From 1 April 2026, TDS on buying a flat or other immovable property (not agricultural land) worth ₹50 lakh or more falls under section 393(1) of the Income-tax Act, 2025, Table serial number 3(i), instead of section 194-IA. The rate is unchanged at 1% of the consideration or the stamp duty value, whichever is higher. The buyer now pays and reports it in Form No. 141 (formerly 26QB) and gives the builder a certificate in Form No. 132 (formerly 16B).
For a builder, little changes in the money and a lot changes in the paperwork: section numbers on demand letters, form names in buyer reminders, and the year in which the credit is shown.
What changed and what stayed the same
| Item | Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|---|
| Section | 194-IA | 393(1), Table Sl. 3(i) |
| Rate | 1% of consideration or stamp duty value, whichever is higher | 1% of consideration or stamp duty value, whichever is higher |
| Threshold | ₹50 lakh or more | ₹50 lakh or more |
| Buyer’s form to pay and report | Form 26QB | Form No. 141 |
| Certificate to the seller | Form 16B | Form No. 132 |
| Rate if the seller has no PAN | 20% (s.206AA) | 20% (s.397(2)(b)(i)) |
| Fee for a late statement | ₹200 a day (s.234E) | ₹200 a day (s.427(1)) |
| Interest on late deduction | 1% a month (s.201(1A)(i)) | 1% a month (s.398(3)(a)(i)) |
| Interest on late payment | 1.5% a month (s.201(1A)(ii)) | 1.5% a month (s.398(3)(a)(ii)) |
| Credit shown against | Assessment year | Tax year |
The 2025 Act came into force on 1 April 2026 (s.1(3)) and repealed the 1961 Act (s.536(1)). The Income Tax Department’s e-filing FAQs say the new Act applies where the earlier of credit or payment falls on or after 1 April 2026; where it fell on or before 31 March 2026, Form 26QB and the other old forms still apply. The same FAQs say tax deducted in March 2026 is credited in assessment year 2026-27, and tax deducted in April 2026 in tax year 2026-27.
What does the new section say?
Table serial 3(i) of s.393(1) covers “any consideration for transfer of any immovable property (other than agricultural land)”. The rate is 1% of the consideration or the stamp duty value of the property, whichever is higher. The threshold column reads “Fifty lakh rupees and as per Note 3”, and Note 3 says tax is deducted where the consideration or the stamp duty value is “equal to or greater than fifty lakh rupees”.
Section 402(9) adds that consideration includes club membership, car parking, electricity or water facility, maintenance and advance fees, and similar charges incidental to the transfer.
Two points on the threshold:
- Note 1 adds up the amounts paid by all buyers to all sellers for the threshold, so a ₹60 lakh flat bought jointly by a couple is above it, even though each pays ₹30 lakh.
- Exactly ₹50 lakh is taxed. As first enacted, Note 3 opened “For the purposes of serial number 3(iii)”, the compulsory-acquisition row. The Finance Act 2026 (Act No. 4 of 2026) substituted “serial number 3(i)” with effect from 1 April 2026 (footnote 81 to s.393 on the Income Tax Department’s site). So the “equal to or greater than” test governs property sales, as the old s.194-IA did. The Form 141 user manual still says TDS is due “only if value exceeds INR 50 Lakh”; that is help text, and the Act prevails.
Tax is deducted at the time of credit or payment, whichever is earlier (s.393(1)(c)). On a construction-linked plan that means on each instalment when it is paid or credited, not once at the end.
A worked example (sample figures)
A buyer books a flat at an agreement value of ₹90 lakh. The stamp duty value is ₹84 lakh, so the higher figure is the consideration. The plinth demand is 10% of the price.
| Step | Amount |
|---|---|
| Plinth instalment due (10% of ₹90 lakh) | ₹9,00,000 |
| TDS at 1% | ₹9,000 |
| Paid to the builder | ₹8,91,000 |
| Deposited by the buyer with Form 141 | ₹9,000 |
The buyer deposits the ₹9,000 with Form No. 141 within 30 days from the end of the month in which it was deducted (rules 218(3) and 219(5)), then downloads Form No. 132 within 15 days of that due date (rule 215) and gives it to the builder. The builder credits the buyer’s account with the full ₹9,00,000: ₹8,91,000 received and ₹9,000 as TDS receivable, cleared once the credit shows in the builder’s annual information statement.
GST is left out of this example; the next section explains why.
Is TDS on property worked out on the GST?
Usually not, where GST is shown separately. CBDT Circular No. 23/2017 (19 July 2017) says that where the agreement shows “GST on services” separately, TDS is deducted on the amount paid or payable without that GST. It covers all TDS on payments to residents, not only rent, and GST on an under-construction flat is charged on a supply of construction services (CGST Act 2017, Schedule II, para 5(b)). Section 536(2)(j) of the 2025 Act keeps circulars issued under the 1961 Act in force so far as they are not inconsistent with the new Act.
| Item on the demand | In the TDS base? |
|---|---|
| Instalment of the price | Yes |
| Parking, club, maintenance and so on | Yes (s.402(9)) |
| GST shown separately | No, under Circular 23/2017 |
| GST not shown separately | Yes, the whole amount |
| Interest for late payment | Not settled; no official guidance, agree it with a CA |
The limit on this: the CBDT has not issued a clarification written for property TDS, and we found no tribunal or court ruling on GST under s.194-IA, so confirm the treatment with your CA. The circular’s condition is that GST is shown separately in the agreement, so keep it a separate line in the agreement for sale and on every demand.
What should a builder change?
- Demand letters and receipts. Replace “194-IA” with “s.393(1), Table Sl. 3(i), Income-tax Act 2025” and “Form 26QB” with “Form No. 141” for instalments paid or credited from 1 April 2026.
- Buyer reminders. Ask for Form No. 132, not Form 16B, and remind buyers to choose the correct tax year and quote your PAN.
- Your PAN on every demand. Form 141 carries the seller’s PAN; if the buyer types it wrongly, the credit does not reach you until the buyer files a correction.
- Short receipts. Book the 1% as TDS receivable, not as an overdue amount, so the buyer is not charged interest on tax they deducted correctly.
- Monthly check. Match the TDS receivable against the credits in your annual information statement (Form No. 168 under rule 245 of the new rules) and chase the buyers whose credit is missing.
Joint development and NRI sales
Two other parts of the same section matter to builders:
- Table serial 3(ii) covers consideration, other than consideration in kind, under the agreement referred to in s.67(14): a registered agreement under which a landowner lets another person develop a real estate project in return for a share in it (s.67(15)(b)). The rate is 10%, with no threshold. Note 2 says that where both 3(i) and 3(ii) apply, tax is deducted under 3(ii) only.
- When a builder buys from a non-resident (for example land from an NRI owner), s.393(1) does not apply, because it covers payments to residents. The deduction falls under s.393(2), Table serial 17, at the rates in force. Form 141 is used for this only where the buyer is a resident individual or HUF (rule 219(5)(e)); a builder company reports it in its quarterly statement in Form No. 144 (rule 219(1)) and needs a TAN, because the TAN exemptions in s.397(1)(c) do not include s.393(2).
How LoftRay records it
LoftRay records TDS, with its section, in transactions, so your team can book the 1% a buyer deducts as TDS rather than leave it as an unpaid amount. Your team approves the TDS rules and their section labels during setup, so the move to the new section numbers is a change your CA signs off. LoftRay does not file TDS returns or download Form 132 for you.