What happens if I don't deduct TDS on Rent

[Rex]

Hi,

My monthly rent is more than 50K (including Maintenance), i don't deduct TDS and claim whole amount as HRA. What could be possible penalty if IT catches that during ITR?

Any CA of expert here who is aware of/done that?

 

[dakshv]

As you have mentioned that your Rent is more than 50k & you are employed you are required to deduct TDS u/s 194-IB @ 5% while paying the rent for March month for whole year.
For eg: Rent 55k
Then TDS will be Rs 33,000/- (55000 * 12months * 5%) Maximum amount of TDS will be restricted to Rent of March month i.e 55k in this case

Also you can claim whole amount as HRA if you pay TDS as net amount went out of your pocket will be 55000p.m (continued above eg) only diff is you’ll pay some part to Govt which will be credited to landlords 26AS as TDS Credit.

 

[Rex]

As you have mentioned that your Rent is more than 50k & you are employed you are required to deduct TDS u/s 194-IB @ 5% while paying the rent for March month for whole year.
For eg: Rent 55k
Then TDS will be Rs 33,000/- (55000 * 12months * 5%) Maximum amount of TDS will be restricted to Rent of March month i.e 55k in this case

Also you can claim whole amount as HRA if you pay TDS as net amount went out of your pocket will be 55000p.m (continued above eg) only diff is you’ll pay some part to Govt which will be credited to landlords 26AS as TDS Credit.

I get that. however, If i deduct TDS, he may ask me to pay the maintenance (INR 7500) directly to Society making the actual rent less than 50K, that way I lose 2500 as part of HRA as maintenance paid can't be claimed under HRA.

 

[gurubhai]

I get that. however, If i deduct TDS, he may ask me to pay the maintenance (INR 7500) directly to Society making the actual rent less than 50K, that way I lose 2500 as part of HRA as maintenance paid can't be claimed under HRA.

What is the rent written in your agreement. is it inclusive of maintenance or exclusive?
.
Also whatever you decide to do after consulting, please do share in this thread. This is a very genuine problem and it might help many people in long run.

 

[beingmohit]

I get that. however, If i deduct TDS, he may ask me to pay the maintenance (INR 7500) directly to Society making the actual rent less than 50K, that way I lose 2500 as part of HRA as maintenance paid can't be claimed under HRA.

Maintenance is not supposed to be a part of your rent. It does not matter that you are paying it to your landlord along with the rent. Legally, you are not supposed to claim HRA on the maintenance paid

 

[Zacobite]

I get that. however, If i deduct TDS, he may ask me to pay the maintenance (INR 7500) directly to Society making the actual rent less than 50K, that way I lose 2500 as part of HRA as maintenance paid can't be claimed under HRA.

Do the calculations on HRA as per IT.. Full Rent paid is anyways not eligible. Check what is the actual HRA benefit as per IT, you may find that the 2.5k will not have any major impact..

https://incometaxindia.gov.in/Pages/tools/house-rent-allowance-calculator.aspx

 

[beingmohit]

As you have mentioned that your Rent is more than 50k & you are employed you are required to deduct TDS u/s 194-IB @ 5% while paying the rent for March month for whole year.
For eg: Rent 55k
Then TDS will be Rs 33,000/- (55000 * 12months * 5%) Maximum amount of TDS will be restricted to Rent of March month i.e 55k in this case

Also you can claim whole amount as HRA if you pay TDS as net amount went out of your pocket will be 55000p.m (continued above eg) only diff is you’ll pay some part to Govt which will be credited to landlords 26AS as TDS Credit.

I have a follow up question. If, after deducting TDS (which is let's say Rs. y), my rent is Rs. x, I can claim HRA on Rs. x, or Rs. (x + y)?

 

[Zacobite]

I have a follow up question. If, after deducting TDS (which is let's say Rs. y), my rent is Rs. x, I can claim HRA on Rs. x, or Rs. (x + y)?

actual amounts matter.. check calculator link.. you will see the actual number

 

[gurubhai]

Maintenance is not supposed to be a part of your rent. It does not matter that you are paying it to your landlord along with the rent. Legally, you are not supposed to claim HRA on the maintenance paid

I am doing that for a long time now.
As it has been seen that tenants don't pay maintenance and leave the place, landlords generally get into trouble of paying the maintenance where this administrative thing is poorly managed.
So most landlord takes it inclusive of rent so that they don't get in trouble later and they have more control over this.
My rent agreement says my rent is X rs inclusive of all society charges and electricity is extra. So I always claim HRA on X amount only.

 

[Rex]

What is the rent written in your agreement. is it inclusive of maintenance or exclusive?

It says inclusive 55K and so I'm claiming whole 55K as HRA. So practically speaking i don't have to know what maintenance he's paying, for me my rent is 55k and I claim as HRA (I know the nitty Gitty of maintenance being part can't be claimed as HRA, but I have been claiming and so far no issues as whole amount goes to landlord's account and integrity is maintained.) If I deposit Maintenace separately to maintenance office, there will be mismatch if I claim the maintenance as HRA

 

[panchabhut]

Maintenance is not supposed to be a part of your rent. It does not matter that you are paying it to your landlord along with the rent. Legally, you are not supposed to claim HRA on the maintenance paid

Depends upon the rental agreement. Agreement can state Rent is X amt and that all society charges and maintenance would be borne by the landlord. As the owner of the property, technically all maintenance is his expenditure. The Income Tax also assumes that maintenance is landlord's responsibility and gives 30% presumptive allowance for this on income from house property.

 

[gurubhai]

It says inclusive 55K and so I'm claiming whole 55K as HRA. So practically speaking i don't have to know what maintenance he's paying, for me my rent is 55k and I claim as HRA (I know the nitty Gitty of maintenance being part can't be claimed as HRA, but I have been claiming and so far no issues as whole amount goes to landlord's account and integrity is maintained.) If I deposit Maintenace separately to maintenance office, there will be mismatch if I claim the maintenance as HRA

So, if you can convince landlord to give 55K rent receipt and you pay maintenance separately as well, will that thing works for you in any way?
Because in the end, only rent receipts matters.

 

[Rex]

So, if you can convince landlord to give 55K rent receipt and you pay maintenance separately as well, will that thing works for you in any way?
Because in the end, only rent receipts matters.

IT Dept don't care about receipts, your org does, so that's not a problem. Also, why your landlord will agree to give you 55K receipt if ur paying to maintenance office. That's why I'm not deducting the TDS so that i can claim the whole thing and wanted to understand the consequences , If any penalty i need to pay once caught, if yes, how much? so that i can calculate pros vs cons