TDS on Property Transactions – Updated Compliance Guide (Section 194-IA to Section 393(1))

The provisions relating to Tax Deducted at Source (TDS) on the purchase of immovable property have undergone an important transition with the introduction of the Income Tax Act, 2025. Earlier governed under Section 194-IA of the Income Tax Act, 1961, these provisions will now fall under Section 393(1) effective from 1 April 2026.

While the fundamental principle of TDS deduction on property transactions remains unchanged, the compliance structure, documentation, and procedural requirements have been streamlined and reorganized. This makes it crucial for buyers, sellers, and tax professionals to stay updated and ensure proper compliance.

🔍 Overview of TDS on Property

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• Applicable on purchase of immovable property (excluding agricultural land)
• TDS is required to be deducted by the buyer
• Triggered when property value exceeds ₹50 lakh
• Deduction is made at the time of payment or credit, whichever is earlier

📊 Key Changes: Section 194-IA vs Section 393(1)

📝 Forms for Compliance: Form 26QB vs Form 141

✔️ Form 26QB (Existing System)

• Challan-cum-statement for reporting TDS on property
• Filed within 30 days from end of month of deduction
• Required for generating Form 16B (TDS certificate)

✔️ Form 141 (New Framework)

• Introduced under the new Act for TDS reporting
• Designed to simplify filing and improve tracking
• Expected to integrate better with the new tax compliance ecosystem

⚙️ Step-by-Step TDS Compliance Process

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1. Verify Applicability
   Ensure property value exceeds ₹50 lakh and is not agricultural land
2. Deduct TDS
   Deduct applicable TDS (generally 1%) at time of payment
3. Deposit TDS
   Pay TDS to the government within prescribed timeline
4. File Relevant Form
   • Up to FY 2025-26 → File Form 26QB
   • From FY 2026-27 → File Form 141
5. Issue TDS Certificate
   Provide Form 16B (or equivalent under new law) to seller

⚠️ Important Points to Remember

• PAN of both buyer and seller is mandatory
• Higher TDS may apply if PAN is not available
• Each buyer–seller combination requires separate compliance
• Delay may lead to interest and penalties

📌 Conclusion

The shift from Section 194-IA to Section 393(1) represents more of a structural and procedural update rather than a conceptual change. However, the introduction of new forms like Form 141 and changes in compliance systems make it essential for taxpayers to adapt quickly.

Staying compliant will ensure smooth property transactions, avoid penalties, and maintain proper tax records under the new regime.

🏠 TDS on Property Transactions – Detailed Compliance & Latest Tax Law Updates

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📌 Applicability of TDS on Property

TDS on property becomes applicable when any person purchases immovable property (land, building, or part thereof) for a consideration of ₹50 lakh or more. This provision applies to both residential and commercial properties, while agricultural land is specifically excluded.

It is important to note that the ₹50 lakh threshold is based on the total property value, not on individual instalments. Even if payments are made in parts, once the aggregate value crosses ₹50 lakh, TDS provisions will apply.

💰 TDS Rate and PAN Requirement

• Standard TDS rate: 1% of sale consideration
• If seller does not provide PAN: TDS may increase significantly (generally up to 20%)

Ensuring the seller’s PAN is correctly obtained and verified is essential to avoid higher tax deduction.

⏱️ Timing of TDS Deduction

TDS must be deducted at the time of payment or credit, whichever is earlier.

This means:

• Advance payments and instalments are also subject to TDS
• Particularly important during financial year transitions, such as the shift to the new law from April 2026

🔄 Tax Law Update – Change in Compliance Forms

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With the introduction of the Income Tax Act, 2025, the compliance mechanism has been updated:

• Up to 31 March 2026 → TDS filing through Form 26QB
• From 1 April 2026 onwards → TDS filing through Form 141

Both forms must be filed within 30 days from the end of the month in which TDS is deducted.

👉 The date of payment determines which form is applicable—not the agreement date.

🔍 Transitional Scenario (Important)

• Agreement signed before March 2026 but payment made after April 2026 → Form 141 applies
• Payment made before April 2026 → Form 26QB applies

In case of multiple instalments across both periods, compliance may be required under both forms.

👥 Multiple Buyers or Sellers

• TDS applicability depends on total property value, not individual share
• Even if individual shares are below ₹50 lakh, TDS still applies if total exceeds threshold
• Separate compliance may be required for each buyer–seller combination

🧾 Responsibility of Buyer

The buyer is responsible for:

• Deducting TDS
• Depositing it with the government
• Filing the applicable form (26QB / 141)
• Issuing TDS certificate to the seller (earlier Form 16B, similar system expected)

⚠️ Consequences of Non-Compliance

• 1% per month interest for failure to deduct TDS
• 1.5% per month interest for failure to deposit TDS
• Late filing fee: ₹200 per day (subject to TDS amount)

Timely compliance is critical to avoid penalties and interest.

📘 Conclusion

Although the core concept of TDS on property remains unchanged, the shift to the new law introduces updated sections and revised compliance forms. The most crucial factor is the timing of payment, which determines whether Form 26QB or Form 141 should be used.

A clear understanding of these provisions ensures accurate compliance, smooth property transactions, and avoidance of penalties.