CBDT Circular 9/2025: Say Goodbye to 20% TDS Woes in Property Transactions!

The Central Board of Direct Taxes (CBDT) has made an important change with Circular No. 9/2025, providing great relief to both buyers and sellers of property. If you've been part of a property transaction before, you probably know the struggles of Tax Deducted at Source (TDS) under Section 194-IA of the Income Tax Act. In particular, the 20% TDS rate for non-filers has been a major issue for a long time. Fortunately, those days are mostly over.

Let’s explain what this new circular means in simple terms.

The Old Headache: Section 206AB and Property Deals

Before Circular 9/2025, there was confusion regarding how Section 194-IA and Section 206AB interacted with each other.

• Section 194-IA: This requires that a buyer of property worth ₹50 Lakhs or more must deduct TDS at a rate of 1% from the payment to the seller.
• Section 206AB: This was introduced to improve tax compliance. It states that if a person has not filed their income tax returns for the past two assessment years (and the total TDS/TCS in each year was ₹50,000 or more), the TDS rate for them would be the higher of:
  • Twice the rate specified in the relevant section.
  • Twice the rates in force.
  • The rate of 5%.

The big question was whether Section 206AB would override Section 194-IA, possibly raising the TDS rate on property sales from 1% to 20%, which caused significant confusion. This uncertainty led to stress, disputes, and delays in property registrations.

The New Solution: CBDT Circular 9/2025 Clarifies Everything!

Recognizing these challenges, the CBDT has clarified the issue. Circular No. 9/2025 specifically states that the rules of Section 206AB do not apply to transactions under Section 194-IA.

What does this mean for you?

• For Buyers: You no longer have to worry about whether the seller is a "specified person" under Section 206AB when deducting TDS on property purchases. You only need to deduct 1% of the sale price (if it’s ₹50 Lakhs or more). This makes compliance much simpler.
• For Sellers: You can relax! The risk of a 20% TDS deduction on your property sale due to a missed tax filing has been eliminated. You can expect a steady 1% TDS deduction, making your financial planning more reliable.

Smoother Transactions: This clarification will lead to smoother and quicker property transactions. Less confusion means fewer disputes and faster registration processes.

Why This Circular is a Big Deal

• Ease of Doing Business: It simplifies a key area of property transactions, making it easier for everyday people to comply.
• Reduced Litigation: By clearing up misunderstandings, the circular should lead to fewer disputes and legal issues related to TDS on property sales.
• Fairness: It ensures that a seller who missed a tax filing won’t face an unfairly high TDS deduction on a significant asset sale.

In Conclusion

CBDT Circular No. 9/2025 is a positive step that provides much-needed clarity and relief to the real estate sector. By separating Section 194-IA from the guidelines of Section 206AB, the government has tackled a real issue for many buyers and sellers.

Next time you're part of a property deal, remember the TDS rate under Section 194-IA stays at a simple 1%, without the complexities of Section 206AB. This circular is indeed a great development for anyone dealing with the Indian real estate market.

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