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Update Date : 31-Dec-2022

Created Date : 31-Dec-2022

Category : Home Loan E-Book (Promotional_New)

TDS - Everything you must know about it while buying a house

TDS stands for “Tax Deducted at Source”.

It refers to an advance tax that every home buyer is required to pay to the government on behalf of the seller.

In other words, anyone buying a house is required to pay advance tax to the government for gains that the seller was making by selling his/her property.

The amount of advance tax being paid is then adjusted against the balance payment that the buyer makes to the seller.

So, the TDS forms a part of the total sale consideration of the property.

The rate of TDS presently is 1% for Indian residents while for NRIs, it is 20% plus cess.

Also, TDS is applicable only for properties that are worth more than ₹50,00,000/-.

Let’s assume, Mr. A has bought a property from Mr. B at a total consideration of ₹ 1,00,00,000/-. So, here’s how the payment plan will work.

In the above arrangement, Mr. A plans to contribute ₹ 25,00,000/- from his savings while the balance ₹ 75,00,000/- will come from the bank loan.

Assuming, the prevailing rate of TDS is 1%, he will deduct ₹1,00,000/- from the total property value and pay the same to the government on behalf of the seller.

The balance ₹ 99,00,000/- will then be transferred into the seller’s bank account directly out of which
₹ 75,00,000/- will come via bank loan while the remaining ₹ 24,00,000/- will come from his own contribution.

As a home buyer, if you fail to pay TDS to the government within a stipulated time, you will become liable to pay a penalty for every day of delay.

Hence, once the registration is done, you must prioritize the TDS payment to avoid any financial loss in the future.