)(a) says the person who receives the payment must give a valid PAN to the deductor. If the builder does not, 20 percent can replace 1 percent on a payment. Ask for the PAN in the agreement for sale stage and check the name on the portal before the first payment. Payments made before 1 April 2026 fell under the old Act, section 194-IA, with Form 26QB and Form 16B. Sachi did not read the Act’s transition rules for an instalment plan that spans both dates. If your plan started before April 2026, ask a chartered accountant.

To check which costs on your cost sheet count toward the 1 percent, Ask Sachi.