TDS on Property Sale Karnataka: Section 194IA Rules, Form 26QB, and Penalties

Published: 8 September 2026 | Updated on: 8 September 2026 | By L K Monu Borkala, CEO & Founder, OneCity Property — 15 years of property consultancy experience and over 20 years in marketing and management at OneCity Technologies Pvt. Ltd.

What Is TDS on Property Sale?

TDS stands for Tax Deducted at Source. In the context of property transactions, it means the buyer holds back a portion of the payment to the seller and deposits that amount directly with the Income Tax Department on behalf of the seller. This is not an additional tax on top of the property price. It is an advance collection of the seller's income tax liability, which the seller can later claim as credit when filing their income tax return.

The provision was introduced to bring transparency into high-value property deals and to give the Income Tax Department a direct record of who sold what property, to whom, and for how much. Since every Form 26QB filing links the buyer's PAN, the seller's PAN, the property address, and the transaction value, the department can cross-verify these details against capital gains declarations made by sellers in their income tax returns.

Who Must Deduct TDS on Property Purchase?

The responsibility falls entirely on the buyer, not the seller. This is the part that catches first-time buyers off guard. Whether you are an individual, an HUF, a company, or a partnership firm, if you are paying for immovable property and the transaction meets the threshold, you must deduct TDS before releasing payment to the seller. The seller has no role in deducting or depositing TDS in a resident-to-resident transaction.

The buyer does not need a Tax Deduction Account Number (TAN) for this specific compliance. A valid PAN is sufficient. This is different from other TDS obligations (like salary TDS) where a TAN is mandatory. For property TDS under Section 194IA, the buyer files Form 26QB using their PAN, and the seller receives the corresponding Form 16B as their TDS certificate.

Section 194IA: Rate, Threshold, and Calculation Basis

Here are the core rules under Section 194IA that every Karnataka property buyer needs to know:

TDS rate: 1% of the transaction value. No surcharge or cess is added on top of this 1%.

Threshold: TDS applies only when the total sale consideration or the stamp duty value (whichever is higher) is Rs 50 lakh or more. If the property value is below Rs 50 lakh, Section 194IA does not apply and no TDS is required.

Calculation basis: The 1% TDS is calculated on the higher of two numbers: the actual sale price agreed between buyer and seller, or the stamp duty value (called guidance value in Karnataka). This is a critical point for Karnataka buyers. If you negotiate a purchase price of Rs 55 lakh but the guidance value for your property is Rs 62 lakh, TDS is calculated on Rs 62 lakh, not Rs 55 lakh.

What counts as immovable property: Residential flats, independent houses, plots, commercial property, agricultural land converted to non-agricultural use, and any other building or land (except agricultural land that is exempt under the Income Tax Act). Agricultural land, as defined in Sections 2(14) and 10(37) of the Income Tax Act, is excluded from TDS under Section 194IA.

No-PAN penalty: If the seller does not provide their PAN, or if their PAN is not linked to Aadhaar (as now required), the TDS rate jumps from 1% to 20% under Section 206AA. On a Rs 70 lakh property, that is Rs 14 lakh withheld instead of Rs 70,000. Always collect and verify the seller's PAN before making any payment.

The October 2024 Amendment: Total Transaction Value, Not Per-Buyer Share

Before October 2024, there was genuine confusion about how the Rs 50 lakh threshold worked in joint purchases. If two buyers each paid Rs 30 lakh for a Rs 60 lakh property, some argued that no individual buyer crossed the Rs 50 lakh mark, so TDS did not apply. The Income Tax Department took a different view, but the law was not explicit enough to settle it definitively.

From 1 October 2024, the law was amended to clarify that the Rs 50 lakh threshold applies to the total value of the property as a whole, not to each buyer's individual share. If the property costs Rs 60 lakh and two buyers each pay Rs 30 lakh, TDS applies because the property value exceeds Rs 50 lakh. Each buyer must deduct 1% TDS on their respective share (Rs 3,000 each) and file a separate Form 26QB for their portion.

How Karnataka Guidance Value Affects Your TDS Amount

Karnataka's guidance value system creates a specific complication for TDS calculations that buyers in this state must understand. The guidance value is the minimum price at which the Karnataka government allows property registration, set by the Department of Stamps and Registration and available on the Kaveri portal.

Since TDS under Section 194IA is calculated on the higher of the sale consideration or the stamp duty value (guidance value in Karnataka), a gap between your negotiated price and the government rate directly inflates your TDS liability. Buyers often discover this gap only at the sub-registrar's office, which is why understanding how stamp duty and registration charges work in Karnataka before signing the sale agreement is important. Here is a practical example:

You agree to buy a 2BHK flat in Whitefield, Bangalore for Rs 65 lakh. But the guidance value for that specific property (based on the sub-registrar office jurisdiction, floor, and built-up area) works out to Rs 72 lakh. Your TDS calculation uses Rs 72 lakh, not Rs 65 lakh. You must deduct Rs 72,000 (1% of Rs 72 lakh) as TDS, even though you are paying only Rs 65 lakh to the seller.

The Karnataka government revised guidance values in February 2026 with a 6-15% increase across Bengaluru urban limits. A further 10-15% state-wide revision has been under consideration, though the formal gazette notification had not been issued as of mid-2026. Always check the live guidance value on the Kaveri portal for your specific property before finalising TDS calculations.

Income Tax Act 2025: What Changed from April 2026

The Income Tax Act, 2025 came into effect from 1 April 2026, replacing the Income Tax Act, 1961. For property TDS, the practical impact is primarily a renumbering exercise rather than a substantive rule change:

Section 194IA of the old Act is now covered under Section 393(1), Table Serial Number 3(i) of the new Act. The TDS rate remains 1%, the Rs 50 lakh threshold is unchanged, and the filing mechanism is now Form 141 (replacing Form 26QB for transactions from April 2026 onward). For payments made before 31 March 2026, Form 26QB still applies. For transactions where payment was made on or before 31 March 2026, the old section numbers apply. For payments from 1 April 2026 onward, the new numbering under the Income Tax Act, 2025 governs.

One practical change from Budget 2026: buyers purchasing property from NRI sellers can now use a PAN-based facility on the Income Tax portal to deposit TDS, without the earlier requirement to apply for a separate TAN. This simplification takes effect from 1 October 2026 for individual and HUF buyers. After completing TDS compliance and property registration, buyers should also complete BBMP property tax registration and other municipal transfers without delay.

How to File Form 26QB: Step-by-Step Process

Form 26QB is a challan-cum-statement. It serves as both your TDS payment receipt and your information return to the Income Tax Department. Here is how to file it:

Step 1: Log in to the Income Tax portal. Visit the official Income Tax e-filing website and log in with your PAN and password. If you do not have an account, register first using your PAN.

Step 2: Navigate to Form 26QB. After logging in, go to the E-file section, select e-Pay Tax, then click Proceed under the 26QB (TDS on sale of property) option in the New Payment section.

Step 3: Fill in buyer details. Enter your PAN, name, address, and contact information. The portal validates your PAN automatically.

Step 4: Fill in seller details. Enter the seller's PAN, name, and address. Again, the portal validates the PAN. If there are multiple sellers, you need a separate Form 26QB for each seller for their respective share.

Step 5: Enter property and transaction details. Provide the complete address of the property, the date of agreement, the date of payment, the total sale consideration, the stamp duty value, and the TDS amount (1% of whichever value is higher). You also select the type of property (land, building, or both) and the assessment year.

Step 6: Make payment. Choose your payment mode (net banking, debit card, or pay-at-bank). Complete the payment. The portal generates a challan receipt with a unique acknowledgment number.

Step 7: Download confirmation. After payment, go to Payment History under the TDS on Sale of Property section. Download the Form 26QB statement and payment receipt. Keep these for your records.

Deadline: Form 26QB must be filed and TDS deposited within 30 days from the end of the month in which the deduction was made. If you made a payment to the seller on 15 September 2026, the deadline for filing Form 26QB and depositing TDS is 31 October 2026.

Form 16B: The TDS Certificate for the Seller

After you file Form 26QB and the payment is processed, the next step is issuing Form 16B to the seller. This is the seller's TDS certificate, which proves that tax has been deducted and deposited with the government on their behalf.

To generate Form 16B, log in to the TRACES portal as a taxpayer. Navigate to the Form 16B download section, enter the acknowledgment number from your Form 26QB filing, and request the certificate. TRACES usually makes Form 16B available within 10-15 days after the Form 26QB processing is complete.

The seller needs Form 16B to claim TDS credit when filing their income tax return. If you fail to issue Form 16B, a penalty of Rs 100 per day applies under Section 272A(2)(g) of the Income Tax Act. This penalty runs from the due date until the certificate is actually issued. Note that TDS compliance is separate from other post-purchase obligations such as updating property tax records in your name, which you should also complete promptly after registration.

TDS When You Pay in Instalments

Many property purchases in Karnataka involve staggered payments, especially for under-construction apartments where the builder collects amounts at different construction milestones. TDS must be deducted on each instalment, not just at the final payment.

If you are buying a flat for Rs 80 lakh and paying in four instalments of Rs 20 lakh each, you deduct 1% TDS (Rs 20,000) from each instalment and file a separate Form 26QB for each payment. The Rs 50 lakh threshold is checked against the total property value, not each instalment. Since the property is worth Rs 80 lakh (above Rs 50 lakh), TDS applies from the very first instalment.

This is where many under-construction property buyers in Bangalore make mistakes. They assume TDS applies only when their cumulative payments cross Rs 50 lakh. That is incorrect. The trigger is the total agreement value, and deduction starts from the first payment itself. Before making payments, verify the property's legal status through official records available on the e-Aasthi portal and cross-check land records with RTC and Pahani documents.

Joint Buyers or Joint Sellers: Who Files What?

Property transactions involving multiple buyers or multiple sellers require separate Form 26QB filings for each buyer-seller combination. The rules work like this:

Multiple buyers, one seller: Each buyer files a separate Form 26QB for their share of the payment. If a husband and wife jointly buy a property for Rs 90 lakh (Rs 45 lakh each), each files Form 26QB for Rs 45 lakh and deducts Rs 4,500 as TDS.

One buyer, multiple sellers: The buyer files a separate Form 26QB for each seller. If you buy a property from two siblings who each own 50%, and the total value is Rs 1 crore, you file one Form 26QB for Rs 50 lakh to Seller A and another for Rs 50 lakh to Seller B, deducting Rs 5,000 TDS from each payment.

Multiple buyers, multiple sellers: Each buyer files a Form 26QB for each seller, proportionate to their share. A property with two buyers and two sellers generates four Form 26QB filings.

Remember: the Rs 50 lakh threshold is tested on the aggregate property value, not on individual shares. Even if each buyer's share is below Rs 50 lakh, TDS applies if the total property value crosses that mark. Joint ownership details should also be clearly reflected in the sale agreement and registration documents to avoid disputes later.

When the Seller Is an NRI: Section 195 Applies, Not Section 194IA

This is the single most important distinction in property TDS, and getting it wrong can result in significant financial penalties for both buyer and seller. If the property seller is a Non-Resident Indian (NRI), Section 194IA does not apply at all. Instead, Section 195 of the Income Tax Act governs the TDS, and the rules are dramatically different.

No threshold: Unlike Section 194IA's Rs 50 lakh minimum, Section 195 applies regardless of the property value. Even a Rs 25 lakh property sale by an NRI attracts TDS.

Higher TDS rates: TDS on NRI property sales is not 1%. The rates depend on whether the property is a long-term or short-term capital asset:

For long-term capital gains (property held for more than 2 years): the base rate is 12.5% as of the post-July 2024 regime. With applicable surcharge and 4% health and education cess, the effective rate can reach approximately 14.95% depending on the gain amount.

For short-term capital gains (property held for 2 years or less): the rate is 30%, plus surcharge and cess, which can push the effective rate above 34%.

TDS on full sale value, not just the gain: By default, Section 195 requires TDS to be deducted on the entire sale consideration, not just the capital gain portion. If an NRI sells a property for Rs 1.5 crore and the actual capital gain is Rs 40 lakh, TDS is still calculated on the full Rs 1.5 crore unless the seller obtains a Lower Deduction Certificate.

Practical impact: On a Rs 1 crore NRI property sale with long-term gains, the buyer would need to withhold approximately Rs 14.95 lakh (at 12.5% + surcharge + cess) rather than Rs 1 lakh (at 1% under Section 194IA). This is why many NRI sellers apply for a Lower Deduction Certificate before the sale. NRI buyers and sellers should also review our NRI property buying guide for India for the full compliance checklist.

A common mistake in Karnataka: buyers or their agents apply the 1% Section 194IA rate to an NRI sale and file Form 26QB instead of the correct Section 195 forms. The Income Tax Department catches this through its Annual Information Return from the sub-registrar's office. The consequence is notices to both buyer and seller, demand for the shortfall, interest, and potential penalties under Section 271C for failure to deduct proper TDS.

Lower Deduction Certificate: Reducing TDS to Actual Tax Liability

When TDS on the full sale consideration significantly exceeds the seller's actual income tax liability (common in NRI sales and some resident sales with high acquisition costs), the seller can apply for a Lower Deduction Certificate (LDC) under Section 197.

The process works as follows: the seller files an application (Form 13, now Form 128 under the Income Tax Act, 2025) with the Assessing Officer before the sale takes place. The application includes a computation of expected capital gains, relevant exemptions (Section 54, 54EC, or 54F reinvestment benefits), and the actual tax liability. If the Assessing Officer is satisfied, they issue a certificate specifying a lower TDS rate or even a nil rate.

The buyer then deducts TDS at the rate specified in the certificate instead of the standard rate. This prevents the seller's money from being blocked unnecessarily with the government while they wait months for a refund through the ITR process.

For NRI sellers in Karnataka, obtaining an LDC before the sale is strongly advisable. The difference between TDS on the full sale value at 12.5-30% versus TDS on actual gain at effective rates of 5-10% can run into lakhs of rupees. The application process typically takes 3-4 weeks, so sellers should plan well ahead of the registration date. Before the sale, both parties should also verify that the project has a valid Karnataka RERA registration where applicable, and that repatriation of sale proceeds is planned in advance.

Penalties for Missing or Delaying TDS on Property

The Income Tax Department does not treat TDS non-compliance lightly, and property transactions are especially easy for them to track. Every property registration above Rs 30 lakh is reported by the sub-registrar's office through the Annual Information Return. If you purchased a property above Rs 50 lakh and did not file Form 26QB, the department will know.

Here is what you face for non-compliance:

Interest under Section 201(1A) for non-deduction: If you failed to deduct TDS altogether, interest at 1% per month (or part of a month) is charged from the date TDS was deductible to the date it is actually deducted. On a Rs 70,000 TDS amount with a 6-month delay, that is Rs 4,200 in interest.

Interest under Section 201(1A) for late deposit: If you deducted TDS but did not deposit it with the government on time, interest at 1.5% per month is charged from the date of deduction to the date of actual deposit. This is a higher rate because you held government money.

Late filing fee under Section 234E: Rs 200 per day for every day Form 26QB filing is delayed, capped at the total TDS amount. If your TDS was Rs 60,000 and you filed 200 days late, the late fee is Rs 40,000 (200 x Rs 200). If you filed 400 days late, the fee is still capped at Rs 60,000.

Penalty under Section 271H: The Assessing Officer can impose an additional penalty of Rs 10,000 to Rs 1,00,000 if Form 26QB is not filed within one year of the due date, or if incorrect details are furnished. This is separate from and in addition to the Section 234E late fee.

Prosecution under Section 276B: In cases of wilful failure to deposit TDS that was deducted, criminal prosecution can be initiated with imprisonment of 3 months to 7 years plus a fine. While prosecution is rare for individual property transactions, it is a legal possibility for large amounts or repeated defaults.

The bottom line: the penalties for skipping or delaying TDS can quickly exceed the TDS amount itself. If you discover you missed TDS on a past transaction, file and pay immediately rather than waiting for a notice. Voluntary compliance before notice typically results in lower penalties.

How the Seller Claims TDS Credit

Once the buyer deducts TDS and files Form 26QB, the deducted amount appears in the seller's Form 26AS (Tax Credit Statement) and the Annual Information Statement (AIS) on the Income Tax portal. The seller can verify this by logging in with their PAN.

When the seller files their income tax return for the financial year in which the property was sold, they declare the capital gains from the sale and claim the TDS as tax already paid. If the TDS exceeds their actual tax liability (which is common when the seller has reinvested under Section 54 or 54EC), the excess is refunded to them.

If the buyer has not filed Form 26QB, the TDS will not appear in the seller's Form 26AS, and the seller cannot claim the credit. This creates a genuine dispute between buyer and seller. Sellers should verify their Form 26AS within a few weeks of the transaction to confirm the TDS credit is reflected. If it is missing, follow up with the buyer immediately rather than waiting until ITR filing season. Separately, sellers should be aware that the property's classification as revenue or agricultural land affects both TDS applicability and capital gains treatment; our guide on revenue site risks in Karnataka covers the key distinctions.

Common Mistakes Buyers Make with Property TDS in Karnataka

1. Applying Section 194IA to NRI sellers. This is the costliest mistake. If the seller is an NRI, Section 195 applies, not Section 194IA. The TDS rate, forms, and compliance requirements are completely different. Using the wrong section leads to notices, demands, and penalties for both parties.

2. Ignoring the guidance value. Many buyers calculate TDS on the agreed sale price without checking the Karnataka guidance value. Since TDS applies on the higher of the two, a higher guidance value means a higher TDS amount. Always check the Kaveri portal before calculating.

3. Missing the per-instalment obligation. Buyers paying in instalments sometimes assume TDS applies only at the time of registration or final payment. TDS must be deducted on every instalment where the overall property value exceeds Rs 50 lakh.

4. Not collecting the seller's PAN before payment. Without the seller's PAN, TDS jumps to 20%. On a Rs 80 lakh property, that is Rs 16 lakh withheld versus Rs 80,000. This also applies if the seller's PAN is not linked to Aadhaar.

5. Filing one Form 26QB for multiple sellers. Each seller must have their own Form 26QB with TDS proportionate to their ownership share. Filing a single form for a multi-seller transaction leads to processing errors and credit mismatches.

6. Confusing TDS with stamp duty. TDS and stamp duty are separate obligations. Stamp duty goes to the state government at the time of property registration. TDS goes to the central government (Income Tax Department) through Form 26QB. Paying stamp duty does not fulfil your TDS obligation, and vice versa. Similarly, updating BBMP property tax records after purchase is a municipal obligation that has no connection to your TDS compliance.

7. Not issuing Form 16B. Many buyers forget about Form 16B after filing Form 26QB. The seller needs this certificate to claim their TDS credit. Delays attract a penalty of Rs 100 per day.

8. Skipping document verification before payment. Before paying any advance or token amount, verify the property's ownership and encumbrance history. Cross-check land records through official revenue records on Pahani and confirm the property is free of litigation. TDS compliance is pointless if the underlying transaction itself is disputed.

Frequently Asked Questions

What is the TDS rate on property sale in Karnataka?

The TDS rate is 1% of the sale consideration or the Karnataka guidance value, whichever is higher, when the property value is Rs 50 lakh or more and the seller is a resident Indian. This is governed by Section 194IA (now Section 393(1) under the Income Tax Act, 2025). If the seller does not provide a valid PAN linked to Aadhaar, the rate increases to 20%. For NRI sellers, different and higher rates apply under Section 195.

Who is responsible for deducting TDS on property purchase?

The buyer is solely responsible for deducting TDS from the payment to the seller and depositing it with the government through Form 26QB. This applies whether the buyer is an individual, HUF, company, or any other entity. The seller has no TDS deduction obligation in this transaction. The buyer does not need a TAN for this purpose; their PAN is sufficient.

Is TDS applicable on property below Rs 50 lakh?

No, for resident sellers. Section 194IA applies only when the total sale consideration or stamp duty value (whichever is higher) is Rs 50 lakh or more. Properties below this threshold are exempt from TDS under this section. However, for NRI sellers, TDS under Section 195 applies regardless of the property value, with no minimum threshold.

How do I file Form 26QB for TDS on property?

Log in to the Income Tax portal (incometax.gov.in), go to E-file, select e-Pay Tax, and choose 26QB (TDS on sale of property). Fill in buyer details, seller details, property details, and the TDS amount. Complete the payment via net banking or debit card. The filing must be done within 30 days from the end of the month in which TDS was deducted. After processing, download Form 16B from the TRACES portal and issue it to the seller.

What is the penalty for not paying TDS on property?

Multiple penalties apply. Interest at 1% per month on TDS not deducted, or 1.5% per month on TDS deducted but not deposited. A late filing fee of Rs 200 per day under Section 234E, capped at the TDS amount. An additional penalty of Rs 10,000 to Rs 1,00,000 under Section 271H for non-filing beyond one year or incorrect filing. In serious cases, prosecution under Section 276B can lead to imprisonment of 3 months to 7 years.

Does TDS apply on under-construction property purchase?

Yes. TDS under Section 194IA applies to under-construction property purchases if the total agreement value or stamp duty value is Rs 50 lakh or more. TDS must be deducted on each instalment payment to the builder or seller. The obligation starts from the first instalment itself, not when cumulative payments cross Rs 50 lakh.

How is TDS different when buying property from an NRI?

When the seller is an NRI, Section 195 applies instead of Section 194IA. There is no Rs 50 lakh threshold, so TDS applies on any property value. The default TDS rate is 12.5% (long-term) or 30% (short-term) plus surcharge and cess, applied on the full sale consideration. The NRI seller can apply for a Lower Deduction Certificate under Section 197 to reduce TDS to their actual tax liability. Using Section 194IA (1% rate) for an NRI sale is a compliance error that results in notices and penalties.

Can the seller claim a refund of TDS deducted on property sale?

Yes. The seller claims TDS credit when filing their income tax return for the year of the property sale. The TDS amount is set off against the capital gains tax liability. If TDS exceeds the actual tax (for example, if the seller reinvests under Section 54 or 54EC to claim exemptions), the excess is refunded by the Income Tax Department. The seller can verify TDS credit in their Form 26AS or Annual Information Statement on the Income Tax portal.