No TDS on Service Tax component

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K V Subba Rao (Querist)
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09 May 2008 In its Circular No: 4/2008 dt 28th Apr 08 (https://www.caclubindia.com/news/2008/5/clarification_on_tds_on_service_tax_on_rent_u_s_194_i.asp), the CBDT made it clear that "Service tax paid by the tenant does not partake the nature of income of the landlord. The landlord only acts as a collecting agency...Therefore...tax deduction at source under section 194-I ...would be required to be made on the amount of rent paid/payable without including the service tax".

The same logic applies for payments of several kinds attracting TDS provisions of Sec 194-C. For instance, we are paying Service Tax for Software Maintenance. Since the annual payment exceeds the limit prescribed u/s 194-C, we are at present, affecting TDS on Gross amount, that is, Software Maintenance including Service Tax.

Taking a cue from the above Circular, shall we restrict TDS to the Software Maintenance, that is, exclude Service Tax. Please advise

Reetika Goel

Reetika Goel (Expert)
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09 May 2008 Since there is notification by CBDT specifically for TDS u/s 194I, the treatment for other types of payments shall remain the same as followed in practice. At least till the time CBDT gives specific notification regarding treatment of other type of TDS.

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