Municipal tax in case of renting of immovable property

This query is : Resolved

CA Sanjay Baheti (Querist)
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29 October 2012 in case of Renting of Immovable property the Municipal Tax paid to Municipal Corporation relevant to the Immovable property rented out, the same is to be reduced from Rental Income for the purposes of computing Service tax thereon.Now query is if such Property tax is to be paid by the occupier/tenant as per terms of Lease rental Agreement then whether such municipal tax paid/borne by occupier is still to reduced from the Rental Value for ST levy purposes or not.

Arun Kumar Singh

Arun Kumar Singh (Expert)
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29 October 2012 Property tax should be paid by the owner of the property. but it will be mentioned in the agreement that all tax in relation to property you will paid then this is your responsibility. Service tax will be exempt on government property used for rent.

CA Sanjay Baheti

CA Sanjay Baheti (Querist)
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29 October 2012 Mr. Arun Kumar Singh,

Thanks for reply.However I could not get your reply.Simply clarify the matter as to Property tax if any paid by the occupier/tenant then whether amount of such Municipal Tax is to be reduced from Rental value received from the Occupier or not for the purposes Service Tax Levy thereon.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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29 October 2012 Inference from the 1st proviso to notification 24/2007 dated May 22 , 2007 is that deduction is for municipal taxes paid by the landlord meaning thereby if it is paid by the tenant, gross value of the rent can be assessed under service tax.

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