A Comprehensive Guide on TDS in Home Loan

The ownership of a house is one of the highest privileges that we pride ourselves on. The transition from a rental property or your parents’ home to your own is a notable achievement for many Indians. That’s when a home loan comes into the picture. A home loan can make the financial decision-making process swifter and more comfortable for individuals looking to buy a house. Let your dreams of owning a house come true with the right financial institution.

When it comes to taking up a home loan, there are several rules and guidelines that one needs to be aware of. One of the most important factors to consider is the TDS in home loans. With proper planning of your finances and research about the TDS meaning, you can make the right decision about your purchase, be it a flat, building, land, or under-construction property.

What Is TDS?

The TDS full form is Tax Deducted at Source, which means that there will be a tax subtracted from the source of origin directly when the payment is to be made. This means that during the transaction between two parties, the payer has to arrange for TDS to be applied on the amount before sending it to the payee. This deducted tax is paid to the Central Government of India.

TDS was introduced into the system to tackle financial fraud through tax evasion. By ensuring that the required tax is paid right at the beginning, the government prevents individuals from dodging tax payments after the transaction is completed.

What Are TDS Rates?

Under Section 194A of the Income Tax Act, 1961, every individual is subjected to a tax deduction for interest on loans. The rate at which TDS is counted is fixed by the government of India. Usually, TDS rates are applicable as per the type of transaction and can vary from 1% to 30%.

For example, considering a salaried individual under any corporation in India, the tax is deducted at the source before the salaries are given out by the company. Up till an annual income of INR 2.5 lakhs, there is no tax levied. Beyond INR 2.5 lakhs, there are income brackets that cover TDS amounts of 10% up to INR 5 lakhs, 20% up till INR 6.33 lakhs, etc. TDS can also be considered on insurance commissions, lottery successes, rent, and digital assets.

For property, the TDS in home loan is calculated according to Section 194LA, which defines 1% to be the TDS on property purchased above INR 50 lakhs section for all immobile properties.

How To Know Deducted TDS Amounts?

Since TDS gets deducted from the amount before the generation, how to know how much TDS is deducted? This information is available online through the official TDS portal. There are 2 ways to do it:

• Through Form 26AS (Tax Credit) - For this, visit the official income tax website.
• Through PAN card linking - For this, visit the TDS CPC website.

How Does TDS Work For Home Loans?

For the home loan TDS section, the lending institution transfers the sanctioned loan amount to your account after deducting the tax according to the bracket mentioned. For example, if you want a home loan of INR 55 lakhs, then the TDS rate applicable will be 1%, meaning that the lending institution will subtract INR 55,000 from your loan amount before transferring it to you.

The bottomline is that you do not have to worry about filing any TDS, your financial lender will be responsible for it.

Property Purchase TDS Rates

The Government has defined several brackets according to property value when it comes to TDS on home purchase.

The TDS on property purchase above INR 50 lakhs section is applicable for residential and commercial properties, bungalows and apartment properties, plots and empty buildings; all land registered under the government except for agricultural vacant land. As is discussed above, this TDS will be 1%.

Hence, for properties purchased at INR 60 lakhs, TDS will be INR 60,000, for properties purchased at INR 88 lakhs, TDS will be INR 88,000, and for properties purchased at INR 97 lakhs, TDS will be INR 97,000.

Conclusion

Every Indian citizen is liable to pay TDS on home loans. To make your home loan application process and tax deductions simpler, turn to SMFG Grihashakti. We will take care of all the required TDS subtractions efficiently. Check out our website to know more about home purchase loans and use the EMI calculator to comprehend the monthly instalments.