Details

Taxpayers must have received the following message from Income tax department on their claims of House Rent Allowance (HRA) exemption under Section 10(13A) without corresponding Tax Deducted at Source (TDS) on rent paid.

Dear Taxpayer XXXXXXXXXX , PAN (XXXXXXXXXX),

It is observed that you have claimed an exemption for HRA under section 10(13A) of Rs XXXXXX, Rs XXXXXX and Rs XXXXXX in your ITR for A.Y. 2022-23, AY 2023-24 and AY 2024-25 respectively. However, no TDS has been deducted on the rent paid. It is requested that the claim may be verified and any mistake, if found, may be rectified by filing the updated ITR by 31.03.2025.

What does this communication mean? 

a. Taxpayer must have claimed HRA exemption by declaring rent amount morethan Rs.50,000 per month ; and

b. have not deducted TDS at 5% on such rental payment under section 194IB of the Income-tax Act.

What is the objective of Income tax department ?

IT Dept. would like to ensure whether such exemption claim of rent, which is normally considered a big amount, is genuine or not. 

Understand the TDS on Rent Rules - If you are paying rent above ₹50,000 per month, you are required to deduct TDS @5% under Section 194IB and deposit it with the government. If you failed to do this, you may need to Pay the pending TDS along with interest and penalty.

What is the expectations & options for the tax payers ?

Before taking any action, check the correctness of the HRA exemption claimed in your ITR. Ensure that Rent payments were actually made to the landlord and Rent receipts are available for the claimed amount.

If the claim of such exemption is genuine, next question is on the default of not deducting TDS on rent payments to property owner and tax payer will be treated as "assessee in default". Tax payer can contemplate between 2 options, 

a. regularise by making TDS remittance along with penalty and interest as applicable ;

b. obtain a chartered accountant certificate in Form 26A which demonstrates that the taxes has been duly paid by property owner by disclosing the rental income earned in his/her/their Income Tax Return

If the claim of such exemption is not genuine, it is advised to file updated return in Form ITR-U since the option of revised return is not available now. Filing updated return results into paying of additional tax and penalty as under,

For AY 2022-23 (Relevant FY: 2021-22)

• 12 months: Till 31st March 2024 → 25% additional tax.

• 12-24 months: Till 31st March 2025 → 50% additional tax.

For AY 2023-24 (Relevant FY: 2022-23)

• 12 months: Till 31st March 2025 → 25% additional tax.

• 12-24 months: Till 31st March 2026 → 50% additional tax.

For AY 2024-25 (Relevant FY: 2023-24)

• 12 months: Till 31st March 2026 → 25% additional tax.

• 12-24 months: Till 31st March 2027 → 50% additional tax.

Seek Professional Help if Needed

If you are unsure about how to respond or whether to file an updated return, consult a Chartered Accountant (CA) for assistance.