Rental agreement in name of company

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A company can rent a guest house in its name if the director has the authority and the property is used for company purposes. However, without a formal sublet agreement between the director and the company, payments made for the guest house could be considered director's compensation, potentially leading to tax and TDS implications. Setting up a sublet agreement simplifies accounting, though tax considerations remain.

Pawan Sharma

Pawan Sharma (Querist)
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01 April 2024 company having guest house on rent and agreement is between director and owner. can be book guest rent and expenses related to guest house, in name of company.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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01 April 2024 Yes, if director has powers and guest house is used by the company.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 April 2024 in terms of booking the expenses, yes. But you need to account for the issue that without a sublet agreement between the director and company any payment made would still be a payment made on behalf of the director and should be added to his compensation. This may have TDS implications as well as tax implications for the director.

alternatively, you may sign a sublet agreement. The tax implications would still be same. but the accounting will be easier.

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