@ Lijo Philip :

Originally posted by : LIJO PHILIP
	Sir / Madam, Please solve the query regarding tax impact on this transaction:- Mr. A is an employee of XYZ Limited. He is staying with his family in a rented house (Leave & License agreement) and reimburses a monthly rent of Rs. 17000. Owner of this house is Mr. & Mrs. B (husband & wife) both. Now XYZ Limited has made two different agreement on behalf of Mr. A with Mr. & Mrs. B with rent to be paid equally Rs. 8500. Query :- 1) Can XYZ Limited make two different agreement for one employee Mr. A just because he can save TDS on monthly reimbursement (Rent) ? 2) Is this agreement a Void in nature ?

The answer to your 1st question is Mr A is not subjected to TDS at all if the property is taken on rent for personal use as in residential purpose by Mr A.

If the purpose of making 2 separate agreements was to save on tds then its better that a single joint agreement is only made having mentioned payment details separately for each of them.

Making 2 agreements will only increase paper work and stamp duty expenses. However it can nowhere be considered as void in nature. It is very much valid

Wrt to this query

"Sir / Madam, Please also guide me in this case regarding tax impact on this transaction :- Mr. R is an employee of ABC Limited. He is working in Pune and provided an accomodation by company (free) and he is claiming a rent of Rs. 25000 monthly (3 lakh yearly) for the his family who is staying in Delhi on Rental house. He first pays the rent out of his pocket and then claims (reimburses) from the Company. Query :- 1) On this transaction TDS will be applicable as the yearly rent is more than Rs. 180,000 ? 2) If yes, then please suggest how the TDS will be deducted (point of taxation), will it be deducted from the Owners Income (House Owner) or will this be treated as an income of Mr. R and TDS will be deducted from Mr. R."

For this I would say that normally a company does not offer rent free accommodation and house rent allowance both. But if it does, tds on rent still won't be applicable as it is for personal use and licensee i.e Mr R is an individual

However company will consider both as your salary income; rent free accommodation as perquisite and hra as your allowance and will deduct tds on salary income
 

@ Moxesh Doshi:

"Section 194I says that TDS to be deducted when rent is paid to any person in excess of Rs.1,80,000. The above limit shall be calculated asset wise assessee wise."
I differ slightly from your opinion wrt assetwise calculation of the limit. It is no deduction shall be made under section 194I 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 

Which means the limit has to be calculated only payee wise and not both assetwise and payee wise.

And wrt this statement, I could not get it properly as to what you meant.

" I think there is nothing to do with nature of agreement made between the Company and The Owners for the purpose of deducting TDS. If the Rent is being credited equally in their seperate accounts, Company is not liable to deduct TDS in this case. "

Your last statement in it is confusing me as in with what respect did you say company is not liable to deduct tds?

If you mean it wrt rent related tds I.e Company to not deduct TDS u/s 194I, then its ok as company is just making an agreement on behalf of A and hence company is not a contracting party to rent. It is A and the house owner, tds deduction are to be seen from point of view of A. So I agree if you mean the last statement in this context.

However company will deduct tds on salaries and will consider reimbursement as part of salary within named hra