Just heard that employees who are claiming HRA and paying rent more than Rs. 50,000 need to deduct TDS on rent amount and pay to government.

How it works? I mean someone can provide details of:

  1. Who need to deduct TDS on rent paid to owner above 50,000?
  2. Every employee has to deduct TDS or is their any exemption?
  3. What if employee did not deduct the tax?
  4. If TDS deducted and not paid to government, what are the penalties and interest?

I feel this provision is really trouble making for some employees.

Posted 4 years ago by Rahul Rai

Dear Rahul

Yes you are right it is a new section in income tax act this will be effective from 1st June 2017.

1. Every Individual or HUF paying a rent of a amount exceedding Rs.50,000 p.m is liable to deduct TDS @ 5%.
2. Only those who are claiming Rent Paid in HRA Exemption exceeding Rs.50,000 are liable to deduct TDS.
3.Failure to deduct TDS will attract a interest of 1% p.m or part thereof since the date TDS was deducted till it is actually deducted
4.Failure to deposit TDS after deducting the same will attract a interest of 1.5% p.m or part thereof.

Further A.O can impose penalty under Section 271C.

CA Bhuwan Sharma
Write me on: bhuwan.chand.sharma@icai.org

Posted 4 years ago by NRO0263978 BHUWAN CHAND SHARMA

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