Income Tax on Buying and Selling Property — 1% TDS Under Section 194-IA on Purchases of ₹50 Lakh or More, 12.5% LTCG Without Indexation or 20% With It for Pre-July 2024 Property, Stamp Value Under 50C and 56(2)(x), Sections 54, 54F and 54EC, Capital Gains Account Scheme, Buying From an NRI, and What the Sub-Registrar Reports
1%
TDS by the buyer under section 194-IA when the consideration or stamp value is ₹50 lakh or more
12.5%
LTCG on property held over 24 months, without indexation (20% with indexation optional for pre-23 July 2024 purchases)
₹10 crore
Cap on the section 54 / 54F exemption for reinvestment in a residential house
₹30 lakh
Registered value above which the sub-registrar reports the deal to the AIS
Guide by BookMyCA's Chartered Accountants · pan-India serviceLast verified against official guidelines on 7 September 2026.
Video Explanation & Insights
What income tax says when you buy or sell property: the 1% TDS and more
4 videos on this topic
Buying: the 1% TDS and the stamp-value rule
- 1Section 194-IA: when the consideration OR the stamp-duty value is ₹50 lakh or more (both are tested since 1 October 2024, and the limit is per property, not per buyer or seller), the buyer deducts 1% TDS from each payment to a resident seller — including advances — and deposits it within 30 days of the month end through Form 26QB (no TAN needed; PAN of both parties), then issues Form 16B to the seller from TRACES.
- 2Joint buyers/sellers: each buyer files a 26QB for their share against each seller; the ₹50 lakh threshold applies to the property value as a whole.
- 3Seller without PAN or with an inoperative PAN: TDS at 20% — the video's ₹1 crore example becomes ₹20 lakh, so check the seller's PAN–Aadhaar status before registration.
- 4Buying from an NRI seller: section 195 applies instead — TDS on the entire consideration at the capital-gains rate (12.5% plus surcharge and cess for long-term, slab for short-term) unless the NRI obtains a lower/nil deduction certificate under 197; the buyer needs a TAN and files Form 27Q.
- 5Section 56(2)(x): if you buy for less than the stamp-duty value by more than the higher of ₹50,000 and 10% of the consideration, the difference is taxed as your income from other sources; keep the stamp value within 10% of the price or get the value contested.
- 6Home loan paperwork, the registered agreement, the 26QB challans and Form 16B, brokerage bills and stamp duty receipts form the cost of acquisition for your own future sale — file them now.
Cash: section 269SS bars accepting ₹20,000 or more in cash for a property transfer (penalty equal to the amount on the receiver); 269ST bars any cash receipt of ₹2 lakh or more. The sub-registrar reports every registration above ₹30 lakh to the AIS with the PAN of both parties.
Selling: computing the capital gain
| Item | Rule |
|---|---|
| Holding period | Long-term if held more than 24 months (12 months for listed REIT units); otherwise short-term, taxed at slab |
| Full value of consideration | Higher of the actual sale price and the stamp-duty value, unless the stamp value is within 10% of the price (section 50C); the value on the agreement date can be used if part payment was made by bank before registration |
| Cost of acquisition | Purchase price, stamp duty, registration, brokerage, legal fees; for property bought before 1 April 2001, the fair market value on 1 April 2001 (capped at the stamp value on that date) may be taken |
| Cost of improvement | Construction, additions, renovation of a capital nature with bills (not routine repairs) |
| Indexation | Removed for sales on or after 23 July 2024. Resident individuals and HUFs may still compute tax at 20% on the indexed gain for land/buildings acquired before 23 July 2024 and pay the lower of that and 12.5% on the un-indexed gain |
| Rate | LTCG 12.5% (plus surcharge, capped at 15%, and cess); STCG at slab |
| Expenses on transfer | Brokerage, advertisement, legal charges on the sale — deductible |
| Inherited/gifted property | Cost and holding period of the previous owner carry over; the gain is the seller's |
| Example — flat bought Apr 2012 for ₹40 lakh (index 200), sold Aug 2025 for ₹1.2 crore (index 376) | Option 1: 12.5% no indexation | Option 2: 20% with indexation |
|---|---|---|
| Indexed cost | — | ₹40 lakh × 376 ÷ 200 = ₹75.2 lakh |
| Gain | ₹80 lakh | ₹44.8 lakh |
| Tax before cess | ₹10 lakh | ₹8.96 lakh |
| Choice | Option 2 is lower — allowed because the flat was acquired before 23 July 2024 |
Saving the tax — sections 54, 54F, 54EC and the CGAS
- •Section 54 (residential house → residential house): the long-term gain is exempt to the extent invested in one new house in India (two houses once in a lifetime if the gain is up to ₹2 crore) bought within 1 year before or 2 years after the sale, or constructed within 3 years; exemption capped at ₹10 crore; the new house must be held 3 years.
- •Section 54F (any long-term asset other than a house → house): the whole net consideration must be invested for full exemption (proportionate otherwise); you must not own more than one other house on the sale date; ₹10 crore cap.
- •Section 54EC: invest up to ₹50 lakh of the gain from land or building in NHAI/REC/PFC/IRFC bonds within 6 months; 5-year lock-in; interest taxable.
- •Capital Gains Account Scheme: money not yet reinvested by the return due date is deposited in a CGAS account with a public-sector bank to keep the exemption; withdraw for the purchase/construction within the time, or the unutilised amount is taxed in the year the period ends.
- •Section 54B (agricultural land) and 54D/54G/54GA for specific cases; rural agricultural land is not a capital asset at all.
- •Losses: a long-term capital loss on property sets off only against long-term gains; carry forward eight years with a timely return.
The video's warning stands: without indexation a 2010 purchase sold today shows a large paper gain; section 54 (buy another house) or 54EC (bonds) remains the way to keep the tax at zero — and both need action within the time limits, not at filing.
Reporting and the notices
- 1Buyer: file 26QB within 30 days of the month of payment (late fee ₹200 a day under 234E, interest 1–1.5% a month, penalty for non-deduction); download Form 16B and give it to the seller; report the purchase in Schedule AL if income exceeds ₹50 lakh; explain the source of funds if asked (loan sanction, bank statements, gifts with deeds).
- 2Seller: claim the 194-IA TDS in the return against the capital-gains tax; report the sale in ITR-2/ITR-3 Schedule CG with the date, consideration, stamp value, cost, improvement and exemption sections; pay advance tax in the instalment after the sale.
- 3Both: the AIS shows the transaction from the sub-registrar (SFT-012) and from 26QB — a return without it invites an e-Campaign message and a 148A notice; a sale reported below stamp value invites a 50C addition.
- 4NRIs: TDS under 195, Form 15CA/15CB for repatriation, lower-deduction certificate under 197 filed before the sale, and the ITR-2 with the 54/54EC claim.
- 5Keep the deed, valuation (for pre-2001 property), bills and challans for at least eight years after the sale year.
Property tax: questions we are asked
On each payment to the seller — but the ₹50 lakh threshold is tested on both the consideration and the stamp value, and TDS is 1% of the higher of the two.
Yes — the flat was acquired before 23 July 2024, so you may pay 20% on the indexed gain if that is lower than 12.5% on the plain gain.
Two years after the sale to buy (or one year before), three years to construct; park the unspent gain in a CGAS account before the return due date.
Yes — 269SS penalty equal to the cash on you as receiver, and 269ST for ₹2 lakh or more; refuse cash.
Within 10% it is ignored; beyond that the stamp value is your sale consideration under 50C (and the buyer pays tax on the difference under 56(2)(x)) unless a valuation officer's report supports the lower price.
Yes — both-option computation, 54/54F/54EC planning, CGAS, 26QB/27Q for buyers, NRI lower-deduction certificates and ITR-2 filing.