TDS ON RENT 194-I NOT INCLUDING SERVICE TAX

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A long awaited clarification regarding tds on payment of service tax on rent u/s 194-I has been Issued by the CBDT.Details about the issue is given hereunder

Brief about section 194-I

  • Rent is to be deducted by all person on payment of rent except huf and individual who's sales is less than limit specified in section 44AB(tax audit)(40 lacs for business 10lac for professionals)
  • Rent means any payment by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of
    • (a) land; or
    • (b) building (including factory building); or
    • (c) land appurtenant to a building (including factory building); or
    • (d) machinery; or
    • (e) plant; or
    • (f) equipment; or
    • (g) furniture; or
    • (h) fittings,
  • section is applicable even in case of payee is owner or not.
  • Rate of tds is(upto payment made on 30.09.2009)
    • For use of any machinery or plant or equipment:10%
    • For other assets :in case of
      • Payee is Individual or Huf:15%
      • other case:20%
    • Rate of tds is( payment made on or after 01/10/2009 as per Budget 2009)
      • For use of any machinery or plant or equipment:2%
      • For other assets :10%
      • No need to add surcharge and Cess for resident deductee
    The rate of TDS wil be 20 per cent in al cases, if PAN is not quoted by the deductee w.e.f. 1.04.2010
  • Tax is deductible only if amount of rent paid is more than 12oooo

what was the issue

  • whether the service tax paid on rent of immovable property to landlord is to included while deducting tax at source.
what is clarified

and now clarification by CBDT has been issued that service tax should not be included while deducting tax at source on rent paid to landlord.

what are implications of clarification

Clarification has been issued in such a manner like that this issue were never a issue at all.what is wording please look

"Service tax paid by the tenant doesn't partake the nature of income of the landlord."

  • By this the CBDT has indirectly fixed a relation between Income and TDS whether it has been fixed intentionally or unintentionally,but this clue/wording can be used for other tds provisions by the assessee in his defense while not deducting tds on reimbursement of taxes so we can draw a conclusion that if person is getting mere reimbursement of taxes than tds should not be deducted.
  • For calculating the amount of 120000 now service tax amount should be excluded ,suppose if a person pay rent of rs 108000 to payee and 12.5% service tax on rent i.e 13500.in this case though total amount paid is 121500 but tds is not deductible after clarification as rent amount is only 108000 and less than 120000 prescribed in the section 194-I
Can we apply this clarification on section 194-J also

Update : Department has issued a clarification vide circular no 01/2014 dated 13.01.14 that in view of Rajasthan High court judgement TDS under section 194J shall not be applicable on service tax portion if that is indicated separately as per term and condition of agreement between payer and payee . (read Circular 01/2014 dated 13.01.2014 )


Update:05.07.2008:A clarification regarding applicability of circular 4/2008 has been issued by the dept to bombay chamber of commerce and clarified that section 194 j is not covered under circular 4/2008 .hence tds should be deducted on service tax under section 194J(professional fees)

  • Though the clarification has been issued for the section 194 -I only but ratio of the clarification can be applied in the case of 194-J also as in the case of section 194 -J also"Service tax paid by the client doesn't partake the nature of income of the professional"and "The professional only acts as a collecting agency for Government for collection of service tax."hence the tax should be deducted only on the amount of fees u/s 194 -J without including the service tax in it.

full text of the circular

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Clarification on deduction of tax at source (TDS) on service tax component on rental income under section 194-I of the Income-tax Act


CIRCULAR NO. 4/2008, DATED 28-4-2008



Representations/letters have been received in the Board seeking clarification as to whether TDS provisions under section 194-I of the Income-tax Act will be applicable on the gross rental amount payable (inclusive of service tax) or net rental amount payable (exclusive of service tax).

2. The matter has been examined by the Board. As per the provisions of 194-I, tax is deductible at source on income by way rent paid to any resident. Further rent has been defined in 194-I as

rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,-

(a) land; or

(b) building (including factory building); or

(c) land appurtenant to a building (including factory building); or

(d) machinery; or

(e) plant; or

(f) equipment; or

(g) furniture; or

(h) fittings,

whether or not any or all of the above are owned by the payee;

3. Service tax paid by the tenant doesn't partake the nature of income of the landlord. The landlord only acts as a collecting agency for Government for collection of service tax. Therefore it has been decided that tax deduction at source (TDS) under sections 194-I of Income-tax Act would be required to be made on the amount of rent paid/payable without including the service tax.

4. These instructions may be brought to the notice of all officers working in your region for strict compliance.

5. These instructions should also be brought to the notice of the officers responsible for conducting internal audit and adherence to these should be checked by the auditing parties.



[F.No.275/73/2007-IT(B)]

please comment

Update : Department has issued a clarification vide circular no 01/2014 dated 13.01.14 that in view of Rajasthan High court judgement TDS under section 194J shall not be applicable on service tax portion if that is indicated separately as per term and condition of agreement between payer and payee.(read Circular 01/2014 dated 13.01.2014 )

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SECURITIES (MNP) (TDS)2007-08 ` 01.07.12 01.09.2008 01.10.2012 06.07.2009 07.08.2012 1 PERCENT EXCISE ITEMS LIST 1 sep 1% excise 10 year nsc 10(10C) 1000 court cases judgements supplied to ITO 1000 rupee note 11-2008 11-2010 130 items 14.08.2008 15 august 150 Rs coin 15g 15h 18-12-2009 192(1A) 192A 194 I 194A 194c from 01.10.2009 194H 194j 194LC 1981-2007 2% cst 2% excise 2004 2008 2008-09 FY 2010 206AA 234A 234B 234C 234c interest calculator 234E 23AC 23ACA 23B 24C 24q annexure II 25 paisa coin 271(1)(c) 271B 271H 272B 27A 280 280 challan 281 282 283 29 AUGUST 29.04.2010. 29/08/2008 29/2008 service tax 2g meaning use 3 idiots 30 MARCH 31st March 32-2010 33 of 2009 35(2AA) 35(2AB) 3CD 3g meaning use 40(b) 43B 44 AB EXEMPTED INCOME 44AA 44AB AGRICULTURE 44AB new limit 44AB NON RESIDENT 44ad 46/2012 45/2012 49C 5 day week 5 years post office deposit 5/2011 50 paisa coin 54b 54EC 54ee 54f 54gb 5th paycommission punjab 6 % excise 6 crore advance limit 6/2005 69/2010 6th cpc 6TH PAY COMMISSION 70% of pan etds 7th Central Pay Commission 8 tips to save tax 80C 80ccc 80CCD 80cce 80CCF 80CCG 80d 80DDB 80EE 80G 80GG 80GGA 80GGB 80ggc 80tta 80U 85% of pan etds 86/2008 DATED 13-08-2008 87A rebate 89(1) 89(1) relief calculator 9.5 % rate for private epf 92E 95% of pan etds 98 dated 04/01/08 aadhaar aakash tablet aam admi aar Aayakar Sampark Kendra abatement abolished ACCOUNT PAYEE DRAFT Accounting ACCOUNTING CODE accounting code for services ACCOUNTING FOR GOVT GRANTS accounting standards ACES ADD IN Add-Ins additional relief in budget 2010 adjustment of advance FBT with advance Tax advance rullings advance salary ADVANCE TAX CALCULATOR advance tax challan ADVANCE TAX CUT OFF AMOUNT ADVANCE TAX DATES AFFIDAVIT AG Projects Technologies Ltd RT age 80 addition pension aibea wage revision aibea wage revision latest news aiboa aiboc aiboc wage revision AIG AIR airline ticket booking tds airlines all is well allowances allownces alphabet of inspiration alteration on check allowed alternate minimum tax AMENDED 3CD amendment in companies bill 2011 amendment in gratuity act 2010 amendment in registration service tax AMENDMENT IN SERVICE TAX ON RENT amendment to finance Bill 2010 AMNESTY SCHEME 2007 amt Anna Hazare anna hazzare bill vs govt lokpal bill appeal apply for new pan card against old pan card aqb arbitration arrears of salary arrears of sixth pay ARRERS TAX AS-12 ASBA assessee in default ASSESSMENT REOPENING ASSESSMENT YEAR 2008-09 REFUND atm atm 100 per day atm cash without card atm tips atm wrong debit audit cases itr filing audit limit enhanced Audit Questionaire AUDIT REPORT AUS VS IND.INDIA VS SL Automated teller machine AUTOMATION OF CENTRAL EXCISE AND SERVICE TAX ay 2010-11 bad debts Bank Bank account bank audit bank audit 2012 bank charges BANK SALARY bank strike 06/07/09 and 07/07/09 banking law amendment banknotes banks npa provisioning BARE ACT bare rules BASE RATE BY BANKS bcct BIMAL JAIN biometric pan card black and white form not 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capital asset capital formation huf Capital gain capital gain account scheme 1988 CAPITAL GAIN INDEX capital gain on repayment of loan capital gain on tenancy rights capital goods capital revenue CAPITAL SUBSIDY CAR LOAN RATE INCREASE carry forward of losses in late return cas cash flow statement CASH PAYMENT DIS ALLOWANCE CASH PAYMENTS EXCEEDING 20000 CASH SUBSIDY cbdt cbec CBI ARRESTED centeral sales tax rate CENTRAL PAY COMMISSION CENTRAL PROCESSING CENTER CENTRALISED PROCESSING OF RETURNS Cenvat CENVAT Credit Rules cgas 1988 challan challan 281 CHALLAN 289 challan correction challan Form 17 CHALLAN STATUS INQUIRY change change in cst rate change in excise duty rates CHANGE IN PAN ADDRESS CHANGE IN PAN DATA change in tds rates in budget changes CHANGES IN SERVICE TAX ACT changes in new itr forms CHANGES IN TDS CHARGES ON CASH PAYMENT OF CREDIT CARD BILL charitable organisation check name from PAN check tds deducted online Cheque cheque bounce cheque payment before due date cheque tender date /realisation date Cheque Truncation CHEQUE VALIDITY child care leave CHILD DEPENDENT PREMIUM CHILD MARRIED PREMIUM child plan childeren name children education allownces chip based atm card cibil cibil for companies CII 2007-08 CII 2008-09 CII 2010 cii 2012-13 CII2011-12 cin CIRCULAR 3/2010 DT 2.03.2010 CIRCULAR 8-2010 CIT v. Emilio Ruiz Berdejo (2010) 320 ITR 190 (Bom.) cloning of atm card clubbing of income COLLECTION CHARGES COLOR SCHEME COMMISSION ON SMALL SAVINGS common error in 2009-10 common error in itr 4-5-6 compa companies bill 2012 COMPANIES RATE COMPANY BILL 2011 company deposit Company Law Settlement Scheme COMPANY REGISTRATION complusory payment of taxes Composition scheme service tax COMPUTER AS FAX MACHINE computer sytem at ito office CONCEPT PAPER configure yahoo mail in outlook express consolidate account statement construction purchase of house Consultancy Service Consumer Price Index continues services CONTRIBUTION TO NEW PENSION SCHEME CONTRIBUTORY PENSION FUND CONVERT FIGURES INTO WORD EXCEL COPARCENER CorpMcash corporation bank correction etds CORRECTION IN PAN DATA correction in section CORRECTION RETURN CORRECTION RETURN.ETDS cost accounting cost audit cost inflation index cost inflation index 2012-13 COST INFLATION INDEX FY 2010-11 COST INFLATION INDEX FY 2011-12 COST OF INDEXATION CALCULATOR court case in entry tax punjab cpc phone number cpf Credit card CREDIT CARD BILL PAYMENT ICICI BANK credit scores cricket team critical illness CROSSED DEMAND DRAFT CRR crr reducred CS DIVESH GOYAL CST CST 3% OR 2 % cst act 1956 cst form CST FORM STATUS cst rate changed CST REDUCE RATE ctt currency CURRENCY TRADING ILLEGAL custom custom changes in budget cusual leave DA MERGE da rate da rate 01.07.2012 da rate january 2013 da rate july 2012 da rate wef 01.01.2012 date extension DDO ASK RENT RECIPT ddt dearness allowance Debit card DEBT EQUITY RATIO debt funds debt trap declared goods DEDUCTION 80C deduction for higher studies deduction on saving bank interst deduction u/s 80DD Deemed income of employee deemed services defective return defence officers defence pay defence pay scales DELAY IN FILING delete ledger in tally DELHI HIGH COURT demat deposit tax of two quarter in single challan depreciation depreciation on car depreciation on commercial vehicle. DEPRECIATION ON INTANGIBLE ASSETS depreciation rate depreciation rate 2009-10 DETAIL AFTER E FILLING DETAIL OF TIN Determination of value DIFFRENT TYPE OF TAXES digital signature din direct payment in bank account DIRECT SUBSIDY direct tax bill direct tax changes in budget direct tax code direct tax code 2009 Disability insurance discussion Paper distribution of salary dividend distribution tax dividend striping dnd do not call. document identification number document ientification number documents required for service tax registration domestic transfer pricing donation dot double taxation dow jones download download 89(1) relief calculator download direct tax code 2012 download form 16A download fvu download idfc INFRA BONDS FORM draft reply drawback rates dtaa dtc DUE DATE AY 2010-11 due date ay 2011-12 due date extended due date extended to 31.08.2012. due date for service tax return due date form 16 due date form 16a due date June due date march tax due date of return 2008-09 due date pf esi due date to deposit tds DUE DATES DUE DATES CALENDAR DUE DATES CALENDER DUE DATES INCOME TAX DUE DATES SERVICE TAX DUE FAMILY PENSION DULICATE PAN DUPLICATE TAN dvat e book Income Tax rules e book on service tax E ERA OF TAXES e filing do and don'ts e filing of audit report e filing processing status e filing software excel free e filing through evc e filing utilities e mode for notice to shareholder e notice to share holder e payment of epf E PAYMENT OF EXCISE DUTY e payment of income