If you’re paying Rent more than Rs 50,000 a month, be aware —the taxman is watching the Tds pay. Recent reports and messages from the Income Tax Department reveal a crackdown on tenants who’ve skipped deducting TDS on the rent payments.
Think of this as a friendly nudge before a not-so-friendly notice lands in your inbox. Let’s break down what’s happening, why it matters, and how to fix it.
The Trigger: Why Rent + TDS = Big News
A recent article in The Hindu titled “Taxpayers defaulting on TDS on rent above Rs. 50,000 get I-T notices” set off alarm bells. The gist? If you claimed HRA (House Rent Allowance) in your tax returns for 2023–24 or 2024–25 but didn’t deduct TDS on rents over Rs. 50,000/month, you might be next in line for a notice.
Section 194-IB: The Rule You Can’t Afford to Miss
Here’s the deal: If your rent crosses Rs. 50,000/month, you (the tenant) must deduct 5% TDS (2% w.e.f Oct 2024 onwards) (not the landlord). This isn’t a suggestion—it’s law (Section 194-IB). The goal? To ensure landlords report rental income honestly. But if you skip this step, the tax department will come knocking—your door, not the landlord’s.
Real-Life Trouble: Meet “Mr. Ram”
Take our client (let’s call him Mr. Ram). He claimed HRA exemptions worth ₹10+ lakhs but forgot to deduct TDS on his ₹60,000/month rent. The result? A stern message from the IT Department:
“You claimed HRA but didn’t deduct TDS under Section 194-IB. Rectify this by filing an updated return by March 31, 2025.”
What Happens If You Ignore TDS on Rent?
- Penalties: 1% monthly interest on the unpaid TDS and penalty for late filing Rs.200 per day
- “Assessee in Default” status: A fancy term for “you’re in trouble.”
- Landlord’s ITR won’t always save you: Even if your landlord paid taxes on the rent, you still needed to deduct TDS. Proving their compliance might help, but it’s not a free pass.
How to Fix This (Before It’s Too Late)
- File an Updated Return (Section 139(8A)): Correct omissions by March 31, 2025.
- Talk to Your Landlord: Share the TDS certificate (Form 16C) so they can adjust their taxes.
- Keep Records: Rent receipts, agreements, and TDS proof are your best friends.
- Ask for Help: If notices flood in, consult a tax pro (like us!).
The Family Rent Trap Safe?
Many taxpayers “pay rent” to family (spouses, parents) to claim HRA and save tax. But beware:
- Clubbing Rules (Section 64): If the taxman smells a fake arrangement, your spouse’s/parent’s “rent income” could be added to your taxable income.
- Prove It’s Real: Can you show the property is truly theirs? Is the rent fair for the area? Courts often dismiss sham deals.
Bottom Line: Don’t Wait for a Notice
The tax department isn’t bluffing—they’re tracking high-value rents closely. If you’ve missed TDS, act now. Update returns, keep paperwork tight, and sleep easy knowing you’re compliant.
Need help? We’re just a call/message away. Let’s keep your taxes clean and stress-free. Consult today
