Buying from a resident? Deduct 1% and file Form 26QB. Buying from an NRI? Section 194-IA does not apply — Section 195 does, at a far higher rate, and deducting 1% makes you the assessee-in-default.
The obligation is the buyer’s. So is the liability when it goes wrong.
Section 194-IA applies only where the seller is a resident. If the seller is a non-resident, Section 195 applies instead — and the rate is the tax rate on the seller’s capital gain plus surcharge and cess, not 1%. Worse, without a lower-deduction certificate under Section 197, the deduction is required on the whole consideration, not on the gain. A buyer who deducts 1% from an NRI seller becomes an assessee-in-default for the shortfall, with interest, and the amount is recovered from the buyer, not the seller.
Two buyers paying ₹30 lakh each for a ₹60 lakh flat are not below the threshold. The ₹50 lakh test applies to the consideration for the property as a whole, and both buyers must deduct on their respective shares. The same is true where there are two sellers. Each buyer-seller combination needs its own Form 26QB — two buyers and two sellers means four forms, not one.
TDS under 194-IA is computed on the higher of the sale consideration and the stamp duty value. Where the circle rate exceeds the negotiated price, the TDS is on the circle rate. Deducting on the agreement value alone is a common short-deduction, and it surfaces later when the seller’s 26AS does not match the registered value.
Late deduction attracts interest at 1% a month; late deposit after deducting attracts 1.5% a month. Late filing of Form 26QB attracts a fee of ₹200 a day under Section 234E, capped at the TDS amount — and that fee cannot be waived. On a small TDS amount the fee can equal the tax within a few months.
The calculator does the arithmetic. TaxSphere — our free case-law library, 1,184 authorities and the Act in full — has the judgments, the circulars and the statutory text for the same provision.
