Buying Property Above ₹50 Lakh? Remember the 1% Tax Rule

When you buy a home or land in India priced at ₹50 Lakh or more, the law requires you (the buyer) to act as a temporary tax collector. Under Section 194-IA, you must deduct 1% of the payment and pay it directly to the government.

The Core Rule: "The 1% Cut"

If the property price is ₹50 Lakh or higher, you must:

  • Deduct 1% from the total price.
  • Pay the remaining 99% to the seller.
  • Deposit the 1% with the government online.

Example: For a house costing ₹60 Lakh, you pay the seller ₹59.4 Lakh and pay the government ₹60,000.

5 Must-Know Facts

  • It’s Your Job: Even with a home loan, the buyer is responsible for this tax, not the bank or the seller.
  • Hidden Costs Count: The ₹50 Lakh limit includes extras like car parking, club fees, and maintenance prepayments.
  • Installments: If paying in parts, deduct 1% from every single payment, not just the last one.
  • Seller’s PAN: You must have the seller’s PAN. Without it, you are legally required to deduct 20% instead of 1%!
  • No Special ID: You don't need a business tax ID (TAN). You can do this using your regular PAN.

The Simple 3-Step Process

  1. Pay Online (Form 26QB): Visit the Income Tax portal, fill out Form 26QB with transaction details, and pay the 1% via net banking or UPI.
  2. Wait for Processing: It usually takes about 5 working days for the payment to be verified by the system.
  3. Issue the Certificate (Form 16B): Download the certificate from the portal and give it to the seller as proof of payment.

Don't Be Late: Missing the 30-day deadline can lead to interest charges of 1% to 1.5% per month and a late fee of ₹200 per day.