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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 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. So here is a guide on TDS - its full form, TDS rates, how it works for home loans, and more.
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.
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.
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.
Under the Income Tax Act, TDS 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 commission, and Section 194J deals with TDS on professional fees.
There are different interest rates for the various categories of transactions and recipients.
Here is a table illustrating TDS rates under different transaction categories for resident Indians.
|Section under Income Tax Act||Transaction category||TDS rate for resident Indian individuals or Hindu Undivided Families (HUFs)|
|Section 192||TDS on Salary payment||According to the tax slab rate|
|Section 194B||TDS on lottery and game winnings (amount should exceed Rs 10000)||30%|
|Section 194EE||TDS on payment toward National Savings Scheme (NSS) deposits (aggregate amount in a financial year (FY) should exceed Rs 2500)||10%|
|Section 194F||TDS on payment toward repurchase of mutual fund units||20%|
|Section 194D||TDS on insurance commission||5%|
|Section 194H||TDS on brokerage or commission||5%|
|Section 194I||TDS on rent||Plant and machinery – 2% Land, building, furniture, fixtures – 10%|
|Section 194J||TDS on professional fees||Technical services – 2% Royalties on cinematographic films – 2% Others – 10%|
|Section 194LA||TDS on the acquisition of immovable property (amount should exceed Rs 50 lakh)||1%|
|Section 194S||TDS on the payment for the transfer of a Virtual Digital Asset||1%|
Regarding TDS accounting, it is essential to note that not every person or income will be charged TDS. TDS 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.
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. Here are the steps to access Form 26AS:
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.
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.
So, 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.
The lender deducts the TDS and pays the remaining amount to the seller.
TDS accounting is essential and should not be undermined. Failure to pay TDS on an immovable property can result in a penalty of up to Rs 1 lakh under Section 271H. The responsibility for the deduction and deposit of TDS on immovable property via home loan lies in the hands of the buyer. They should ensure that the lender deducts TDS, and a deposit of the same should be made to the government timely. The process for depositing TDS can be done online. If you are looking for a good home loan, you can contact the experts of Tata Capital to assist you with the same.
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