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Key Highlights
- The bank financing the home loan is not responsible for TDS; the buyer must deduct it from the total sale consideration, not just the loan amount.
- TDS is deducted at 1% on properties valued above ₹50 lakh, including residential, commercial, and under-construction properties, but excluding agricultural land.
- The buyer must deduct TDS, deposit it within 30 days, submit Form 26QB online, and issue Form 16B as proof to the seller.
Buying a house is a milestone, but it also comes with financial responsibilities. If you have taken a home loan , you might have heard about tax deducted at source (TDS) on home loan repayments. Understanding TDS is essential, especially if you pay a seller or builder.The TDS on home loans is a tax deducted when you pay the seller if the property value exceeds a certain limit. Let's discuss the concept of TDS in detail and how it applies to house property bought on a loan.
What is TDS?
Tax deducted at source (TDS) is a system under the Indian Income Tax Act of 1961 that requires tax deduction at the point where income is generated. This approach enables the government to collect taxes in advance, easing the pressure of year-end tax collection while curbing tax evasion. TDS applies to multiple payment types, such as salaries, rent, interest, commissions, and professional fees.The deductor (payer) deducts a specified tax percentage before paying the deductee (receiver). This deducted amount is deposited with the government and linked to the deductee's PAN. The deductee can file a credit for the TDS amount while submitting their income tax return. Also Read : What is TDS (Tax Deducted at Source)? - Meaning, Filing & Rates
Understanding TDS Rates Under Different Sections
Since TDS applies to multiple payments, the Income Tax Act has different sections that define the provisions and rates for TDS. Here are the details:
| Section | Description | TDS Rate/Condition |
| 192 | TDS on Salary | As per applicable income tax slab rates. |
| 194A | TDS on Interest (other than securities) | 10% for residents. No TDS if the interest does not exceed ₹40,000 (₹50,000 for senior citizens). |
| 194B | Applicable on winnings from lotteries and games if the amount exceeds ₹10,000 | 30% |
| 194C | TDS on payment to contractors/sub-contractors | 1% for individual/HUF contractors, 2% for others. |
| 194D | TDS on insurance commission | 5% |
| 194EE | Applicable on payments made towards National Savings Scheme (NSS) deposits if the total amount in a financial year exceeds ₹2,500 | 10% |
| 194F | TDS on payments for the repurchase of mutual fund units | 20% |
| 194H | TDS on commission or brokerage | 5% |
| 194I | TDS on rent | 2% for plant/machinery/equipment, 10% for land/building/furniture. |
| 194J | TDS on professional fees, technical fees, royalty, etc. | 10% for professional fees, 2% for technical services. |
| 194LA | TDS on the purchase of immovable property (applicable if the amount exceeds ₹50 lakh) | 1% |
| 194N | TDS on cash withdrawal | 2% on withdrawals exceeding ₹20 lakh and 5% on withdrawals over ₹1 crore. |
| 194Q | TDS on purchase of goods | 0.1% on purchases exceeding ₹50 lakh. |
| 194S | TDS on payments made for transferring a virtual digital asset | 1% |
| 195 | TDS on payments to non-residents | Varies based on the nature of income and DTAA. |
| 196D | TDS on income of foreign institutional investors | 20% |
How to Check TDS on Home Loan?
To know the home loan TDS amount, follow these steps:
- Step 1: Visit the income tax e-filing portal .
- Step 2: Use your PAN (permanent account number) as the User ID, along with your password and captcha code to log in to your account:
- Step 3: After logging in, navigate to the 'e-File' menu. Select 'Income Tax Returns', then click 'View Form 26AS (Tax Credit).'
- Step 4: The link will redirect you to the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website. Agree to the terms and conditions by ticking the checkbox and clicking 'Proceed.'
- Step 5: Click 'View Tax Credit (Form 26AS)' on the TRACES page.
- Choose the assessment year for which you want to check the TDS details.
- Step 6: Select the format (HTML or PDF) to view or download the statement. If you choose PDF format, click 'Export as PDF' to download the file.
- Step 7: Open the downloaded file using the password, which is your date of birth in DDMMYYYY format.
Note : Form 26AS provides a detailed summary of the TDS deducted and deposited against your PAN. It includes information on tax deducted by employers, banks, or other deductors, as well as any refunds issued.
TDS on Home Loans
As per Section 194-IA of the Income Tax Act, 1961, TDS is deducted as 1% of the total sale consideration if the property value exceeds ₹50 lakh. This deduction is the buyer's responsibility, even if the property is financed through a home loan. Below are the key details and terms associated with TDS for home loans :
- TDS applies to all types of properties, including residential, commercial, and under-construction properties, except agricultural land.
- Both the buyer and seller must have valid PANs. Failure to provide a PAN results in a higher TDS rate.
- The buyer must fill out Form 26QB online to report the TDS deduction.
- The TDS deducted must be deposited with the government within 30 days of the end of the month in which the deduction is made. For example, if payment is made on July 15, deposit the TDS by August 31.
- After depositing the TDS, the buyer must issue Form 16B (TDS certificate) to the seller as proof of deduction.
- If the property is financed through a home loan, the buyer must ensure TDS is deducted from the total sale consideration, not just the loan amount.
- In the case of instalment payments, TDS must be deducted on each instalment.
- The bank or financial institution disbursing the loan is not responsible for deducting TDS. It remains the buyer's obligation.
- Failure to deduct TDS on time attracts interest at 1% per month. A delay in depositing TDS incurs interest at 1.5% per month. Non-filing of Form 26QB or failure to issue Form 16B also results in penalties.
How to Deposit TDS on a Home Loan?
Here are the steps to depositing TDS on a home loan with the government.
- Step 1 : Visit the TIN-NSDL website and go to the e-payment section. Select Form 26QB for TDS on property transactions.
- Step 2 : Provide details such as the buyer's and seller's PAN, property details, TDS amount, and payment mode. Ensure accuracy to avoid discrepancies.
- Step 3 : Pay the TDS amount online using net banking, a debit card, or other available options. Upon successful payment, the platform will generate the challan.
- Step 4 : Save and print the challan for your records. This serves as proof of TDS payment.
- Step 5 : Download Form 16B from the TRACES portal after depositing TDS.
Also Read: ? How To Claim TDS Refund
TDS on Home Loans Made Simple
TDS on loan interest and principal is a buyer's responsibility, not the bank’s. If your property's value exceeds ₹50 lakh, you must deduct 1% TDS from the total sale amount, deposit it within 30 days, and issue Form 16B to the seller. Failure to comply can result in penalties. You can deposit TDS online via Form 26QB and verify deductions through Form 26AS. Understanding these steps ensures compliance and prevents legal or financial issues in your home-buying journey.
FAQS - FREQUENTLY ASKED QUESTIONS
How does a home loan help you save tax under Section 80C?
This section allows you to claim up to ₹1.5 lakh in deductions on the principal repayment of your home loan. This benefit applies to residential properties and to loans taken from banks, housing finance companies, or specified institutions. However, the property should not be sold within five years of possession; otherwise, the tax benefits will be reversed.
Who is responsible for deducting TDS on a home loan?
As a buyer, you are responsible for deducting TDS when paying the seller. The bank or financial institution providing the home loan does not handle TDS deductions. You must deposit the deducted amount with the government and submit Form 26QB online within the specified deadline.
Does TDS apply to all types of properties?
TDS applies to all immovable properties, including residential, commercial, and under-construction properties, as long as the sale value exceeds ₹50 lakh. However, agricultural land is exempt from TDS deductions, as per the Income Tax Act.
What is the tax benefit on home loan interest under Section 24?
If you have financed a self-occupied property, you can claim up to ₹2 lakh per financial year on the interest paid under Section 24(b). However, this benefit is available only if the construction or purchase of the house is completed within five years from the end of the financial year in which the loan was taken. If not, the deduction is reduced to ₹30,000.
How can I deposit the TDS deducted on a home loan?
You can deposit the deducted TDS online through the TIN-NSDL website using Form 26QB. After filling in details like PAN, property information, and payment mode, you can pay via net banking or a debit card. A challan will be generated as proof of payment.
How can I check if the TDS on my home loan payment has been credited?
You can check your TDS details by logging into the Income Tax e-filing portal and viewing Form 26AS. This document summarises all TDS deductions linked to your PAN, including those deducted from property transactions.
What if the property is jointly owned? How is TDS handled?
If a property is jointly owned, each buyer must deduct and deposit TDS separately based on their share in the property. Each buyer must fill out a separate Form 26QB, mentioning their respective share of the sale consideration and ensuring compliance with TDS regulations.
What happens if you take a home loan for an under-construction property?
If you have taken a home loan for an under-construction property, you cannot claim tax benefits on principal repayment under Section 80C until construction is completed. You can claim the interest paid during the construction phase in five equal instalments, beginning from the year the construction is completed, while ensuring it remains within the limits set under Section 24(b).
What is Section 80EE, and how does it benefit first-time homebuyers?
Section 80EE provides an additional benefit of up to ₹50,000 per financial year on the interest paid for home loans taken between April 1, 2016, and March 31, 2017. This deduction is available only if the home loan amount is ₹35 lakh or less and the property value is ₹50 lakh or less. The borrower should not own any other residential property at the time of loan sanction.
Can I claim a refund if excess TDS is deducted?
If excess TDS is deducted, you can claim a refund by filing your income tax return. The excess amount will be credited back to your account after assessment by the Income Tax Department. Ensure that Form 26AS reflects the correct deduction details for a smooth refund process.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
