On December 24, the MoF notified that the ministry would verify the rental income declared against the information gathered during the year from relevant stakeholders with the rental information collected during the physical verifications conducted by the regional offices.
It also stated that the regional revenue and customs offices (RRCO) will carry out a physical verification of the rental income declared at any point of time after the tax filing.
Finance Minister Namgay Tshering said that the incidence of house owners not declaring or under-declaring the rental income received for the year has been increasing over the years.
“There was a mismatch between the tenants’ and house owners’ income declarations,” he added. Lyonpo said that it is a reminder to fulfil their moral duty to the State.
He added that the ministry would conduct a random cross checking once the tax documents are filed. If someone has breached the law, the provisions of income tax will apply.
However, it will be difficult to verify the rental income for each individual house owner.
The Department of Revenue and Customs made it compulsory for the property owners to issue rent receipts to tenants to detect the actual amount of rent in 2019 as required under Rule no. 35 (2) (c) Part III of the Rules of the Income Tax Act 2001.
However, most tenants do not get receipts from their house owners. It was found that many house owners manipulated the amount of rent collected in their annual income tax return.
The MoF urged property owners to continue issuing money receipts, not only for tax purposes but also to facilitate proper accounting of the income at the time of tax filing.
Lyonpo said that evidence of rental receipts is necessary. If the tenants paid digitally, the ministry will retrieve the information from the banks.
Lyonpo said that if the tenants and house owners try to collude, there are ways to detect the collusion.
The notification also requested that the property owners declare actual rent collected, and if there are any waivers or discounts granted, to maintain proper documentary proof with signatures of the tenants for submission to the RRCO at the time of filing.
Also, it stated that the RRCO should be informed in writing about vacant properties within 15 days.
Anyone found concealing or giving false details of any particulars of the rental income must pay a fine equivalent to two times the tax amount evaded in addition to the tax due, as per the Income Tax Act, 2001.
One tenant, Ugyen Dorji, said people should be honest, especially the house owners, who have been given huge loan repayment deferment and other benefits during the pandemic.
“There are house owners who have given concessions on rentals to ease the financial pressure on their tenants, and there are those who did not. Some have increased the rent,” he said, adding that those who did not should not tamper with rental receipts or force the tenants to do the same to evade taxes.
Another tenant, a civil servant, said that it is the right moment for the government to make it compulsory for the house owners to produce receipts while filing taxes to ensure there is no leakage of tax money.
“Since the receipts of the owners and tenants are not cross-checked, there might be manipulation. Owners may have two receipts and provide receipts with a lower amount for filing,” he added.