Tax Deducted at Source 1% rule explained.

Under Section 194-IA of the Income Tax Act, any buyer purchasing immovable property (other than agricultural land) worth ₹50 Lakhs or more must deduct TDS at the rate of 1% of the total sale consideration. This applies to bank auctions as well.

Who Deducts and When?

You, the buyer, must deduct this 1% from the payment made to the bank. For example, if the winning bid is ₹60 Lakhs, you pay ₹59.4 Lakhs to the bank and ₹60,000 to the Income Tax Department.

The PAN Card Issue

Normally, TDS is deducted against the seller's PAN. In an auction, the 'seller' is technically the borrower (owner), but the money goes to the bank. This creates confusion. The standard practice is to deduct TDS against the PAN of the Borrower (defaulting owner). However, if the borrower's PAN is not available, you might be liable to deduct 20% TDS. It is critical to clarify this with the Authorized Officer of the bank before making the final payment to ensure you don't breach tax laws.