Late TDS on property purchase: interest, late fee and what to do

The due dates that decide whether you are late

TDS on purchase of immovable property from a resident seller is deducted by the buyer at the time of each payment or credit to the seller, whichever is earlier, once the consideration or the stamp duty value is Rs 50 lakh or more. According to the Income Tax Department's FAQs on Form 141, the deducted amount must be paid within 30 days from the end of the month in which it was deducted, and the challan-cum-statement must be furnished within one month from the end of that month.

Example. You pay the seller on 12 November. The TDS is deducted on 12 November. Payment of the TDS and filing of the statement are due by the end of the following month. A payment made on 31 December is late; one made on 10 December is on time.

Under the Income-tax Act, 1961, this TDS was governed by section 194-IA and reported in Form 26QB. From 1 April 2026, the Income-tax Act, 2025 applies, the provision is section 393(1), and the form is Form 141, Schedule B. A deduction made on or before 31 March 2026 is still reported in Form 26QB.

Three kinds of default

It helps to work out which of these applies, because each has a different cost.

1. TDS not deducted at all. The full amount was paid to the seller without deduction. The buyer is treated as an assessee in default for the TDS amount.
2. TDS deducted but paid late. The buyer kept back the TDS from the seller but paid it to the government after the due date.
3. Statement furnished late. The TDS may have been paid on time, but the challan-cum-statement was furnished after the due date. With Form 141 and Form 26QB, payment and statement go together, so a late payment usually means a late statement as well.

Interest on late deduction or late payment

Under section 398(3)(a) of the Income-tax Act, 2025, which replaced the earlier section 201(1A), interest is charged at:

• 1 percent a month or part of a month where tax was not deducted, from the date it should have been deducted until the date it is actually deducted.
• 1.5 percent a month or part of a month where tax was deducted but not paid, from the date of deduction until the date of payment.

Because a part of a month counts as a full month, a delay of even one day into a new month adds a full month of interest. The interest must be paid before or along with the TDS.

Example. On a flat of Rs 75 lakh, TDS at 1 percent is Rs 75,000. If it was deducted on 5 June and paid on 2 September, the delay runs over four months or parts of months (June, July, August and part of September), so interest at 1.5 percent a month is Rs 75,000 x 1.5 percent x 4 = Rs 4,500.

Late fee for furnishing the statement late

Under section 427 of the Income-tax Act, 2025, which replaced the earlier section 234E, a fee of Rs 200 is payable for every day the failure to furnish the statement continues. The total fee cannot exceed the amount of TDS in that statement.

Example. If the statement was due on 30 June and furnished on 9 August, the delay is 40 days and the fee is Rs 8,000, provided the TDS in the statement is at least Rs 8,000. If the TDS was Rs 6,000, the fee is limited to Rs 6,000.

The late fee is not the same as interest. Both can apply to the same transaction, and both are in addition to the TDS itself.

Penalty, in some cases

Separate from interest and the late fee, the law provides for penalties for failure to deduct or pay TDS and for failure to furnish statements. Penalties are not automatic. They are levied by an order, and the law allows the buyer to show a reasonable cause. Paying the TDS, interest and fee promptly, before any notice, puts the buyer in a stronger position.

What to do now: step by step

1. Work out the dates. Note the date of each payment to the seller, the date TDS should have been deducted, and the date of payment of TDS, if any.
2. Compute the TDS. One percent of the consideration or the stamp duty value, whichever is higher, for each payment. A higher rate applies where the seller's PAN is not available or is inoperative.
3. Compute the interest. Use the rates above for the number of months or parts of months of delay.
4. File the statement and pay. Log in to the income tax portal with the buyer PAN and file Form 141 (or Form 26QB for deductions up to 31 March 2026) for the month of deduction. The portal shows the interest and fee fields; enter them and pay the challan generated.
5. Check TRACES. After processing, log in to TRACES as a taxpayer, confirm there is no outstanding demand, and download the TDS certificate for the seller.
6. Inform the seller. Give the seller the certificate so the TDS shows in their Form 26AS and they can claim it in their return.

If you never deducted TDS and the seller has already paid tax

Where the buyer did not deduct TDS but the seller has included the sale in their return and paid the tax, the earlier law allowed the buyer to avoid being treated as in default for the tax amount on producing a certificate from a chartered accountant in the prescribed form, although interest up to the date of the seller's return still applied. Check the corresponding provision and form under the Income-tax Act, 2025 before relying on this route, because form numbers have changed.

How to avoid this next time

• Deduct TDS on the advance and on each instalment, not only at registration.
• File Form 141 and pay on the same day as the payment to the seller wherever possible.
• Check the guideline value on tnreginet.gov.in before the agreement, because TDS is on the higher of the sale consideration and the stamp duty value.
• Ask the bank, before disbursement of a home loan, to release the amount net of TDS.

If the problem is a wrong PAN, amount or year rather than a delay, see correcting a mistake in TDS on property. For help with the filing, see TDS on property purchase.