Handling TDS Errors on Rental Income and Correcting Them in Your ITR Filing

Tax Deducted at Source (TDS) is a significant component of the Indian tax system, ensuring that taxes are collected at the source of income. Rental income is subject to TDS, and errors related to it can delay your Income Tax Return (ITR) filing and affect your tax refund. Common mistakes in reporting TDS on rental income can arise from incorrect TDS details, mismatches in TDS credit, or failure to report the TDS deducted by the tenant. Such errors can lead to discrepancies in the final tax calculation, delays in refund processing, or even tax notices from the authorities.

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Table of Contents

• Common TDS Errors on Rental Income

• Steps to Correct TDS Errors in Your ITR Filing

• Latest Updates and News (2024–2025)

• Conclusion

• FAQs

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Common TDS Errors on Rental Income

• Incorrect TDS Credit Reflection: One of the most common errors when filing ITR for rental income is the incorrect reflection of TDS credits. The TDS credit may not match the actual TDS deducted and deposited by the tenant, or the TDS credit may not be updated in the system. This can occur if the tenant has failed to deposit the deducted tax or if the TDS statement issued by the tenant contains discrepancies. Failing to reconcile the TDS credit accurately may result in either over-reporting or under-reporting your tax liability.
  

• Mismatched PAN Details: If the tenant deducting the TDS has entered incorrect or mismatched PAN details, the TDS credit might not be reflected under your PAN in the tax department’s records. This can create issues when trying to claim TDS against your income, leading to a mismatch during ITR filing.
  

• Failure to Report TDS on Rental Income: Many taxpayers overlook reporting TDS deducted on rental income, either due to lack of awareness or due to incorrect documentation. It's essential to ensure that the TDS deducted by the tenant is reported under the appropriate section in the ITR to avoid discrepancies. Failing to report the TDS can cause delays in refunds and may result in penalties or notices from the tax department.
  

• TDS Deductions on Non-Eligible Payments: In certain cases, TDS might be deducted on payments that are not subject to TDS under the Income Tax Act. For instance, payments related to rent under a certain threshold amount or rent from certain types of properties may not be subject to TDS. If TDS has been deducted in these instances, it can create unnecessary complications during tax filing.
  

• Incorrect TDS Filing by Tenant: Tenants may sometimes incorrectly deduct TDS or fail to issue the TDS certificate (Form 16A) in a timely manner. This leads to difficulties in claiming the TDS credit while filing your return. If the tenant has not deposited the TDS with the government or has made errors while doing so, you will not receive the credit as expected.

Steps to Correct TDS Errors in Your ITR Filing

• Check Your TDS Credit Details: First, cross-check the TDS credit available under your name by accessing the Form 26AS, which is a consolidated tax statement. This form will show all the TDS credited to your account by the tenant. You can access Form 26AS through the Income Tax Department's e-filing portal.
  

• Verify the TDS Certificate: Ensure that the tenant has issued a TDS certificate (Form 16A), which provides the correct details of the TDS deducted, including the TAN (Tax Deduction Account Number) of the tenant and the amount of TDS deducted. If there are discrepancies, contact the tenant to rectify them.
  

• Rectify TDS Mismatches with the Tenant: If you notice that the TDS deducted by the tenant does not match the amount recorded in your Form 26AS, ask the tenant to file a correction with the tax department. The tenant may need to rectify their TDS return by submitting a revised return with the correct information.
  

• Update Your ITR Filing: While filing your ITR, make sure you report the TDS correctly under the appropriate income section. If there is a mismatch in the TDS credit due to errors by the tenant, you will need to manually adjust the figures in the ITR or explain the discrepancy to the Income Tax Department in case of any query.
  

• File a Revised Return: If you've already filed your ITR but later discover a TDS error or mismatch, you can file a revised return under Section 139(5) of the Income Tax Act. Make the necessary corrections and ensure that the TDS details are updated correctly.
  

• Seek Professional Assistance: If you're unsure about handling TDS-related errors, it's advisable to seek help from a tax professional who can assist in correcting the discrepancies. Professional help can ensure that the TDS is reflected correctly and that the tax filing process is completed without errors.

Latest Updates and News (2024–2025)

For the Financial Year (FY) 2024-25, the Income Tax Department has made several key updates to the TDS (Tax Deducted at Source) filing process, particularly concerning rent payments. These changes aim to improve transparency and efficiency in reporting TDS deductions, ensuring that both tenants and landlords comply with tax regulations in a more structured manner.

One of the major changes introduced is that tenants now have stricter requirements for reporting TDS on rent payments. Tenants are required to upload accurate details regarding the TDS deductions made, and this information will be available for verification by the landlord. This new measure ensures that landlords can promptly identify any discrepancies or errors in the TDS details submitted by tenants. It also reduces the possibility of disputes or confusion between tenants and landlords, helping both parties stay in compliance with the tax laws.

This stricter process also ensures that TDS is reported accurately and promptly, minimizing the risk of errors that could lead to penalties or audits. Additionally, the Income Tax Department will now use advanced data analytics and monitoring systems to track TDS compliance, making the entire process more streamlined and efficient.

TDS on Rent Increased for Commercial Property:

As part of the latest budgetary updates for FY 2024-25, the government has raised the TDS rate on rent payments for commercial properties. The TDS rate for rent on commercial properties has been increased, which will directly impact both tenants and landlords who are involved in commercial leasing agreements.

The higher TDS rate on commercial rent payments means tenants will have to deduct a larger portion of the rent paid to landlords as tax. For landlords, this means that the TDS deducted will be higher, which can affect their cash flow management if the tenant does not promptly deposit the TDS with the government. Additionally, landlords may face a situation where they are required to follow up with tenants to ensure that the increased TDS is being properly reported.

From a tax planning perspective, tenants and landlords involved in commercial leases will need to account for the increased TDS deduction in their financial planning, especially if it impacts cash flows or rental agreements. Both parties should be aware of the new TDS rates and incorporate them into their agreements to ensure smooth and compliant transactions.

TDS for Landlords Not Provided Form 16A:

One common issue faced by landlords in the TDS filing process is the non-issuance of TDS certificates (Form 16A) by tenants. In cases where the tenant fails to provide the necessary Form 16A, landlords can still claim the TDS credit by referring to the data available in their Form 26AS, which is an online tax credit statement provided by the Income Tax Department.

The Income Tax Department has clarified that in the absence of Form 16A, landlords are allowed to raise a request with the department to verify the TDS details based on Form 26AS. This clarification makes it easier for landlords to claim the tax credit even if they do not receive the certificate directly from their tenants. The process of verifying TDS records using Form 26AS provides a reliable alternative, ensuring that landlords are not penalized due to missing or delayed TDS certificates.

For landlords, it is important to keep track of Form 26AS and verify the TDS credits reflected in their accounts. If discrepancies are found, they can approach the tax authorities for clarification or corrections. Landlords should also ensure that tenants are aware of their responsibility to provide Form 16A on time, which can help prevent any delays or issues in claiming TDS credits.

More Focus on TDS Compliance:

The Income Tax Department has significantly ramped up its efforts to enforce TDS compliance for FY 2024-25, especially concerning the accurate reporting of rental income. The department is taking a more proactive approach in ensuring that both tenants and landlords comply with TDS regulations, and as a result, more notices are being sent to ensure the accuracy of TDS records.

One of the key strategies for increasing TDS compliance is the implementation of automated systems that monitor TDS deductions and payments in real-time. These systems allow the Income Tax Department to cross-check the TDS deductions reported by tenants against the details available in the department’s database. If there are discrepancies, the department is likely to send notices to both parties, requesting clarification or correction.

This increased scrutiny means that landlords and tenants alike need to be more diligent in maintaining accurate TDS records. Tenants must ensure that TDS deductions are correctly made and reported, while landlords must verify that the amounts reported by tenants align with the actual deductions. As part of this compliance push, the department may also conduct audits or reviews of high-risk cases to ensure that the TDS filing process is transparent and accurate.

Additionally, the department is encouraging taxpayers to use e-filing platforms like the Income Tax Department’s portal and other third-party platforms like TaxBuddy to file their TDS returns correctly and avoid any potential issues. Landlords should stay up-to-date with these regulations to avoid penalties or unnecessary complications, while tenants must be prompt in making the required TDS deductions and submitting accurate details.

Conclusion

TDS on rental income is an essential aspect of tax compliance for both landlords and tenants. Common errors in reporting TDS can lead to discrepancies in ITR filings, delays in refund processing, and potential tax notices. However, these errors can be corrected by verifying TDS details, ensuring accurate reporting in Form 26AS, and collaborating with tenants to rectify any mismatches. As we move into FY 2024-25, it's crucial to stay updated on TDS-related changes and ensure all information is accurately reflected. For smooth and error-free filing, platforms like TaxBuddy can assist you with TDS verification, error detection, and filing the correct ITR. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.

FAQs

Q1: What should I do if the tenant has not provided me with a TDS certificate?

If the tenant has not provided you with a TDS certificate, you can still claim the TDS credit by referencing your Form 26AS. Form 26AS is an annual statement that shows all the taxes deducted on your behalf, including TDS. If the TDS is missing from this statement, you should reach out to the tenant and ask for Form 16A, which is the TDS certificate for rental payments. If discrepancies persist, you can raise a query with the Income Tax Department to resolve the issue.

Q2: How can I ensure that the TDS deducted by my tenant is correctly reflected?

To ensure that the TDS deducted by your tenant is reflected correctly, you should regularly check your Form 26AS. Form 26AS is a consolidated tax statement, which lists all TDS deductions made on your behalf. If the tenant’s TDS is not reflected or appears incorrectly, contact the tenant to rectify the TDS details, or request them to file a revised TDS return.

Q3: Can I file my ITR if there is a TDS error?

Yes, you can file your ITR even if there is a TDS error. However, it is crucial that the error is corrected before you submit the return. If you have already filed and realize the mistake afterward, you can file a revised return once the discrepancies in the TDS details are rectified.

Q4: How do I file a revised return to correct TDS errors?

To file a revised return, visit the e-filing portal and select the "Revised Return" option under the ITR filing section. You will need to enter the acknowledgment number of the original return and provide updated TDS details. Once the correction is made, submit the revised return, and it will replace the original filing.

Q5: What happens if I miss reporting TDS on my rental income?

If you miss reporting TDS on your rental income, it can lead to discrepancies in your tax calculation, resulting in delayed refunds or potential scrutiny by the tax authorities. Failure to report TDS correctly can also result in penalties or interest charges. Ensure that all TDS credits are reported accurately to avoid these issues.

Q6: Is TDS applicable on rental income from both residential and commercial properties?

Yes, TDS is applicable to rental income from both residential and commercial properties. However, the TDS rate might differ depending on the type of property. For instance, the TDS rate on rental income from commercial properties could be higher than that for residential properties, reflecting different tax treatments.

Q7: What is the TDS rate on rental income?

The TDS rate on rental income is typically 10% for residential property. However, this rate may vary based on the circumstances, such as the type of property (residential or commercial). For commercial properties, the rate could be higher, and in some cases, a higher TDS rate may apply depending on the payment structure or recipient's status.

Q8: Can I correct TDS mismatches after filing my return?

Yes, you can correct TDS mismatches even after filing your return. You can file a revised return under Section 139(5) of the Income Tax Act before the end of the assessment year. The revised return allows you to update any incorrect TDS information that may have led to discrepancies in your original filing.

Q9: How do I claim TDS credit on rental income?

To claim TDS credit on rental income, ensure that the TDS is correctly reflected in your Form 26AS and matches the TDS certificate provided by your tenant. If everything is accurate, you can claim the TDS credit by including the relevant details in your ITR, which will be accounted for in your tax calculation and refund process.

Q10: What happens if my TDS details are incorrect in Form 26AS?

If your TDS details are incorrect in Form 26AS, you should immediately contact your tenant to rectify the TDS information in their return. If the issue persists, you can raise a query with the Income Tax Department to resolve the discrepancy. It’s essential to have accurate TDS details in your Form 26AS to claim the correct credit during your tax filing.

Q11: Can I claim TDS credit if the tenant did not deduct TDS?

If the tenant has failed to deduct TDS on your rental income, you cannot claim the TDS credit for the tax that should have been deducted. In such cases, you will be required to pay the full tax on your rental income, and you may be subject to penalties for non-compliance. You can also seek guidance from the Income Tax Department to resolve any non-deduction issues.

Q12: What is the penalty for not filing TDS correctly?

Failing to file TDS correctly can lead to penalties, including interest on any unpaid taxes and fines for incorrect or incomplete reporting. Penalties can also apply if the TDS return is not filed on time or if the deducted TDS is not remitted to the government. To avoid these penalties, ensure that TDS is deducted, reported, and remitted correctly in a timely manner.