Lease rentals
This query is : Resolved
15 April 2013
The Company is taking agriculture land on lease from the lessors.
The company is having only agriculture income. therefore, lease rental income of the lessors will be taxable or will be treated as agriculture income?
Kindly help
REgards
CA venkatesh Duvvuri
The company is having only agriculture income. therefore, lease rental income of the lessors will be taxable or will be treated as agriculture income?
Kindly help
REgards
CA venkatesh Duvvuri
15 April 2013
Section 2(1A) Agriculture income means -
(a)any rent or revenue from land, which is situated in India and is used fro agriculture purpose.
.
Lease Rentals are rent.
If you can not say it Rent tell it revenue.
- hence it's definitely agriculture income.
.
Section 10(1): exempts this income.
.
Section 2(1A) Agriculture income means -
(a)any rent or revenue from land, which is situated in India and is used fro agriculture purpose.
.
Lease Rentals are rent.
If you can not say it Rent tell it revenue.
- hence it's definitely agriculture income.
.
Section 10(1): exempts this income.
.
16 April 2013
Thank you sir
One more doubt that I have is that since, the income of lease rent will be exempt in the hands of the lessor, will company be required to deduct TDS on the same?
if the company is taking sub-lease of agriculture land than the income will be taxable or agriculture for lessor who has in turn leased the land from farmer?
Kindly guide sir,
Thank you
CA Venkatesh Duvvuri
One more doubt that I have is that since, the income of lease rent will be exempt in the hands of the lessor, will company be required to deduct TDS on the same?
if the company is taking sub-lease of agriculture land than the income will be taxable or agriculture for lessor who has in turn leased the land from farmer?
Kindly guide sir,
Thank you
CA Venkatesh Duvvuri
02 August 2024
### **TDS on Lease Rent**
**1. **Income Tax Act Provisions for TDS on Lease Rent**
- **TDS Requirement:**
- Under **Section 194-I** of the Income Tax Act, a company is required to deduct TDS on lease rent paid, even if the income is exempt in the hands of the lessor.
- The rate of TDS under Section 194-I for lease rent is **10%** (for rent paid to individuals/HUF/others) and **40%** (for companies).
- **Exemption of Lease Income:**
- If the income from lease rent is exempt in the hands of the lessor (e.g., agricultural income), it does not absolve the lessee (payer) from the responsibility of deducting TDS. The lessee must still deduct TDS as per the applicable rates and deposit it with the government.
**2. **Taxability of Sub-Lease Rent**
- **Taxability of Sub-Lease Rent:**
- **Agricultural Income:** If the original lease is for agricultural land and the lease rent received by the lessor (farmer) is treated as agricultural income, it is exempt from tax under Section 10(1) of the Income Tax Act.
- **Sub-Lease of Agricultural Land:** If the company sub-leases the agricultural land and earns rental income, this income is typically not classified as agricultural income. Therefore, the rental income from sub-leasing agricultural land is taxable under the Income Tax Act. The company would need to pay tax on this income, and TDS would be applicable on payments made to the lessor under the relevant sections.
- **Case of Original Lease:**
- If the original lessor's income is exempt due to agricultural status, it does not affect the taxability of rental income from a sub-lease arrangement. The sub-lease income will be taxable for the company.
### **Summary**
1. **TDS Deduction:** The company must deduct TDS on lease rent payments as per Section 194-I, even if the lease income is exempt for the lessor.
2. **Taxability of Sub-Lease Income:**
- Income from sub-leasing agricultural land is taxable in the hands of the company.
- The lessor's exemption status due to agricultural land does not impact the taxability of sub-lease rent received by the company.
### **Practical Steps**
- **For Lease Rent Payments:**
- Ensure TDS is deducted at the correct rate and deposited with the government.
- Issue Form 16A to the lessor as proof of TDS.
- **For Sub-Lease Income:**
- Report the sub-lease income as taxable income and ensure compliance with tax provisions.
- Keep accurate records of all lease and sub-lease agreements and related financial transactions.
**1. **Income Tax Act Provisions for TDS on Lease Rent**
- **TDS Requirement:**
- Under **Section 194-I** of the Income Tax Act, a company is required to deduct TDS on lease rent paid, even if the income is exempt in the hands of the lessor.
- The rate of TDS under Section 194-I for lease rent is **10%** (for rent paid to individuals/HUF/others) and **40%** (for companies).
- **Exemption of Lease Income:**
- If the income from lease rent is exempt in the hands of the lessor (e.g., agricultural income), it does not absolve the lessee (payer) from the responsibility of deducting TDS. The lessee must still deduct TDS as per the applicable rates and deposit it with the government.
**2. **Taxability of Sub-Lease Rent**
- **Taxability of Sub-Lease Rent:**
- **Agricultural Income:** If the original lease is for agricultural land and the lease rent received by the lessor (farmer) is treated as agricultural income, it is exempt from tax under Section 10(1) of the Income Tax Act.
- **Sub-Lease of Agricultural Land:** If the company sub-leases the agricultural land and earns rental income, this income is typically not classified as agricultural income. Therefore, the rental income from sub-leasing agricultural land is taxable under the Income Tax Act. The company would need to pay tax on this income, and TDS would be applicable on payments made to the lessor under the relevant sections.
- **Case of Original Lease:**
- If the original lessor's income is exempt due to agricultural status, it does not affect the taxability of rental income from a sub-lease arrangement. The sub-lease income will be taxable for the company.
### **Summary**
1. **TDS Deduction:** The company must deduct TDS on lease rent payments as per Section 194-I, even if the lease income is exempt for the lessor.
2. **Taxability of Sub-Lease Income:**
- Income from sub-leasing agricultural land is taxable in the hands of the company.
- The lessor's exemption status due to agricultural land does not impact the taxability of sub-lease rent received by the company.
### **Practical Steps**
- **For Lease Rent Payments:**
- Ensure TDS is deducted at the correct rate and deposited with the government.
- Issue Form 16A to the lessor as proof of TDS.
- **For Sub-Lease Income:**
- Report the sub-lease income as taxable income and ensure compliance with tax provisions.
- Keep accurate records of all lease and sub-lease agreements and related financial transactions.
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