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Discussion > Service Tax >

Service tax on Rental Income

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[ Scorecard : 64]
Posted On 22 May 2007 at 07:57 Report Abuse

I am receiving a rent Rs 1.00 lakh per month which is sharing equally myself and my wife. The property is in the joint name. The property has given letout for a software company. As per the latest provisions of service tax, the service tax will be levied on rentals. Please guide the service tax provisions, whether service tax applicable to this case? In case if required to pay service tax.. who has to pay the service tax i.e service provider or service receiver. Please clarify ?




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Nirav Shah

[ Scorecard : 13]
Posted On 22 May 2007 at 08:34

According to readings and findings in Service tax law & procedure latest addition, commercial rent is itself taxable hence aatrect 12.36% additional burden being service tax. i.e. if any body pays Rs.100/- per sq. feet or any way that person is liable to pay now Rs.112.36 being the rent of commercial properties. However the following properties are exempt from Service tax laws. 1. Vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbendary, mining purposes 2. Vacant land, of any type having no clear tytle for its use 3. Land used for Educational, sports, circus, entertianment and parking purpose 4. Building used solely for residential purpose 5. Building used for accomodation like hostel, hotels, boarding houses, holiday accomodation, tents, camping facilities 6. Renting of immovable property to/by a religious society/trust/body 7. Renting of immovable property to an educational body that does not includes commercial training/coaching centre. 8. Mixed use of land/building I.e. partly residential and partly commercial will be trreated as whole building/land commercial hence rental income will attract service tax @ 12.36% Exemption limit of Rs.800000/- is applicable i.e. only rent received or paid during the year more then Rs.8,00,000/- will attrect service tax @ 12.36%. Regards Nirav Shah

Ramanan R

[ Scorecard : 65]
Posted On 22 May 2007 at 08:36

You will not be liable as the gross rental collection will be only 6 Lakhs which is well below the 8 Lakh limit.(Provided you dont have other receipts subject to Service Tax) Moreover it is still too early since the statue has not decided how much of the rent will be subject to Tax. It is hoped that they give some allowances on the Gross rent

Himanshu Tandon

[ Scorecard : 144]
Posted On 22 May 2007 at 10:26

First of all you have to tell the actual title of the property is in whose name. if the title is in joint name then exemption of limit within 7 lakhs can be availed by you and your wife and if the title is on single name liability of service tax applicable on the person who is actual title owner. further quarry invited

Posted On 25 May 2007 at 04:54

In one of my client case,the property is in the name of 7 co owners who are individuals.The company(Say" A" Who is my client) has enter into a collaboartion agreemnt with the 7 co owners that the compnay will demolish the existing structure and build a new building.In that collaboration agreemnt it is mentioned that demolition and construction cost will be borne by the company and in turn company will get the half of the rent which that building will fetch after it is ready for letting out. Now the building is let out for commercial purpose.The tenant is paying the rent to the 7 co owners being the legal owner.These 7 co owners EACH are giving half of the rent to the company A .The total rent received by Company A is more than 8 lacs annually.My question is that whether the compnay A is liable for charging service tax to these co owners who are NOT actually the service recepient??Pl help me out!!

Posted On 25 May 2007 at 05:12

We are receiving a rent Rs. 1.50 Lakh per month. The property has given letout for a Factory space at Okhla. As the latest provision of service tax, the service tax will be levied on rent received. Please guide us what, we have to pay service tax on that amount, if so, what is proceduure and what is the limit?

Himanshu Tandon

[ Scorecard : 144]
Posted On 25 May 2007 at 06:59

Service Tax is on Rental Property and Service tax has to be charged from tanants commercial property. your quarry means that 7 owner of the property and builder is getting half portion of rent from each 7 owner. the best way that half portion of rent of each 7 owner should be directly be received by the Company A and if the receipt of the company is above 7 lacs in a year he then company has to take a registration under service tax and charge service tax from tenent on pay tax when he cross the limit 8 lacs in a financial year. in 7 owners case if their half share is below 7 lacs in a year he then they are not reqire to take registration.

Himanshu Tandon

[ Scorecard : 144]
Posted On 25 May 2007 at 07:00

Service tax is payble if gross rent received during the year is above 7 lacs and tax is payable after limit is crossed 8 lacs in a financial year. in case of rent it can be calculated on tips. If you are getting rent @ 1.5 Lacs per month on commercial property you have to charge service tax from tenent factory. if said factory is registered under Central Excise and paying Excise duty then he may take the CENVAT credit of said service tax paid by the them. the service tax is applicable from 01.06.2007 therefore registration has to be taken with in thirty days from the applicable of the service.
you cant hide the said amount as TDS must also be deducted on the said rent.

Posted On 28 May 2007 at 01:52

Thanks Himanshu for yr reply. The tenant is not ready to pay the share of Co a directly to A since Co A is not the landowner.Today i have read in ET today that exemption is there for revenue-sharing deals.In my case it is sharing of rent would it cover in this exemption??

Posted On 30 May 2007 at 12:21

The service tax has to be paid by the service providers.The law assumes that you have collected the service tax and therefore u can work backwards if yOur lessee does not pay the tax seperately.Whether u can demand the tax seperately from ur lessee is a matter of agreement enterd into by you and ur lessee.But u have to pay service tax.The co-owner issue need a clarification from CBEC. In my opinion if yiur wife has not invested her money in the propoerty,ypu may be treted as the person liable

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