Income Tax dept sends notices for HRA claims without TDS deductions. Here’s what you can do

The Income Tax Department is now reportedly sending notices to salaried taxpayers who have claimed House Rent Allowance (HRA), but did not deduct tax at source (TDS) on rent payments in the past financial years.

These notices are to ask the taxpayers to verify their claims and if they are incorrect, to amend their tax returns before the March 31 deadline, according to a Mint report.

What you can do

The law states that tenants must deduct 2 per cent TDS (which was reduced from 5 per cent in October 2024) if their monthly rent exceeds ₹50,000, as long as the landlord is a resident Indian.

In cases where the landlord is a non-resident Indian (NRI), the TDS rate is 31.2 per cent, regardless of the rent amount.

However, “those who have claimed genuine HRA don’t need to file an updated return,” the report quoted Bhawna Kakkar, founder of Kakkar & Company, Chartered Accountants, as saying.

A 1 per cent monthly interest gets charged for not deducting TDS, while not depositing TDS leads to a higher 1.5 per cent monthly interest. For delays in filing e-TDS, ₹200 per day is the late filing fee, though the upper limit can be equal to the TDS amount, according to the report.

Receiving a notice means that the department considers you a defaulter under Section 201.

However, assessees can give the landlord’s tax return as proof that the rent was declared as income and taxes were duly paid. Assessees should also file Form 26A and obtain a CA certificate confirming that the landlord has reported the rental income and paid the taxes, according to the report.

The income tax department is doing this due to fake HRA claims being on the rise, as per the report.

Source: Hindustan Times