TDS on Home Loan: Everything You Need to Know

• 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.

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

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:

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.

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.

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 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.