Govt has tightened several rules governing real estate to step flow of black money in the sector
For the past four-five years, the income tax (I-T) department has been consistently tightening its noose around realty transactions. From making registration of rental agreements with PAN details of both the tenant and owner mandatory to the latest — deduction of TDS (tax deducted at source) on monthly rental of Rs 50,000 and above — rules have been tightened significantly to ensure black money isn’t generated from this sector.
The Central Board of Direct Taxes’ (CBDT’s) latest salvo targets people who claim significant amounts as house rent allowance (HRA), sometimes with the help of false documents. From June onwards, those who pay monthly rental of Rs 50,000 need to deduct 5 per cent TDS and deposit it with the IT return department.
This TDS trail will serve as proof for people claiming high HRA. The provision was introduced in the Finance Bill, 2017. “The idea behind the provision is to make sure taxpayers don’t claim fake HRA exemption and also to trace those who don’t disclose their rental income. When a trail is created, it will be possible to detect such individuals in the system,” said Kuldip Kumar, partner and leader, personal tax, PwC India.
Interestingly, the government has also made the provision that if multiple tenants stay at the same place and pay total rent of Rs 50,000 and above per month, they need not deduct TDS. But, all tenants’ names should be in the registered agreement with the owner. On the other hand, if the entire rent is paid by a single tenant and the others are merely paying that person, then TDS is applicable. Clearly, CBDT has given relief to people staying together, especially in big cities and paying high rent to stay near their office or for any other reasons…read more…