Section 194-IA: Multiple Buyers Cannot Dodge 1% Property TDS After the 1 October 2024 Change

Buyers of residential and commercial property have long treated Section 194-IA of the Income-tax Act 1961 as a box-ticking exercise: deduct 1% tax at source, file Form 26QB, move on. A quieter habit grew around the Rs 50 lakh threshold, though. Where a flat sold for, say, Rs 90 lakh, a husband and wife would register as co-buyers, record Rs 45 lakh each, and argue that neither share crossed Rs 50 lakh, so no tax needed to be deducted. The Finance (No.2) Act 2024 shut that door from 1 October 2024. This piece explains the amended rule, works through the arithmetic for a two-buyer purchase, and flags the mistakes that surface most often in Form 26QB scrutiny.

The change matters because property TDS defaults are not forgiven lightly. A buyer who fails to deduct becomes an assessee-in-default under Section 201, exposed to the tax itself plus interest and a late-filing fee, even though the money was the seller's liability. Understanding the aggregate-consideration rule introduced on 1 October 2024 is now part of basic purchase diligence.

What the Section Says

Section 194-IA requires any person (the transferee, or buyer) who pays consideration to a resident transferor (the seller) for the transfer of immovable property, other than agricultural land, to deduct tax at 1% of that consideration at the time of credit or payment, whichever is earlier. The obligation sits on the buyer, not the seller, and applies to residential flats, commercial units, and land that is not agricultural. The statutory text is published by the Income Tax Department at incometax.gov.in.

The deduction is not triggered on every purchase. Section 194-IA(2) sets a floor: no tax is to be deducted where the consideration for the transfer of the immovable property is less than Rs 50 lakh. Following the Finance Act 2022 amendment, that threshold test reads against both the consideration and the stamp duty value of the property, so the exemption applies only where both figures are below Rs 50 lakh. If either crosses the line, the 1% obligation is live.

Until 30 September 2024, the ambiguity was whether "consideration" meant the whole-property price or each individual's share where several buyers or sellers were on the deed. The Finance (No.2) Act 2024 removed the doubt. With effect from 1 October 2024, where there is more than one transferor or transferee in respect of an immovable property, the consideration means the aggregate of the amounts paid or payable by all the transferees to all the transferors for the transfer of the property. The test is the whole deal, not the slice each name carries.

That single clarification collapses the split-sale planning idea. A Rs 90 lakh flat bought by two spouses is a Rs 90 lakh transaction for Section 194-IA from 1 October 2024, regardless of the Rs 45 lakh each pays, so 1% must be deducted. The buyer reports the deduction on Form 26QB, the challan-cum-statement notified for Section 194-IA, and issues Form 16B to the seller. You can see how the deduction feeds a seller's credit record in our explainer on Form 26AS, and the mechanics of tax deducted at source in the TDS glossary entry.

Worked Example

Consider a purchase registered on 15 November 2025. Arjun and Meera jointly buy a resale apartment in Pune for a total consideration of Rs 90,00,000, each contributing Rs 45,00,000. There is one seller. The stamp duty value assessed by the sub-registrar is Rs 88,00,000.

Under the pre-amendment reading that some buyers relied on, each co-buyer's Rs 45,00,000 share sat below Rs 50 lakh, and the pair claimed no deduction was due. Under the rule in force since 1 October 2024, the consideration is the aggregate Rs 90,00,000 paid by both transferees to the transferor. That crosses Rs 50 lakh, so 1% TDS of Rs 90,000 must be deducted and deposited.

Because there are two buyers and one seller, each buyer files a separate Form 26QB for the portion of consideration they pay. Arjun files Form 26QB for his Rs 45,00,000 and deducts Rs 45,000; Meera files her own Form 26QB for Rs 45,00,000 and deducts Rs 45,000. The forms together account for the full Rs 90,000. The number of Form 26QB filings equals buyers multiplied by sellers, so a two-buyer, two-seller deal needs four statements.

Now change one fact. Suppose the same flat carries a total consideration of Rs 48,00,000 but a stamp duty value of Rs 52,00,000. The consideration is below Rs 50 lakh, yet the stamp duty value is not. Because the exemption in Section 194-IA(2) requires both to be under Rs 50 lakh, TDS is due here as well. You can model the cash impact of such a deduction against your sale proceeds using the TDS calculator, and estimate the seller's eventual capital-gains position with the capital gains calculator.

The 1% rate itself is unchanged by the 2024 amendment; only the definition of consideration for multiple-party deals moved. The stamp duty value is the figure the state's registration authority adopts, and it is the comparison benchmark the section builds into the threshold.

Common Mistakes

The most frequent error, and the one the 1 October 2024 amendment targets, is splitting the recorded consideration across co-buyers to keep each share under Rs 50 lakh. That reading no longer survives: consideration is the aggregate of all amounts paid by all transferees to all transferors. A notice under Section 200A or a demand treating the buyer as an assessee-in-default under Section 201 follows where the aggregate crosses the floor and nothing was deducted.

A second mistake is ignoring the stamp duty value. Buyers routinely test only the price they negotiated and overlook that the exemption lapses if the stamp duty value is Rs 50 lakh or more, even when the agreed price is lower. Both figures must be under Rs 50 lakh for the no-deduction relief to hold.

Third, buyers often file a single Form 26QB for a multi-party transaction. One statement per unique buyer-seller combination is required: two buyers and one seller means two Form 26QB filings, not one. Consolidating them triggers mismatch errors because the system expects the deducted amount to map to each PAN pairing.

Fourth, late deposit is costly. Tax deducted under Section 194-IA must be paid within 30 days from the end of the month in which the deduction is made, using Form 26QB. Interest under Section 201(1A) runs at 1% per month for failure to deduct and 1.5% per month for failure to deposit after deduction, and a fee under Section 234E of Rs 200 per day applies for late filing of the statement, capped at the TDS amount.

Fifth, the agricultural-land carve-out is misread. Section 194-IA does not apply to agricultural land, but the land must genuinely be agricultural within the Act's meaning; a plot described loosely as agricultural but falling within municipal limits as defined for a capital asset can still attract the section. Treat the classification as a question of fact, not of the brochure.

Finally, some buyers deduct on the net amount after adjusting advances or brokerage. TDS under Section 194-IA is on the consideration for the transfer, before such adjustments. If you are also budgeting your own year's liabilities, the income tax calculator helps you see where a property transaction sits alongside salary and other income.

FAQ

Does Section 194-IA apply if my share as a co-buyer is below Rs 50 lakh?

Yes, if the total consideration for the property is Rs 50 lakh or more. From 1 October 2024, the Finance (No.2) Act 2024 defines consideration for a multiple-buyer or multiple-seller transaction as the aggregate of all amounts paid by all buyers to all sellers. A Rs 45 lakh share in a Rs 90 lakh flat is inside a Rs 90 lakh transaction, so 1% TDS is due.

How many Form 26QB forms do we file for two buyers and two sellers?

Four. One Form 26QB is required for each unique buyer-seller pairing, so two transferees and two transferors produce two multiplied by two, or four statements, each covering the portion of consideration paid by that buyer to that seller.

What if the price is below Rs 50 lakh but the stamp duty value is higher?

TDS is still due. The exemption in Section 194-IA(2) applies only where both the consideration and the stamp duty value are below Rs 50 lakh. If the stamp duty value is Rs 50 lakh or more, the 1% deduction obligation applies even though the agreed price is lower.

At what rate is the tax deducted, and on what base?

The rate is 1% of the consideration for the transfer of the immovable property, deducted at the time of credit or payment, whichever is earlier. The rate was not changed by the 2024 amendment. This differs from rent TDS under Section 194-IB, which was cut from 5% to 2% on 1 October 2024, as covered in our report on the Section 194-IB rate cut.

Does Section 194-IA apply to agricultural land?

No. Section 194-IA excludes agricultural land from its scope. The land must, however, be agricultural in the Act's sense; a plot within specified municipal distances may be treated as a capital asset and fall outside the exclusion. The classification is a question of fact.

When must the deducted tax be deposited?

Within 30 days from the end of the month in which the deduction is made, through Form 26QB. Late deposit attracts interest under Section 201(1A) and a late-filing fee under Section 234E of Rs 200 per day, capped at the amount of TDS.

Is the seller's capital-gains liability affected by this TDS?

The 1% deducted under Section 194-IA is tax collected on account of the seller and is credited against the seller's final liability. It does not change the capital-gains computation itself; long-term gains on property transferred on or after 23 July 2024 are taxed at 12.5% without indexation, with a grandfathered 20%-with-indexation option for assets acquired before that date.