1% TDS on Property Purchase: A Buyer's Guide to Form 141 (Earlier Form 26QB)

A buyer who pays Rs. 50 Lakhs or more for a home must deduct 1% of the price as tax and pay it to the Income Tax Department on the seller's behalf. Since 1 April 2026 this is done through Form 141, which replaced the familiar Form 26QB under the new Income-tax Act, 2025. This guide explains when the rule applies, how the amount is worked out, the steps and deadlines, and the mistakes that cost buyers in Bangalore money.

The Rule in Brief

The 1% deduction applies to the purchase of any immovable property other than agricultural land from a seller who is resident in India. It covers flats, villas, plots and commercial space, whether new or resale. The duty to deduct and pay is on the buyer, and the seller receives credit for the tax.

The key points of the rule are listed below:

• Threshold: the sale price or the stamp duty value is Rs. 50 Lakhs or more
• Rate: 1% of the sale price or the stamp duty value, whichever is higher
• Law: section 393(1) of the Income-tax Act, 2025, which took the place of section 194-IA of the 1961 Act
• Form: Form 141, a combined challan and statement, filed online
• Certificate: Form 132, given by the buyer to the seller, which replaced Form 16B
• Numbers needed: the PAN of the buyer and the seller, with no TAN required

Most apartments in Bangalore are priced above Rs. 50 Lakhs, so the rule touches nearly every buyer in the city. It applies in the same way to a builder sale and a resale between two individuals.

How the Amount Is Worked Out

The tax is 1% of the full price, and the Rs. 50 Lakhs limit is only the test for whether the rule applies. A flat bought for Rs. 1.2 Crore therefore carries a deduction of Rs. 1.2 Lakhs. The buyer pays the seller Rs. 1.188 Crore and pays the balance to the department.

Two details catch buyers out. The first is the stamp duty value, which in Karnataka is the guidance value of the property. If the guidance value is higher than the agreed price, the 1% is worked out on the guidance value.

The second is what counts as price. Charges that are part of the transfer are included, such as car parking, club membership, electricity and water connection fees, advance maintenance and similar amounts in the cost sheet. The deduction is made on the total of these and the basic price.

Joint buyers and joint sellers

The Rs. 50 Lakhs test looks at the property as a whole. A flat of Rs. 80 Lakhs bought by a couple is covered, even though each share is Rs. 40 Lakhs. Each buyer deducts 1% on the share paid and files a separate form, in which more than one seller may be listed.

Under-Construction Homes and Instalments

Tax is deducted each time money is paid or credited to the seller, whichever happens first. For an under-construction home bought on a payment schedule, that means a deduction of 1% on every instalment. Form 141 is filed for each month in which an instalment is paid, within that month's deadline.

On an instalment of Rs. 12 Lakhs, the buyer keeps back Rs. 12,000 and pays it to the department. Most developers show the tax as a separate line in each demand letter. The deduction made on the booking amount is often missed, and it is easier to settle at the time than later.

When a bank releases a home loan instalment directly to the developer, the buyer is still the person responsible for the tax. The usual practice is for the buyer to pay the 1% from personal funds and give the bank and the developer the receipt. It is worth agreeing this with the lender before the first disbursement.

Steps and Deadlines

The whole process is online and takes a few minutes once the details are in hand. The steps run in this order:

1. Collect the seller's PAN, and confirm in writing that the seller is resident in India
2. Log in to the income tax e-filing portal with the buyer's PAN and open Form 141
3. Enter the details of the buyer, the seller and the property, with the total price and the amount paid now
4. Pay the tax online and save the acknowledgement and the challan
5. Download Form 132 once it is available and give it to the seller

Form 141 and the payment are due within 30 days from the end of the month in which the tax was deducted. Tax deducted on 10 November is therefore due by 30 December. Form 132 is due to the seller within 15 days after that date.

Payments made on or before 31 March 2026 stay under the old law and Form 26QB. Instalments paid from 1 April 2026 go through Form 141, even when the agreement was signed earlier. A buyer in the middle of a payment schedule may hold certificates in both formats.

When the Seller Is an NRI

The 1% rate applies only to a resident seller. A purchase from a non-resident seller follows a different rule, with tax deducted at much higher rates that depend on the seller's capital gain. Since 1 October 2026, a resident individual buyer reports that tax on Form 141 as well, in a separate schedule and without a TAN.

Applying 1% to a non-resident seller leaves the buyer liable for the shortfall with interest. The seller's residential status is the first fact to settle, before the agreement is drafted. Our NRI page has more on property dealings by non-residents.

Cost of Getting It Wrong

The consequences fall on the buyer, since the law treats the buyer as the person who failed to deduct. The charges that apply are listed below:

• Interest at 1% a month on tax that was due and was deducted late or not at all
• Interest at 1.5% a month on tax that was deducted and paid late
• A late fee of Rs. 200 a day for a delayed form, limited to the amount of the tax
• Deduction at 20% in place of 1% where the seller gives no PAN

A wrong PAN or a wrong amount also delays the seller's tax credit, which leads to disputes after the sale. Errors in a filed form are corrected through the department's TDS portal. Careful entry at the start avoids the correction process altogether.

Checklist Before Registration

These points are worth ticking off before the sale deed is signed:

• The seller's residential status and PAN, confirmed in writing
• The guidance value of the property, compared with the agreed price
• A clause in the agreement stating that 1% will be deducted from the price
• A record of every payment made so far, with the form and challan for each
• The lender's process for the tax on loan disbursements
• Form 132 for each payment, handed to the seller

The tax is part of the price and adds nothing to the cost of the home. Stamp duty, registration and the loan are the real extras, and our EMI calculator shows them with the monthly payment. Ask us if a cost sheet or a demand letter needs a second look.