Can Showing a Rent Agreement Help Employees Get a TDS Rebate? Seeking Advice

Dear All,

Greetings! I am working as an HR manager in an IT company in Indore. It is an owner-based company. I would like to know if a rebate on TDS can be given if an employee shows a rent agreement.

My company deducts TDS from employees' salaries every month, and some employees are claiming tax rebates on HRA. However, the management is not agreeing to this. My question here is - if I show my house rent agreement to the company, am I eligible to get a relaxation on TDS?

Regards,
Astha

Employees can give the declaration first about the rent payable so that monthly TDS can be calculated based on the self-declaration of the employee. They can submit the document proof in the month of January for that financial year. Only the original rent receipts will be considered as documentary evidence. If the rent is more than Rs. 1,00,000 per annum, then the PAN number of the owner should be provided.

Thank you so much, Mr. Saravanan. What can I do if management is not agreeing to this? I have already explained this rule to management, but they are still insisting on deducting TDS. Employees are feeling very demotivated because a certain amount is deducted from their salary every month as TDS, even after presenting the original rent agreement.

Can I get a copy of the rule or a link to the rule (Government) for the same?

Regards, Astha

HRA Allowance and Income Tax Deduction

HRA allowance provided by the employer to its employees to meet the cost of house rent is subject to deduction under section 10(13A) of the Income Tax Act, 1961, provided that the employee resides in a rental house not owned by them. However, as per CBDT Circular 8/2013, if the rent paid by the employee exceeds 1 lakh, the PAN number of the landlord must be given to the employer by the employee.

Since it is a statutory deduction, if the employee is eligible under section 10(13A) to avail of the deduction of HRA, the employer cannot deny providing this deduction and also cannot deduct excess TDS. Can you claim the HRA exemption if eligible while filing the income tax return if no HRA exemption was given by the employer?

Thanks & Regards,
V. SHAKYA
HR & Labour Laws Advisor

Let me suggest to you in simple words. I don't know whether your employer is not accepting only the rent receipts or all the investment proofs for 80C, 80D, and so on. If they accept everything except rent receipts, then you need to find the reason for this from them. If they don't accept all, then I think they are not taking the responsibility of collecting the document proofs for the TDS deductions.

As rightly suggested by @Shakya, your employees can claim the refund of all deductions during income tax return filing at the end of the financial year. I suggest you coordinate with the Finance Manager (if available) in your organization and seek his/her help to solve this issue. He/She may provide you with support to convince the management.

FYI, a rental agreement can be accepted by the employer for HRA exemption, after verification of the original document.

Dear All,

Thank you so much for your reply. @Mr. Saravanan, there is no financial manager in this company, there is only one accountant. And he does whatever the director (Owner) says. Even though I have shown all the rules to them, I don't know why they are not agreeing upon this.

Regards,
Astha