When purchasing immovable property in India, buyers must comply with Section 194-IA of the Income Tax Act, which mandates Tax Deduction at Source (TDS). This crucial provision requires buyers to deduct a percentage of the payment made to the seller and deposit it with the government. Understanding these requirements is essential for successful property transactions and avoiding penalties.

Section 194-IA was introduced in the Finance Act of 2013 to prevent tax evasion in real estate transactions. It places the responsibility of tax collection directly on property buyers when purchasing immovable property from a resident Indian seller.

TDS on property purchase applies when all of the following conditions are met:

1. The property is immovable (land, building, apartment, etc.)
2. The total consideration exceeds ₹50 lakhs
3. The seller is a resident of India
4. The property is not agricultural land (regardless of rural or urban location)

Under Section 194-IA, the applicable TDS rates are:

• 1% of the total consideration if the seller provides PAN
• 5% of the total consideration if the seller does not furnish PAN

The term “consideration” includes all payments for property transfer:

• The agreed sale price
• Car parking allocation charges
• Club membership fees
• Maintenance deposits
• Electricity and water deposits
• Any other charges paid to the seller