Nov 2017

TDS on Rent not including service tax

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Whether TDS on Rent 194-I  including service tax or not ?

Rent is to be deducted by all person on payment of rent except huf and individual whose sales is less than limit specified in section 44AB(tax audit)(60 lacs for business 15 lac for professionals) (1 Crore for Business, 50 lac for Profession wef FY 2016-17)

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,

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

For more clarification : Tds on service tax u/s 194-J on professional and technical fees

what are implications of clarification ?

Clarification has been issued in such a manner like that this issue were never an 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 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

Question: whether the TDS is to be charged on 100000/- Lac (Professional Fees) or on 110300/- (Professional Fess + Service Tax)

Answer: Well in case of rent the text in ITA is ‘any INCOME’ paid to any person…so now ST is NOT income so we exclude ST while leving TDS…whereas in case of professional services the text is ‘any SUM’ paid to any person….’any SUM’ includes ST…dats y we deduct TDS inclusive of ST. i hope it wil make things clear for u. Take care.


7 Comments on TDS on Rent not including service tax

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  4. hello u need to do a correction. There’s has been an amendment for section 44AB : its Rs.60 lac for business and Rs.15 lac for individual.

    • Corrected

      Thanks Reader. !!!

    • Hello sir, it means TDS will not be deducted on ST in case of rent of P&M, Equipment, furniture & fittings?
      e.g. machinary rent 190000 & ST@10.30 19570. so we will deduct TDS only on rent amout i.e 190000?

      • Yes Naveen. TDS only be deducted on Total amount less Sericve Tax charged.

        New Amendment from PY 2012-13 : Rent is to be deducted by all person on payment of rent except huf and individual whose sales is less than limit specified in section 44AB(tax audit) (1 Crore for Business, 25 lac for Profession)

        On your case, TDS is deductable only for Rs 190000.

        Thanks. Stay tune in Carocks.!

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