Buy a flat for ₹50 lakh or more and the law makes you a tax deductor, not just a buyer. Section 393 of the Income-tax Act, 2025 requires you to hold back 1% of what you pay, deposit it with the government, and hand the seller a certificate for it. The deduction exists so that a large, one-off sale is taxed as it happens, not chased up months later on trust. Get it wrong, and the interest and fees fall on you, the buyer – not the seller.
The rule is the same whether you pay in one instalment for a resale flat or across a dozen instalments on a construction-linked plan for a flat still being built. This guide works through a ₹1 crore flat on a construction-linked schedule, sets out the steps on the e-filing portal, and answers the question buyers ask most: whether the 1% also applies to the GST charged on top of each instalment.
None of this changes what you owe the builder or the seller. It only changes how you pay it – a small slice goes to the government instead of the seller, and the seller gets credit for that slice against their own tax bill.
The rule, and the ₹50 lakh test
Section 393(1) of the Income-tax Act, 2025 requires anyone paying a resident seller for immovable property – other than agricultural land – to deduct income tax at the time of credit or payment, whichever comes first. The rate is 1%, on whichever is higher: the price you agreed, or the property’s stamp duty value. The Act sets the threshold at ₹50 lakh, tested against either figure – cross it on the price or on the stamp value, and the deduction applies to the whole amount, not just the excess.
Stamp duty value is the figure the state uses to charge stamp duty: Karnataka’s guidance value, or the sub-registrar’s own assessment where that runs higher. Our guide to guidance value covers how that figure is set and looked up on Kaveri; the same figure governs this test. Buy a flat priced under its guidance value and you deduct 1% of the guidance value, not the lower price on your agreement – the same logic that pushes up stamp duty on an underpriced sale pushes up the TDS with it.
The rule applies only to a resident seller; the Act says so in the opening words of section 393(1). A non-resident seller moves you to an entirely different provision, covered near the end of this guide.
Deducting on each instalment
Nothing in the Act says the 1% is deducted once, at the end. Section 393(1) taxes each sum “credited or paid” during the tax year, at the time of credit or payment, whichever is earlier. On a flat you are paying for as it is built, that means every instalment carries its own deduction, not just the final one at possession.
The ₹50 lakh test looks at the deal as a whole, not any single instalment. The Act defines the consideration for this purpose as the aggregate of the amounts paid or payable by all the buyers to all the sellers for the property – the whole price, in other words, not the size of one cheque. So on a flat priced above ₹50 lakh, every instalment attracts 1%, including the first, small booking amount. You do not wait for your payments to add up to ₹50 lakh before you start deducting.
Take a ₹1 crore flat on a construction-linked plan: 10% at booking, then 15%, 20%, 20%, 20% and 15% as each stage is reached – the same schedule our payment-plans guide works through. Deduct 1% at every stage and the running total comes to ₹1 lakh by possession: 1% of the whole price, paid in the same six pieces as the price itself.
| Stage | Instalment | TDS at 1% | Paid to the seller |
|---|---|---|---|
| Booking, 10% | ₹10,00,000 | ₹10,000 | ₹9,90,000 |
| Foundation, 15% | ₹15,00,000 | ₹15,000 | ₹14,85,000 |
| Structure, 20% | ₹20,00,000 | ₹20,000 | ₹19,80,000 |
| Superstructure, 20% | ₹20,00,000 | ₹20,000 | ₹19,80,000 |
| Finishing, 20% | ₹20,00,000 | ₹20,000 | ₹19,80,000 |
| Possession, 15% | ₹15,00,000 | ₹15,000 | ₹14,85,000 |
| Total | ₹1 Cr | ₹1,00,000 | ₹99,00,000 |
Even where a bank is disbursing your loan directly to the builder, the deduction is still your job as the buyer, not the bank’s. Tell your bank, before it releases a stage payment, to pay the builder net of 1% and to release the 1% to you instead, so you can deposit it – a bank paying the builder the full instalment leaves you short of the cash to make good the deduction.
Here is one stage of that schedule in full, from demand to certificate.
The stage is billed
The builder raises a demand for this stage: ₹20,00,000, with GST charged separately on top.
You hold back 1%
₹20,000, deducted from the base amount, at the time you pay or credit it, whichever comes first.
You pay the rest
₹19,80,000 to the builder, plus the GST on the stage in full – TDS does not touch the GST.
You deposit and file
Form 141, Schedule B, with the ₹20,000 – within 30 days of the end of the month you deducted it.
The seller’s certificate
Form 132, downloaded from TRACES once the form is processed, and handed to the seller within 15 days more.
Where GST fits in
GST is not part of the 1%, provided the agreement shows it separately from the price – which every construction-linked demand does. The Central Board of Direct Taxes settled this in 2017 for TDS generally, not just for this one section: where “the component of ‘GST on services’ comprised in the amount payable to a resident is indicated separately” in the contract, tax is deducted “on the amount paid or payable without including such ‘GST on services’ component.” A flat still under construction is, under GST law, a construction service until its completion certificate issues, so the circular reaches it directly.
That circular was written for the 1961 Act’s TDS chapter. The 2025 Act repeals that Act outright, but carries forward any circular, direction or instruction issued under it, so far as it does not conflict with the new one. Nothing in section 393 is inconsistent with leaving GST out of the deduction, so the position holds under the new Act too: deduct 1% on the instalment’s base price, not on the GST charged with it.
On the ₹20 lakh stage above, GST at 5% adds ₹1 lakh to the demand, for a total bill of ₹21 lakh. TDS is 1% of ₹20 lakh – ₹20,000 – not 1% of ₹21 lakh. Deduct on the GST-inclusive figure by mistake and you have simply overpaid the government and underpaid your seller by ₹1,000; it is the seller’s money to chase back from you, not a fine either of you owes the government.
The seller’s PAN, not a TAN
You do not need a Tax Deduction and Collection Account Number to deduct this TDS. The Act specifically exempts anyone deducting tax on a resident seller under this provision from applying for one; your own PAN is enough to pay and file Form 141.
What you do need is the seller’s PAN. The Act requires anyone entitled to a sum on which tax is deductible to furnish their PAN to the person paying them, and puts the cost of not doing so on you, the deductor: deduct at 20% instead of 1%, the higher rate the Act sets for a payment where the payee’s PAN is missing or invalid. Ask for the seller’s PAN before the first instalment, and check it against their identity documents. On the ₹10 lakh booking amount above, a bad PAN turns a ₹10,000 deduction into ₹2 lakh – money that comes straight out of what you have to pay the builder.
Paying it: Form 141
Form 141 is the single challan-cum-statement that replaced the old Forms 26QB, 26QC, 26QD and 26QE. It is PAN-based – you file it under your own login, with no TAN – and Schedule B is the part that covers a property purchase specifically.
The steps, on the e-filing portal
- Log in to the income-tax e-filing portal with your PAN, and go to e-Pay Tax.
- Choose the Income-tax Act, 2025, then Form 141, then Schedule B for immovable property.
- Enter both parties’ PAN, address and contact details, the property’s details, and the instalment’s amount and date of deduction.
- Pay the TDS online, as part of the same filing.
- Submit the form, and download the challan-cum-statement for your own record.
Pay and file within 30 days of the end of the month you deducted the tax – not 30 days from the payment itself. Deduct on 28 February and you have until 30 days after the end of February; deduct on 2 March instead and the clock resets to 30 days after the end of March. On a construction-linked plan, each stage is its own deduction, in its own month, so expect to file Form 141 as many times as you have instalments; the portal groups deductions by month, not by the property.
Once the form is processed, download the certificate – Form 132, which replaced Forms 16B, 16C, 16D and 16E – from the TRACES portal, and give it to the seller within 15 days of Form 141’s own due date. The seller sees the credit reflected against their PAN and sets it against the tax they owe on the sale; without the certificate, they still get the credit through their own records, but a certificate in hand is what they will ask you for.
Interest and fees for delay
Miss a deduction, or deduct and sit on the money, and interest runs in two separate stretches. From the date you should have deducted to the date you actually do, it is 1% a month or part of a month. From the date you deduct to the date you actually pay it over to the government, it rises to 1.5% a month or part of a month. Both are simple interest, and any part of a month counts as a whole one – deduct a day late into a new month and you owe a full month’s interest.
Filing Form 141 late is a separate default from paying late, and carries its own fee: ₹200 for every day the statement remains unfiled, capped at the tax you were due to deduct in the first place. On the ₹20,000 deducted at one stage of the worked example above, three months of delay in filing – about 90 days – would reach ₹18,000 in fees before the cap even matters; a longer delay simply stops at ₹20,000, the full amount of that stage’s TDS.
Several buyers or sellers
The ₹50 lakh test looks at the whole transaction, not each buyer’s share of it. Two buyers splitting a ₹1 crore flat 50:50 still cross the threshold on the combined price, even though neither individually pays ₹50 lakh – the Act defines the consideration for this purpose as the aggregate paid by all the buyers to all the sellers together. Each buyer then deducts 1% of their own share of each instalment.
Filing is more forgiving than the old, separate forms were. One buyer does not need to file a distinct Form 141 for every seller: where all the sellers on a property share the same status – all individuals, say, or all companies – one filing covers all of them for that transaction. Only where the sellers mix statuses, some companies and some not, do you file twice: one form for the company sellers, one for the rest. The same grouping applies from the other side, where several buyers are deducting on the same property.
If the seller is an NRI
Everything above assumes a resident seller, because section 393(1) says so in its own opening words. Pay a non-resident seller instead and you move to a different provision entirely: no ₹50 lakh floor, no flat 1%, and a TAN this time, not just a PAN. Our guide to buying from an NRI covers how that deduction is worked out, and how a seller can apply to the Assessing Officer for a lower-deduction certificate to bring it down before you pay. Get this wrong and the shortfall – plus the same interest and fees set out above – is yours to make good, so confirm whether your seller is resident before you rely on the simpler rule in this guide.
Deducted under section 393(1), once the price or stamp value reaches ₹50 lakh. No TAN needed – your PAN alone files Form 141. The rate does not shift with the seller’s own tax position.
Deducted under section 393(2), on every rupee, with no ₹50 lakh floor. You need a TAN to deduct it. The seller can apply for a lower-deduction certificate; without one, the default withholding runs well above 1%.
Before you deduct
- Check the ₹50 lakh test against both the price and the stamp duty value – whichever is higher decides it.
- Get the seller’s PAN before the first instalment, and verify it – a bad PAN means 20%, not 1%.
- Deduct on every instalment, from the first, on the base price before GST.
- Pay and file Form 141 within 30 days of the end of the month you deducted.
- Download Form 132 from TRACES and give it to the seller within 15 days more.
- Confirm residency first – an NRI seller replaces this whole mechanism with a different one.
Sources, checked 10 Sep 2026. The 1% rate, the ₹50 lakh test on consideration or stamp duty value, and the resident-only rule: Income-tax Act, 2025, section 393(1) and its Table, Serial No. 3(i) with Notes 1 and 3 (Gazette of India, 21 Aug 2025). No TAN needed for this deduction, and 20% where the seller’s PAN is missing: sections 397(1)(c) and 397(2). Interest for late deduction and late payment: section 398(3)(a). The ₹200-a-day filing fee, capped at the tax deductible: section 427. Circulars issued under the 1961 Act continuing in force under the new one: section 536(1) and (2)(j). GST excluded from the TDS base where shown separately in the agreement: Central Board of Direct Taxes, Circular No. 23/2017, 19 July 2017. Form 141’s schedules, due dates and filing steps, and Form 132 as its certificate: Income Tax Department guidance on Form 141 and Form 132, published on incometax.gov.in and incometaxindia.gov.in. Section 393 replaces section 194-IA of the Income-tax Act, 1961 from 1 April 2026. This is a general guide, not tax advice; a chartered accountant can check a specific deduction, especially where the seller’s residency or PAN status is in doubt.