With the advancement of technology & new income source tracker system in the form of ‘AIS’ what precautions should be taken by salaried person & Landlord of the property while claiming HRA.
IF YOU ARE LANDLORD:
How Income tax department may disturb you:
If you are a Landlord & rented your property, confirm from your tax consultant and ask him to verify with your AIS before filing your ITR. It may be possible your tenant might have claimed HRA wrongly & corresponding rent income is wrongly reflected in your AIS or when there are joint owners of property full rent amount is reflected against only one co-owner’s pan number. In such case income tax department may treat full rent income as single co-owner’s income and you may receive notice for mismatch of rent income shown in your ITR.
GST department can issue you a notice for concealment :
If you are GST registration holder similarly GST department may catch this wrongly reported amount and you can receive a show cause notice from GST department for concealing services provided by you. In that case unless you make rectification in AIS, you may end up paying more taxes.
Wrongly reported rent amount can be rectified in AIS as shown below.
In the above screen shot one of our subscriber client faced similar issue where there were 2 joint owners of the rented property but whole rent amount was reflected against one owner’s pan no. then we rectified it through option available on portal and rectified amount is reflected as derived value (i.e. 77000).
Precaution in such cases
There should be clarity between landlord and tenant about the co-ownership ratios between Landlords & accordingly proper separate receipts should be provided by both the joint landlords with their respective pan numbers on respective receipts and accordingly tenant should be informed about the due diligence to be carried out on his part while filing his ITR.
IF YOU ARE A TENANT:
What care should be taken that your HRA claims are not rejected
Make sure your landlord files ITR if you are giving rent and claiming HRA. Many of the salaried employees give rent to their landlord and claim HRA for the same. While computing HRA, your company asks for the PAN of the landlord, the same is reported to Income Tax Department when the TDS return of salary is filed by your employer. Now the rent which is paid by you is reflected in the AIS [Annual Information Statement] of your Landlord as well so make sure while filing your ITR, HRA is calculated on the rent which is actually paid & when there are joint landlords, amount matches with the rent paid by you to both landlords in their ownership ratios. To justify your HRA claim It would be advisable to have proper separate rent receipts from both your joint landlords and diligently give pan numbers of both joint landlords to your company with their ownership ratios, because if ratios are not correctly mentioned landlords may reject the wrong income reflected in their AIS which in turn will endanger your HRA claims and you may receive mismatch notice from income tax department. If the rent and other Income of the rent receiver exceed the slab limit, you should make sure that the landlord is also filing his/her ITR and showing rent paid by you as “Rental Income”.
What if Rent is paid to parents?
- You can pay rent to parents if you are staying in their house.
- Remember the house should be owned by parents and you should not be owner or Co-owner.
- You should make a rent agreement for payment of rent.
- Proper rent receipt should be issued from your parents to justify your rental expense.
- Make sure you are filing their Income Tax Return and showing the rental Income given by you.
Do I need to deduct TDS on Rent paid?
In case the monthly rent exceeds Rs. 50000, you need to deduct TDS u/s 194-IB. You do not need to apply for a Tax Deduction Account Number [TAN] for that. The payment of TDS and Return filing would be through a PAN-based System.
What if the ITR is not filed?
Please note that if your income exceeds the slab limit, and you are not filing your ITR, you will be considered as an assessee in default. Further, the due date for filing ITR for FY 2020-21 was, 31st December 2021, you can still file your return by paying Late Fees.
