{"id":29839,"date":"2023-08-28T13:17:34","date_gmt":"2023-08-28T13:17:34","guid":{"rendered":"https:\/\/www.tatacapital.com\/blog\/?p=29839"},"modified":"2026-01-19T11:30:24","modified_gmt":"2026-01-19T06:00:24","slug":"what-is-tds-and-how-does-it-work-for-home-loan","status":"publish","type":"post","link":"https:\/\/www.tatacapital.com\/blog\/loan-for-home\/what-is-tds-and-how-does-it-work-for-home-loan\/","title":{"rendered":"What Is TDS & How Does It Work For Home Loan?"},"content":{"rendered":"\n

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Buying a home of your own is a source of great pride and accomplishment in India and worldwide. But with soaring real estate prices, very few people can purchase property without taking any financial loan. Buying property often requires much thought, research, and planning. Furthermore, getting a home loan<\/a> for a property can be a complex and confusing process. Buyers then get even more confused with the concept of TDS thrown into the mix. <\/p>\n\n\n\n

So here is a guide on TDS \u2013 its full form, TDS rates, how it works for home loans, and more.<\/p>\n\n\n\n

What is TDS \u2013 TDS Meaning and TDS Full Form?<\/h2>\n\n\n\n

Most people know that the TDS full form is Tax Deducted at Source. It is a direct tax deducted from an amount at the time of payment. The TDS full form is self-explanatory; it indicates that TDS means the tax collected from the income source.  <\/p>\n\n\n\n

The concept of TDS is that a person who has to make a payment to another will have to get the tax deducted from the source amount and pay the same to the Central Government. TDS accounting is essential as the government uses it to minimize tax evasion by taxing the income as soon as it is generated rather than taxing it later. <\/p>\n\n\n\n

When is TDS Deduction Applicable?<\/h2>\n\n\n\n

The TDS meaning is well-known because it is applied to different types of payments. This payment includes TDS on professional fees, rent, salary, commissions earned, bank payment interest, lottery winnings, and more. Due to this exposure in various avenues, people understand the TDS meaning and concept. <\/p>\n\n\n\n

Under the Income Tax Act, TDS on purchase of house property deducted at source for various categories of transactions is covered under different sections. So, for example, Section 192A deals with TDS on salary payment, Section 194D deals with TDS on insurance<\/a> commission, and Section 194J deals with TDS on professional fees.<\/p>\n\n\n\n

What are TDS Rates?<\/h2>\n\n\n\n

There are different interest rates for the various categories of transactions and recipients.<\/p>\n\n\n\n

Here is a table illustrating TDS rates under different transaction categories for resident Indians.<\/p>\n\n\n\n

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Section under Income Tax Act<\/td>Transaction category<\/td>TDS rate for resident Indian individuals or Hindu Undivided Families (HUFs)<\/td><\/tr>
Section 192<\/td>TDS on Salary payment<\/td>According to the tax slab rate<\/td><\/tr>
Section 194B<\/td>TDS on lottery and game winnings (amount should exceed Rs 10000)<\/td>30%<\/td><\/tr>
Section 194EE<\/td>TDS on payment toward National Savings Scheme (NSS) deposits (aggregate amount in a financial year (FY) should exceed Rs 2500)<\/td>10%<\/td><\/tr>
Section 194F<\/td>TDS on payment toward repurchase of mutual fund units<\/td>20%<\/td><\/tr>
Section 194D<\/td>TDS on insurance commission<\/td>5%<\/td><\/tr>
Section 194H<\/td>TDS on brokerage or commission<\/td>5%<\/td><\/tr>
Section 194I<\/td>TDS on rent<\/td>Plant and machinery \u2013 2% Land, building, furniture, fixtures \u2013 10%<\/td><\/tr>
Section 194J<\/td>TDS on professional fees<\/td>Technical services \u2013 2% Royalties on cinematographic films \u2013 2% Others \u2013 10%<\/td><\/tr>
Section 194LA<\/td>TDS on the acquisition of immovable property (amount should exceed Rs 50 lakh)<\/td>1%<\/td><\/tr>
Section 194S<\/td>TDS on the payment for the transfer of a Virtual Digital Asset<\/td>1%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Regarding TDS accounting, it is essential to note that not every person or income will be charged TDS. TDS on purchase of house property is not applicable when the payment for NSS deposits does not exceed Rs 2500 per financial year. TDS will be deducted only when the deposits toward the NSS exceed Rs 2500 per FY.<\/p>\n\n\n\n

How to Know the Deducted TDS Amount?<\/h2>\n\n\n\n

Sometimes a person does not know the TDS deducted at source amount for the financial year. In this case, the TDS amount can be found by accessing Form 26AS, a tax credit statement that provides a detailed TDS report during the financial year. <\/p>\n\n\n\n

Here are the steps to access Form 26AS:<\/p>\n\n\n\n

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  1. Visit the official website of the Income Tax Department of India and register as a new user<\/li>\n\n\n\n
  2. Enter the required information, such as PAN details, and generate the password<\/li>\n\n\n\n
  3. Once registration is complete, log in using the registered ID and password<\/li>\n\n\n\n
  4. Choose the option to view Form 26AS or the tax credit statement<\/li>\n\n\n\n
  5. The page will be redirected to a new page for the TDS Reconciliation Analysis and Correction Enabling System, which provides details of a taxpayer\u2019s tax liabilities, including the TDS information.<\/li>\n<\/ol>\n\n\n\n

    How Does TDS Work for Home Loans?<\/h2>\n\n\n\n

    Under Section 194LA of Income Tax Act, a person responsible for paying a Resident Indian for the acquisition of immovable property (except agricultural) must get deducted 1% to be paid as TDS to the government. <\/p>\n\n\n\n

    Section 194LA of Income Tax Act indicates that the buyer has to pay the TDS. However, in the case of home loans, the buyer is not paying the seller directly but has the lender paying the seller on their behalf. <\/p>\n\n\n\n

    So, to know how does TDS work, the buyer should ask the lender to deduct the TDS on their behalf by submitting an application requesting the same. The buyer must provide the lender with relevant computations for TDS in their application. The buyer should inform the seller of the property that TDS will be deducted from the loan amount as per the law. Details of the TDS deducted from source should be provided in the Deed\/Agreement to avoid future conflict or confusion and provide clarity on how does TDS work. <\/p>\n\n\n\n

    The lender deducts the TDS on purchase of house property and pays the remaining amount to the seller.<\/p>\n\n\n\n

    TDS on Purchase of House Property<\/h2>\n\n\n\n

    TDS on property purchase applies when a residential property is bought for \u20b950 lakh or more. Under TDS Section 194IA, the buyer must deduct 1% TDS on the total sale value before making payment to the seller. This rule applies to residential houses and apartments and does not cover agricultural land<\/a>.<\/p>\n\n\n\n

    The responsibility of deducting and depositing TDS on house buying lies entirely with the buyer, not the seller. TDS must be deducted at the time of payment, even if the purchase amount is paid in instalments.<\/p>\n\n\n\n

    Once deducted, the buyer must deposit the TDS using Challan 26QB on the TIN-NSDL portal within 30 days from the end of the month in which the payment is made. After payment, Form 16B must be downloaded and issued to the seller as proof of TDS deduction.<\/p>\n\n\n\n

    It is important to verify the seller\u2019s PAN before making the payment. If PAN details are incorrect or unavailable, TDS may be deducted at a higher rate of 20%. Delays in deduction or payment can attract interest at 1% to 1.5% per month, along with penalties.<\/p>\n\n\n\n

    Understanding TDS on Interest on Loan<\/h2>\n\n\n\n

    TDS on loan interest is governed by Section 194A of the Income Tax Act, which applies to interest payments other than on securities. The standard TDS rate under this section is 10% when the PAN of the recipient is furnished; if PAN is not provided, the rate increases to 20%. <\/p>\n\n\n\n

    Now let\u2019s take a look at loan interest TDS rules. For home loans taken from banks or recognised financial institutions, borrowers are not required to deduct TDS on the interest they pay, because these lenders are exempt from TDS deduction liabilities under normal home loan interest payouts. <\/p>\n\n\n\n

    TDS provisions kick in only if you are making interest payments to other parties (e.g., non-banks or unsecured loans<\/a>) and the total interest paid in a financial year exceeds specified thresholds (commonly \u20b940,000 for banks\/post offices and \u20b95,000 in other cases). <\/p>\n\n\n\n

    Interest earned from savings accounts is not subject to TDS on loan interest, and borrowers can file Form 15G\/15H to avoid unnecessary deductions if their total income is below the taxable limit. <\/p>\n\n\n\n

    How to Deposit and File TDS for Home Loans<\/h2>\n\n\n\n

    If you are wondering how to file TDS 194IA, here are some simple steps to deposit and file TDS on home loan<\/a> for purchasing a property: <\/p>\n\n\n\n