Big news for real estate investors in 2025! Buying property in India just got a little more transparent and a lot more interesting.

Budget 2025 introduced some changes to the existing provisions in the TDS on property deals under the Income Tax Act 1961. The changes are brought with a view to simplify tax compliance for individuals and businesses. These amendments streamline compliance and smoothen taxation processes.

This blog will cover a detailed look at the new updates and their implications in the real estate sector.

What is TDS on Property Transactions?

TDS is a method where the buyer deducts an amount of tax from the value of a property as an advance on behalf of the seller. The money is then deposited at the Income Tax Department. TDS is a way to ensure tax compliance and add transparency in property deals.

Purpose of TDS on Property Transactions

• Prevent tax evasion
• Make sure the seller declares the capital gain from the transaction
• Recording the list of high-value property sales

TDS on Property Transactions: What’s New in 2025?

TDS to Be Deducted on Higher of Sale Value or Stamp Duty Value

TDS was deducted from the consideration mentioned in the agreement. The new rule for TDS on sale of property from April 1st, 2025, applies to the highest value of the following:

• Actual Sale Consideration or
• Stamp Duty Valuation (SDV)

The new property TDS rules align with Section 50C of the Income Tax Act which already considered SDV when calculating capital gains.

TDS Compliance Got Stricter

Listed below are a few improved compliance measures by The Income Tax Department:

• TDS deduction will be allowed only if both party's PAN is linked with Aadhaar.
• Form 26QB, about TDS return for property transactions, must be submitted within thirty days after the deduction.
• The penalties for non-compliance or delay have been reinforced with fines up to Rs1 Lakh.

TDS Clarification in Joint Property Deals

Earlier it happened when investors avoided TDS on property by splitting payments for joint property transactions and ensured that individual payments were below the Rs 50 lakh threshold. The TDS rules of 2025 have brought something new.

The Finance Ministry clarified that the aggregate consideration paid by buyers in joint property deals will be taken into account for TDS purposes. If the total exceeds Rs 50 lakh, a TDS of 1% is applicable, regardless of individual contributions.

This amendment will ensure uniform tax compliance and prevent evasion tactics while promoting transparency and fairness in real estate transactions.

Increase TDS Threshold for Rental Income

The Budget 2025 proposed increasing the threshold for TDS on rental income. The annual TDS limit on rent has increased from Rs 2.4 lakhs to Rs 6 lakhs. This is equivalent to a threshold of Rs 50,000 monthly.

Impact of Landlords on Tenants: TDS will no longer be deducted from rental income received by landlords below this threshold, simplifying the cash flow management. Tenants can benefit from reduced obligations, which makes rental agreements more smooth.

Understanding Applicability

Reasons For These Changes

• To bring clarity and uniformity in provisions related to TDS on property transactions
• Stressing the commitment by the government to simplify tax processes
• To encourage transparency and formalization in the sector by tightening the TDS regulations
• To align taxation with market realities and reduce the number of people forced into tax processes over small amounts
• Improving the ease of doing property deals
• To make compliance easier for both individuals and businesses
• Boost investor confidence and encourage them to participate in real estate

Will It Boost Real Estate Investment and Homebuyers’ Confidence?

Yes. The changes in rules for TDS on property transactions boost confidence in homebuyers and real estate investment in the following ways:

• It ensures increased transparency in property transactions by simplifying TDS rules. It reduces the scope for under-the-table deals or legal ambiguities.
• These rules bring easier compliance for the middle class by raising the TDS threshold on rent. This reduces the burden on landlords and tenants, driving higher participation in the formal housing sector.
• Individuals can have more affordable housing uptake with increased confidence in faster transactions, reduced hidden costs, and more competitive developer pricing.

Mistakes To Avoid When Dealing with TDS on Property Sales

• Not deducting TDS on transactions exceeding Rs 50 lakh
• Mentioning wrong details in the Form 26QB
• Delaying the TDS payment more than the given time
• Not giving Form 16B to the seller
• Not complying with the rules for TDS on sale of property in India, especially for NRIs
• Assuming agricultural land is exempt, without verifying the land type

Conclusion

The update regarding TDS on property deals sets an important change in India's real estate taxation. The 2025 changes are all set to bring transparency and accountability for real estate investors, driving more confidence in them.

FAQ’s

What do the new TDS rules for joint property purchases say?

Budget 2025 means that TDS on property would be calculated on the aggregate transaction value and not individual shares.

Are there any changes in the TDS threshold for rental income?

Yes. The TDS threshold for rental income was increased from Rs 2.4 Lakh to Rs 6 Lakh per year (or Rs 50,000 per month). This makes it easier for landlords and tenants to comply with tax laws.

Will these changes affect NRIs who invest in Indian property? 

The new rules for TDS on property transactions also apply to NRIs, particularly regarding joint ownership and large-value property purchases. The simplification of the rules might make investing more attractive to NRIs looking for clarity and stability.