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The Income Tax Department has issued notices to Taxpayers who have been paying a rent of ₹50,000 or more per month and not deducted Tax Deducted at Source (TDS) while remitting the amount to landlord, a tax expert said. 

Many taxpayers have received a notice from the Income Tax Department pertaining to the assessment years 2023-2024 and 2024-25 stating that you made a claim of House Rent Allowance (HRA) for specific years and not deducted TDS on that. The notice also states, If you want to file an updated return by reducing your claim, this is the right time to do it, Abhishek Murali, President, All India Tax Payers’ Association said.

These notices have been issued to several taxpayers across the country, he said.

“Where you are a tenant of a particular house property and you are paying a rent of ₹50,000 or more, the Income Tax Act mandates that as a tenant you need to deduct TDS of 2% (effective from October 2024 earlier it was 5%) on the rent you are paying to the landlord. So the onus to deduct the TDS is on the tenant. The tenant has to deduct the TDS and remit it to the Income Tax Department and pay the balance to the landlord,” Mr. Abhishek said.

“If the tenant has failed to do so, the person is considered as an assessee in default. Then you are subject to a levy of certain interest, fines and penalties by the Income Tax Department which may vary from 1-1.5% per month depending on the individual cases and time of the default,” he said. 

“There is one exemption to this. If the landlord has filed is Income Tax return and shown the rental income and if has paid the taxes duly calculated on the same and if you are able to furnish the information to the assessing officer, you will not be considered as assessee in default and need not pay any interest or penalty,” Mr. Abhishek said.

“However, some landlords may not be comfortable sharing certain confidential/private documents. Therefore, it is advisable that all assessees properly deduct and remit the TDS in a timely manner to comply with the law and to avoid being an assessee in default,” he said.