TDS on Property Purchase: 194IA (1%) and 194IB (5%) Explained

194IA - property (buyer deducts)

• Threshold: consideration over Rs. 50 lakh (includes stamp duty value where applicable in some cases)
• Rate: 1% of the consideration
• No TAN needed for deduction; but need TAN for challan - use the specific payment option on the portal
• Form 26QB with each payment; due within 30 days of the deduction month end
• Applies to all buyers - individuals, companies, firms

194IB - rent (tenant deducts)

• Applicable to individuals/HUF not liable for tax audit
• Threshold: monthly rent above Rs. 50,000
• Rate: 5% of the rent
• Deposit by 30th of the following month; file Form 26QC
• Companies using premises deduct 194I at 10% (land/building) or 2% (plant/machinery)

Registration complication

The sub-registrar asks for the 26QB/26QC challan at registration in many states. Many buyers end up re-registering because the TDS is wrongly computed (e.g., counting stamp duty in consideration) or paid under the wrong challan code. Get the payment right before the registration meeting.

Impact on both parties

• Seller: lower cash inflow at closing; credit in 26AS later; NRI sellers need a PITDS/TCS arrangement - check applicable provisions
• Buyer: proof of payment protects against double demand; ensure the seller's PAN is correct on 26QB
• Landlord: credit against rental income in ITR; keep Form 16C/16B certificates

What you should do

• Compute the threshold BEFORE signing the sale deed
• Use the exact challan code for 194IA/194IB payments
• File 26QB/26QC within the 30-day window - late filing means form rejection
• Verify the seller/landlord PAN twice - a typo produces a refund nightmare
• Keep challan and SRN copies for the seller's 26AS reconciliation