Income Tax Rules on Rent: Nowadays, most people pay their house rent in cash. Did you know that this habit could put you at significant risk? You could receive a notice from the Income Tax Department. Receiving a notice could result in significant losses. The Income Tax Department also sends notices only when there’s a change in your expenses. If no cash source is found, you could come under the Income Tax Department’s radar.
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What Experts Advise
Experts advise paying house rent via check, bank transfer, or UPI so you have information about your source of income. If you receive a notice for any reason, there’s no need to panic. You just need to keep a few documents handy: the rent agreement, payment receipts, and the landlord’s PAN card information. This will prove that the rent you paid is valid.
TDS Rules on Rent Over ₹50,000
If the monthly rent of a house exceeds ₹50,000, the tax law requires TDS to be deducted. In this case, identification information of both the landlord and tenant must be submitted. Failure to comply with this rule could lead to future legal troubles.
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Benefits of Digital Payments
Digital payments not only prevent income tax notices but also safeguard against future legal disputes. Online payments increase transparency and ensure that there are no discrepancies between your expenses and income. This ensures financial security and helps prevent tax evasion.