2024-01-24

Home Loans

What a feeling it is to be able to call your house your own! It is extraordinary and out of the world. It almost feels like a sign of your hard work in life, a reward so sweet that we literally call it a “home sweet home”. 

And Regrob has been helping you to make the whole experience sweeter with its skill and expertise. So what, if you are not aware of all the heavy tax related terms and find it difficult to keep up with all the information? We will do it for you. Let us help you with one such tax term today, called TDS.

So let us deal with the most basic question on your mind right now. 

What is TDS?

TDS or Tax Deducted at Source is a means of indirect tax collection by Indian authorities according to the Income Tax Act, 1961.

Income and expenditure such as salary, lotteries, interests from banks, payment of commissions, rent payment, payments to freelancers etc. fall under the circle of TDS.
When making payments under these segments, a percentage of the overall payment is withheld by the source that is making the payments. This source that can be a person or an organization is known as the Deductor. The person whose payment is getting deducted is called the Deductee.

What the income tax act says?

The Income Tax Act says that TDS on Property is to be deducted whenever the buyer makes any payment to the seller for purchase of property.

The law says that there are 2 parties in any agreement for sale of property i.e. the buyer and the seller and there is no mention of the bank loan.

Main points is--

Once your home loan application is approved and before the first disbursement, you should give in a written application to the bank. In the request openly mention to deduct TDS through Home Loan on your behalf. Also, you should provide bank account details in which bank can disburse the TDS deducted in the name of a buyer. In the case of NRI seller, it is advisable to share calculations as the case may be. You should also take an acknowledgement from a Bank/HFC employee for this written request. Sometimes banks give an excuse that buyer has not submitted any request for TDS deduction.
Discuss and set actual terms with your banker. After the discussion and finalizing the process of TDS through Home Loan you should drop a mail to a bank employee.

Next step is informing the seller regarding TDS deduction from the home loan amount.

It is sensible to document the TDS details in Sale Agreement or Sale deed to avoid any confusion in future.

Time of deduction of TDS is whenever any payment is made to the Seller. It is the responsibility of the buyer to deduct the TDS whenever any payment is made to the seller.

Since it is your responsibility as a buyer to deduct the TDS and the bank may or may not do this on its own. It is in your best interest to clarify at the time of availing loan how the TDS proceedings will be dealt with.

In the case of a joint home loan you can open a joint savings account before availing home loan.

The TDS should be deducted and deposited in the proportion of ownership.

There is a misconception that if one of the co-borrower/co-owner is non-earning then earning buyer/borrower can deduct and deposit TDS for full value.

In case joint bank account is not feasible, you may provide individual bank accounts to the bank and request them to disburse TDS amount individually in each account in the proportion of ownership. Click here to read about Tax benefits on home loan.

So here is a summary of the steps you need to follow when deducting TDS on your home loan.

Set terms with your banker while availing the loan. It is best to submit a written application stating your request to the bank to deduct TDS on your behalf.

 Next, inform the seller about the TDS deduction. It is wise to document the TDS details in Sale Agreement/Sale deed to avoid any disagreement in future.

Your bank will then deduct the TDS from payment to the seller and deposit the same in borrower’s bank account.

After receiving TDS disbursement from the bank, the buyer should deposit the TDS in time and submit a copy of the TDS certificate with a bank and a seller.

Any lapse or mistake from bank’s end is not an excuse for delay in deduction or deposit/filing. It is only and only your responsibility.

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