/ TDS

Tax Notices for Non-Deduction of TDS on Rent >50,000 P.M.

Tax notice .

Tax Dept Sends Tax Notices for Non-Deduction of TDS on Rent >50,000 P.M.

TDS Deduction Responsibility on Rent 

Income Tax Dept has issued notices to tenants paying INR 50,000/- or more in monthly rent who failed to deduct and deposit TDS before remitting payments to their landlords. Even salaried employees paying rent from their taxable income must deduct TDS if their rent exceeds INR 50,000/- Per month.

  • Tenants must deduct 2% TDS on rent payments exceeding INR 50,000/- per month (effective from October 2024, earlier 5%) and deposit it with the Income Tax Department. TDS must be deposited on time to avoid penalties.
  • If tenants failed to deduct TDS on rent, they may need to revise their House Rent Allowance claims as a corrective measure. In cases where landlords have already paid tax on rental income, tenants should obtain Form 26A certification from the landlord to avoid liability.

Why Are Tenants Receiving Notices? Many taxpayers failed to comply with TDS on rent for AY 2023-24 & 2024-25 and are now receiving notices from the Income Tax Dept.

  • Some taxpayers might not realize that reducing their HRA claim is a corrective measure.
  • The department is increasing scrutiny on high-rent transactions, urging taxpayers to review filings and ensure compliance to avoid penalties.

What Should Tenants Do: The tax notice allows individuals to file an updated ITR and adjust their HRA claims to rectify non-compliance before penalties are imposed.   Under “Exception to the Rule,” clarify that if the landlord has already paid taxes on the rental income, the tenant can request a Form 26A certification from the landlord to prove compliance. Consequences of failing to deduct TDS on rent payments and the necessary compliance measures for tenants paying high rent.

Consequences of Non-Compliance

  • Non-deduction of TDS can result in:
  • Being considered an “assessee in default.”
  • Interest penalties ranging from 1-1.5% per month.
  • Additional fines imposed by tax authorities.

Exemption from Penalty

  • Tenants can avoid penalties if their landlord has already declared rental income in their ITR and paid taxes on it. However, obtaining proof from landlords may be difficult due to privacy concerns.
  • ITR-U must be filed within the allowed timeframe (24 months from the end of the relevant AY) to rectify non-compliance before penalties escalate.

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