I-T dept flags HRA claims for TDS lapses: your action plan

Taxman warns tenants to ensure compliance, file corrections by 31 March to avoid penalties

- Shipra Singh

The Income Tax Department is sending notices to salaried taxpayers claiming house rent allowance (HRA) for tax benefits but has skipped tax deducted at source (TDS) on rent payments in the previous financial years.

The I-T notices ask taxpayers to verify their HRA claims—and, if incorrect, update their tax returns before the 31 March 2025 deadline.

For those with legitimate HRA claims, it isn't proving authenticity—it's the potential liability for failing to deduct TDS on rent, said chartered accountant Prakash Hegde. "Those having claimed genuine HRA need not file an updated return," said Bhawna Kakkar, founder of Kakkar and Co., Chartered Accountants.

I-T department's email suggests if TDS hasn't been deducted, the HRA claim could be invalid, nudging taxpayers to reassess their claims, Kakkar said.

TDS on rent: What the law says

Under India's tax laws, tenants must deduct 2% TDS (from 5% in October 2024) if monthly rent exceeds ₹50,000—provided the landlord is a resident Indian. If the landlord is a non-resident Indian (NRI), TDS rates jump to 31.2%, regardless of rent amount.