Property prices in Chandigarh, Mohali, and Panchkula have climbed steadily over the past decade. A mid-segment 3BHK in Chandigarh Sector 20 or 22 typically costs ₹1 crore or more. A 2BHK flat in Mohali Phase 7, Phase 8, or IT City routinely crosses ₹60–80 lakh. In Tricity, almost every residential property transaction crosses the ₹50 lakh mark.
Under the New Income Tax Act 2025, when you buy any immovable property — a flat, house, plot, or commercial space — for a total consideration of ₹50 lakh or more, you, the buyer, must deduct 1% of the total amount as tax before making the payment to the seller. This is called Tax Deducted at Source (TDS) on property purchase.
Most buyers discover this rule only at the sub-registrar's office — or months later, when the tax department sends a notice. This guide explains who must deduct TDS, how much, the exact process, and what happens if you miss it.
Key Takeaways
- Property purchase at ₹50 lakh or more — buyer must deduct 1% TDS
- No TAN required — filed using your PAN via Form 26QB online
- Deadline: 30 days from the end of the month in which you paid the seller
- TDS is on whichever is higher — agreed price or stamp duty (circle rate) value
- Seller receives Form 16B as their TDS certificate
- NRI sellers: entirely different rules — consult RLVC before making any payment
Who Must Deduct This TDS?
Any buyer of immovable property in India — whether an individual, HUF, company, LLP, or partnership firm — is required to deduct TDS if the total purchase consideration is ₹50 lakh or more. This obligation sits with the buyer, not the seller and not the builder.
This applies whether you are:
- Buying a flat or house in any Chandigarh sector
- Purchasing a plot or floor in Mohali Phase 7, 8, 9, or IT City
- Acquiring residential or commercial property in Panchkula
- Buying an under-construction flat from a builder through a construction-linked payment plan
- Purchasing property through a resale transaction between private individuals
Agricultural land is exempt. The TDS rule applies only to non-agricultural immovable property. If the total purchase price is below ₹50 lakh, no TDS is required.
How Much TDS — and on Which Amount?
The TDS rate is 1% of the purchase consideration. However, there is an important rule about which figure you use as the base:
TDS must be calculated on whichever is higher — the agreed purchase price between you and the seller, or the stamp duty value (circle rate value) assigned to the property by the state government.
You agree to buy a flat in Chandigarh Sector 22 for ₹85 lakh. The sub-registrar's circle rate values the same property at ₹92 lakh. TDS is calculated on ₹92 lakh (the higher figure) = ₹92,000. You pay the seller ₹84,08,000 and deposit ₹92,000 as TDS with the government.
If your agreed price is higher than the stamp duty value, TDS is on the agreed price. The rule simply ensures you always use the higher of the two figures.
No TAN Required
Unlike most TDS transactions (where the person deducting TDS needs a Tax Deduction Account Number), TDS on property purchase does not require a TAN. The entire process — from filing to payment — uses your PAN (Permanent Account Number).
This is filed through a specific form called Form 26QB, available on the Income Tax portal and the TIN-NSDL portal.
Step-by-Step Process
Deduct TDS from the payment to the seller
When making payment to the seller — whether full payment or a specific instalment — deduct 1% before handing over the amount. The seller receives 99% of the agreed amount for that payment. Keep a record of the date and amount of each payment.
Fill Form 26QB online
Log in to the Income Tax portal (incometax.gov.in) or the TIN-NSDL portal and navigate to TDS on property purchase. Fill Form 26QB with your PAN, the seller's PAN, the property address, the total consideration, the stamp duty value, the amount paid in this transaction, and the date of payment.
Pay the TDS — within the deadline
Pay the TDS amount via net banking, NEFT, or debit card. The payment must be made within 30 days from the end of the month in which you made the payment to the seller.
Example: You pay the seller on 15th May 2026 → TDS must be deposited by 30th June 2026.
Download Form 16B from TRACES
After the TDS is deposited and processed (usually 2–3 working days), log in to the TRACES portal (traces.gov.in) to download Form 16B — the TDS certificate for the seller.
Give Form 16B to the seller
Hand Form 16B to the seller. They will use it to claim credit for the TDS deducted when filing their own income tax return. Without this certificate, the seller cannot claim the credit — so providing it promptly is important.
Buying in Instalments?
For under-construction properties or staggered payment plans — common with builder flats in Mohali and Panchkula — TDS must be deducted on each instalment separately, not just on the final payment at registration.
A separate Form 26QB must be filed for each payment made to the seller. Each filing must be completed within 30 days from the end of the month in which that particular payment was made. Form 16B is also issued separately for each payment.
If the total consideration is ₹50 lakh or more, the TDS obligation applies from the very first instalment — not just after the cumulative total crosses ₹50 lakh.
Is the Seller an NRI?
If the person selling the property to you is an NRI (Non-Resident Indian), the TDS rules are completely different. The rate is significantly higher and linked to capital gains tax applicable to the seller. The process involves additional steps and the rates depend on the holding period of the property and applicable tax treaty provisions. Contact RLVC before making any payment to an NRI seller. Getting this wrong exposes the buyer to substantial penalties.
Consequences of Not Deducting TDS
If you do not deduct and deposit the TDS on a qualifying property purchase, the New Income Tax Act 2025 treats you as a defaulter. The consequences are:
- Interest on late deduction: Charged from the date TDS should have been deducted to the date it is actually deducted
- Interest on late deposit: Charged from the date of deduction to the date of deposit
- Penalty: A penalty equal to the TDS amount itself can be imposed
- Notice from the department: The Income Tax Department routinely cross-references property registration data with TDS records and issues notices for missing deductions
The sub-registrar does not verify TDS compliance at registration in every case. Many buyers assume the registration has gone through smoothly — only to receive a tax notice six to twelve months later. At that point, interest has been accruing from the original payment date.
You can still regularise the default by depositing the TDS along with accrued interest via Form 26QB. The sooner this is done, the lower the interest. Contact RLVC immediately — we will calculate the exact amount and file Form 26QB on your behalf before a formal notice is issued.
Frequently Asked Questions
Do I need a TAN to deduct TDS when buying property?
No. TDS on property purchase is filed through Form 26QB using your PAN. A TAN (Tax Deduction Account Number) is not required for this specific type of TDS — unlike most other TDS transactions.
There are two sellers on the sale deed. Do I file one Form 26QB?
No. You must file a separate Form 26QB for each seller, with TDS calculated proportionately based on each seller's ownership share in the property. Similarly, if there are two buyers, each buyer files Form 26QB for their proportionate share of the payment.
The stamp duty value is lower than our agreed price. Which figure do I use?
TDS is always calculated on whichever is higher — the agreed consideration or the stamp duty (circle rate) value. If your agreed price is ₹80 lakh and the stamp duty value is ₹75 lakh, TDS is calculated on ₹80 lakh. You cannot use the lower figure.
We completed registration without deducting TDS. Can we still correct this?
Yes, but you need to act quickly. You can deposit the TDS along with the interest that has accrued since the date of payment to the seller. The longer you wait, the higher the interest. Contact RLVC — we will calculate the exact amount including interest, file Form 26QB on your behalf, and help you regularise the default before the department issues a formal notice.
What is Form 16B and why does the seller need it?
Form 16B is the TDS certificate you issue to the seller after depositing the TDS with the government. The seller uses it to claim credit for the tax deducted when filing their income tax return — ensuring the same income is not taxed twice. It is downloaded from the TRACES portal (traces.gov.in) after the TDS payment is processed. Providing it promptly to the seller is part of your obligation as the buyer.