TDS on Lease Rent

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2010 Dear Experts,

I would like to know if my company has to pay rent for 15 (March'09 to May'10) months,amount of 29000/-p.m. as per agreement so, whether it is required to deduct tds on 15 months payment or befurcate it with financial year.
secondly, i want to know on which amount tds has to be deducted, excess of amount or fully amount if it cross to limit of exemption.

if possible pls calculate the tds amount per month & year as per my data..

thanks in advance

CA Mihir Shah

CA Mihir Shah (Expert)
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14 July 2010 Hi, here is the provision of income tax act relating to TDS on Rent. hope it will help you.

Any person, not being an individual or a Hindu undivided family, who is responsible for paying to [a resident] any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, [deduct income-tax thereon at the rate of—
(a) two per cent for the use of any machinery or plant or equipment; and

(b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:]]

Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred and eighty thousand rupees] :

[Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such income by way of rent is credited or paid, shall be liable to deduct income-tax under this section.]

Explanation.—For the purposes of this section,—

[(i) “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;]
(ii) where any income is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.]

from the above it is clear that tds has to be deducted on the full amount and not the excess payment.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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14 July 2010 TDS will be deducted on Total Rent i.e on 15 Months.

Dedcutee can claim it in two financial year for which rent is related.
Please find the below circular regarding TDS On advance Rent.

—Circular: No. 736, dated 13-2-1996.

Problems faced by assessees in getting due credit for tax deducted at source - Number of representations have been received by the Board pointing out the problems being faced by the assessees in getting due credit for tax deducted at source under the provisions of section 199 in respect of tax deducted in terms of section 194-I of the Act. Such problems in getting due credit for tax deducted at source mainly relate to the following situations :

•(a) Tax is deducted at source under the provisions of section 194-I of the Act on advance rent pertaining to more than one financial year to be adjusted against future rent.
•(b) Subsequent to the deduction of tax at source on advance rent pertaining to one or more financial years :

(i) Rent agreement gets terminated/cancelled resulting into refund of balance amount of advance rent to the tenant.
(ii) Rented property is transferred by way of sale, lease, gift, etc., with tenant in occupation or otherwise
resulting into refund of balance amount of advance rent to the transferee or the tenant, as the case may be.
In the situation mentioned at (a) in para above, difficulty in getting due credit for tax deducted arises because the entire amount of advance rent does not accrue to the assessees as income in one financial year since the income from the property is taxed on the basis of annual letting value whereas the tax is deducted at source on the entire amount of advance rent pertaining to more than one financial year. Therefore, credit for entire amount of tax deducted at source is not allowed in terms of section 199 of the Act because the credit is to be given for the assessment year for which such income is assessable. Thus, the assessees do not get credit for the entire amount of tax deducted at source in the first assessment year, in which part of the advance rent is offered as rental income, on the basis of the certificate furnished under section 203 of the Act. Further there is a difficulty in claiming the credit in the remaining assessment years to which balance of advance rent relates in the absence of the certificate for tax deducted at source for these years.
In the situation as at (b) mentioned above, difficulty in getting due credit for tax deducted at source arises because rental income ceases to accrue to the assessees on account of termination/cancellation of rent agreement or transfer of the rented property subsequent to the deduction of tax at source on advance rent pertaining to one or more financial years. The credit is not given in the hands of the assessees in whose names certificate for tax deduction at source stands because there is no relatable rental income and, further credit for tax is not allowed to any person other than the person in whose name certificate for tax deducted at source has been issued. Thus, in such cases, even though tax has been deducted at source and paid to the Government, due credit for such tax deducted is not allowed.

The matter has been considered by the Board and it has been decided that credit for tax deducted at source shall be allowed to the assessees on whose behalf such tax has been deducted and to whom certificate for tax deducted at source has been furnished under section 203 as under :

•(i) In such cases as referred to in (a) above where advance rent is spread over more than one financial year and tax is deducted thereon, credit shall be allowed in the same proportion in which such income is offered for taxation for different assessment years based on the single certificate furnished for tax so deducted on the entire advance rent.
•(ii) In respect of the situation as at (b), credit for the entire balance of tax deducted at source, which has not been given credit so far, shall be allowed in the assessment year relevant to the financial year during which the rent agreement gets terminated/cancelled or rented property is transferred and balance of advance rent is refunded to the transferee or the tenant, as the case may be