Section 393(1) Explained: New TDS Rules on Property Purchase

The rules for TDS (Tax Deducted at Source) on the purchase of property have been revised under the new Income Tax Act, 2025. Previously, it was covered under Section 194-IA of the Income Tax Act, 1961. However, from April 1, 2026, it will be covered under Section 393(1) of the Income Tax Act, 2025.

The idea remains the same, but the section number and some compliance procedures, including forms, have changed. Consequently, both buyers and professionals must know about the revised rules.

TDS on property applies when a person buys immovable property for Rs 50 lakh or more. It applies to both residential and commercial property. However, agricultural land is not covered. The Rs 50 lakh limit is based on the total property value, not on individual instalments. TDS applies if the total is Rs 50 lakh or more, even if paid in parts.

The TDS rate is 1% of the sale consideration. But if the seller does not provide a valid PAN, the TDS rate can go up to 20%. Therefore, the buyer needs to collect and verify the seller’s PAN before making payment.

If the property agreement is signed before March 2026 but payment is made after April 1, 2026, the new rules will apply because TDS is deducted at the time of payment or credit. For payments made on or after April 1, 2026, Form 141 will need to be filed. For payments made before this date, Form 26QB will apply under the old system. If payment is made in instalments before and after April 2026, both forms may have to be used for the same property transaction.

In cases where there are multiple buyers or sellers, TDS is calculated based on the total property value and not on each person’s share. So, even if each person’s share is less than Rs 50 lakh, TDS will still apply if the total property value is Rs 50 lakh or more.

The buyer is responsible for deducting and depositing TDS. The buyer must deduct 1% from the payment, deposit it with the government within the prescribed time, and file the required form. After filing, the buyer must also provide the TDS certificate to the seller. Earlier, this certificate was issued in Form 16B, and a similar system is expected under the new law.

If TDS is undeducted or undeposited on time, interest and penalties can apply. If tax is not deducted, interest is charged at 1% per month; if tax is deducted but not deposited, interest is charged at 1.5% per month. Apart from these penalties, there is also a late filing fee of Rs 200 per day, up to the amount of TDS. Therefore, timely compliance is crucial.