Taxpayers Received Notice from Income Tax Department for Not Deducting TDS on Monthly Rent of Rs.50,000 or More

The Income Tax Department has sent notices to the Taxpayers who have been paying a monthly rent of Rs.50,000 or more but have failed to deduct Tax Deducted at Source (TDS) while paying the rent to their landlords.

According to an expert, many taxpayers have received notices from the Income Tax Department for the Assessment Years 2023-2024 and 2024-25, showing that they claimed House Rent Allowance (HRA) for those years but did not deduct TDS on the rent payments. The notice further suggests that if taxpayers want to file an updated return and reduce their HRA claim, now is the right time to do it. These notices have been sent to many taxpayers across India.

The expert added that if you are a tenant and you are paying a monthly rent of Rs.50,000 or above, it is compulsory for you as a tenant to deduct TDS of 2% on the rent paid to the landlord as per the Income Tax Act. The TDS of 2% is effective from October 2024; earlier, the rate was 5%. The tenant must remit the deducted TDS to the Income Tax Department and pay the balance to the landlord. Tenants who fail to deduct the TDS are considered as an assessee in default. The Income Tax Department will impose fines and penalties for the same. The penalties can vary, generally ranging from 1% to 1.5% per month, depending on the specific case and the duration of the default.

However, there’s an exception to the rule that specifies that if the landlord has already filed their tax return and shown the rental income along with the payment of the tax on it. If the tenant can furnish this to the tax authorities, the tenant won’t be considered an assessee in default and won’t have to pay any interest or penalty.

However, some landlords may not feel comfortable sharing private documents like their tax return. So, to avoid any trouble, it’s better for tenants to deduct and pay the TDS on time.