Whenever a buyer purchases a property from the seller, TDS needs to be deducted.

The law states that it is the buyer’s responsibility to deduct TDS. But in case of a home loan, the buyer does not pay the seller directly. Instead, the lender pays the seller on behalf of the buyer. That is why home loan TDS deduction is hard to follow.

The buyer can either deduct the TDS themselves or request a lending institution to do it on their behalf. Read below to learn more about both of these methods.

## How can a buyer deduct TDS?

Consider the following example. X is purchasing a property from Y for Rs. 1 crore. X takes a loan for Rs. 40 lakhs from the lender Z. Since the lender is not responsible for deducting TDS on home loans, Z will pay Rs. 40 lakhs to Y directly, without deducting TDS. The remaining amount will be self-financed by X, and while paying this amount, X must deduct TDS @ 1%. See the calculations below for more clarity.

* Note that for properties sold between 14.05.20 and 31.03.21, the rate of TDS applicable is 0.75%.

## How can a buyer get the lender to deduct TDS on their behalf?

### Step 1 – Write an application

Once the lender sanctions your loan, write an application requesting them to deduct TDS on your behalf, and submit it before the first disbursement. Furnish the details of the bank account where the lender must transfer the TDS amount after deducting it. You must also show all the relevant computations in the application. You can use an online home loan calculator for TDS and other calculations. Remember to collect an acknowledgement for the application.

### Step 2 – Inform the seller

Inform the seller that TDS will be deducted from the loan amount. Ideally, you should mention details about the deduction of home loan TDS in the Sale Deed/Agreement itself, to prevent any confusion or disputes in the future.

### Step 3 – Deduction and disbursement

The lender will deduct TDS @ 1% and disburse the remaining amount to the seller. The TDS deducted will be transferred to the specified bank account.

Additional Read: 10 Important Clauses in a Home Loan Agreement Everyone Must Know

### Step 4 – Deposit the TDS

Deposit the TDS within the applicable deadline. Share a copy of the TDS certificate with the seller and the lender.

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