Income Tax Department Issues Notices to Taxpayers Claiming HRA without Deducting TDS

The Income Tax Department is sending notices to salaried individuals who have claimed House Rent Allowance (HRA) but have not deducted TDS on rent payments in the past financial year. When the tax department sends a notice to you, it considers you a defaulter under Section 201. The tax department is doing this because many individuals are claiming fake HRAs.

As per a report, the notices have asked the taxpayers to verify their claims, and if the claims are found incorrect, the taxpayers are instructed to revise their tax returns before the deadline of March 31.

What Should the Taxpayers do Now?

• As per the law, if a tenant pays a monthly rent of Rs. 50,000 or above to a landlord who is a resident of  India, then the tenant must deduct TDS at 2%. Earlier, the TDS rate was 5%. However, it was reduced to 2 % in october 2024.
• If the Landlord is a non-resident Indian (NRI), TDS must be deducted at 31.2%, no matter how much monthly rent is paid to the landlord.

Understanding TDS Penalties

• If you do not deduct TDS, you will be charged with a 1% monthly interest.
• If you do not deposit the TDS, you will be charged with 1.5% monthly interest.
• If you delay filing the e-TDS, you will be charged Rs.2 per day as a late filing fee.

However, taxpayers can provide the tax return of their landlord as proof that the rent was declared as income and the taxes were duly paid. Taxpayers should file Form 26A and get a CA certificate to confirm that the landlord has disclosed the rental income and has paid the taxes.