Claimed HRA but skipped TDS? Income Tax department comes knocking with notices

Income Tax Department.

The taxmen are seeking verification of the previous-year claims filed in the Income Tax Returns (ITR). If, however, the taxpayer has made a mistake and wants to rectify the tax returns for earlier years, they have until March 31 to submit an updated-and rectified-ITR to account for the gap.

ET explains below what the relevant TDS provisions entail, and what a taxpayer should do when served a notice.

What does the law say?

Under Section 194-I of the IT Act, tenants paying more than ₹50,000 per month as rent to a resident Indian landlord are liable to deduct TDS at 2% on the rent amount (it was 5% until October last year). If a taxpayer claimed HRA, but did not pay TDS on the rent paid, the claim is considered invalid. The monthly rent amount determines the taxpayer's obligation, not the HRA exemption claim. So even a single month's rent payment exceeding ₹50,000 makes the person liable for TDS.
The PAN number of the landlord or the person receiving rent must be mentioned in the TDS challan. If not mentioned or if PAN is inoperative, TDS on rent is deducted at 20% under Section 206AA. If the landlord is a non-resident Indian, the TDS is 30%.

When and how is the applicable TDS to be paid?

The tenant is required to deposit the TDS amount within 7 days from the end of the month of final tenancy period (in case if the tenant vacates before the end of the financial year) or within 30 days from end of the financial year (whether actual rent payment was monthly or otherwise). So, if the tenant has a rent agreement for one year starting July, he may deduct the TDS for 9 months up to March only once from the March rental payment, to be deposited by the 30th of April. If s/he vacates the property in