Renting of immovable property
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 April 2011
4 people jointly own a property which has been rented for Rs.12 Lacs a year. Though each one is getting only Rs.3 Lacs each but the total figure of rent is more than Rs.12 Lacs.
Will ST be applicable in this case ?
Should the joint owners get ST No. as an AOP ?
Please support your answer with relevant extracts from the finance act or court judjements..
Thanx..
4 people jointly own a property which has been rented for Rs.12 Lacs a year. Though each one is getting only Rs.3 Lacs each but the total figure of rent is more than Rs.12 Lacs.
Will ST be applicable in this case ?
Should the joint owners get ST No. as an AOP ?
Please support your answer with relevant extracts from the finance act or court judjements..
Thanx..
07 April 2011
ST IS NOT APPLICABLE IN THAT CASE
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 April 2011
"Please support your answer with relevant extracts from the finance act or court judjements.."
21 July 2025
Here's a detailed answer for your question on Service Tax applicability on joint owners renting out property:
Scenario Recap:
4 people jointly own a property.
Total rent received from tenant = Rs. 12 lakhs/year.
Each owner receives Rs. 3 lakhs individually.
Question: Is service tax applicable on Rs. 12 lakhs total or on individual shares? Do joint owners need separate service tax registrations or should they register as AOP (Association of Persons)?
Service Tax Law Context (pre-GST regime):
Taxable Service: Renting of Immovable Property
Under Section 65(105)(zzzz) of the Finance Act, 1994, "Renting of immovable property" is taxable under service tax if the aggregate rent from a property exceeds Rs. 10 lakhs per annum.
Individual Threshold Limit
The key question is whether the threshold applies on aggregate rent from property or on the individual receipt of each co-owner.
Relevant Circulars and Rulings:
Circular No. 137/9/2012-ST dated 30-11-2012 clarifies that
“Where the property is jointly owned by more than one person, the aggregate rent received from the tenant is to be considered for the purpose of service tax liability and registration.”
So, if total rent exceeds Rs. 10 lakh, service tax registration is required regardless of individual share.
Further, joint owners cannot avoid service tax liability by splitting rent among themselves to keep individual rent below threshold.
Registration and AOP:
If the owners are acting jointly as an Association of Persons (AOP) or Joint Ownership, they can register as an AOP under service tax to cover the joint liability.
If they do not register as AOP, each individual can be considered liable for their share of rent; but service tax department may consider the aggregate rent to determine liability.
Summary of the Position:
Rent Received (Jointly) Service Tax Applicability Registration
Below Rs. 10 lakhs No service tax No registration
Above Rs. 10 lakhs Service tax applicable on aggregate rent Registration required (either individually or as AOP)
Court Judgments:
There are limited specific judgments, but the Revenue’s stand is consistent with the circular quoted above.
In case of disputes, Courts tend to look at substance over form — if the owners act jointly and rent is received jointly, then aggregate rent is considered.
Conclusion for your case:
Since total rent is Rs. 12 lakhs (> Rs. 10 lakhs), service tax is applicable.
Joint owners should consider registering as an AOP for service tax to comply and discharge tax liability.
If they do not register as AOP, they may still be liable individually if their individual share exceeds the threshold, but Revenue may treat aggregate rent as taxable.
References:
Finance Act, 1994 - Section 65(105)(zzzz) (definition of taxable service: Renting of immovable property)
Circular No. 137/9/2012-ST dated 30-11-2012 (Service Tax on renting of immovable property)
Service Tax Manual, Chapter on Renting of Immovable Property
Legal principles of joint ownership and taxation in AOP under Service Tax Act.
Scenario Recap:
4 people jointly own a property.
Total rent received from tenant = Rs. 12 lakhs/year.
Each owner receives Rs. 3 lakhs individually.
Question: Is service tax applicable on Rs. 12 lakhs total or on individual shares? Do joint owners need separate service tax registrations or should they register as AOP (Association of Persons)?
Service Tax Law Context (pre-GST regime):
Taxable Service: Renting of Immovable Property
Under Section 65(105)(zzzz) of the Finance Act, 1994, "Renting of immovable property" is taxable under service tax if the aggregate rent from a property exceeds Rs. 10 lakhs per annum.
Individual Threshold Limit
The key question is whether the threshold applies on aggregate rent from property or on the individual receipt of each co-owner.
Relevant Circulars and Rulings:
Circular No. 137/9/2012-ST dated 30-11-2012 clarifies that
“Where the property is jointly owned by more than one person, the aggregate rent received from the tenant is to be considered for the purpose of service tax liability and registration.”
So, if total rent exceeds Rs. 10 lakh, service tax registration is required regardless of individual share.
Further, joint owners cannot avoid service tax liability by splitting rent among themselves to keep individual rent below threshold.
Registration and AOP:
If the owners are acting jointly as an Association of Persons (AOP) or Joint Ownership, they can register as an AOP under service tax to cover the joint liability.
If they do not register as AOP, each individual can be considered liable for their share of rent; but service tax department may consider the aggregate rent to determine liability.
Summary of the Position:
Rent Received (Jointly) Service Tax Applicability Registration
Below Rs. 10 lakhs No service tax No registration
Above Rs. 10 lakhs Service tax applicable on aggregate rent Registration required (either individually or as AOP)
Court Judgments:
There are limited specific judgments, but the Revenue’s stand is consistent with the circular quoted above.
In case of disputes, Courts tend to look at substance over form — if the owners act jointly and rent is received jointly, then aggregate rent is considered.
Conclusion for your case:
Since total rent is Rs. 12 lakhs (> Rs. 10 lakhs), service tax is applicable.
Joint owners should consider registering as an AOP for service tax to comply and discharge tax liability.
If they do not register as AOP, they may still be liable individually if their individual share exceeds the threshold, but Revenue may treat aggregate rent as taxable.
References:
Finance Act, 1994 - Section 65(105)(zzzz) (definition of taxable service: Renting of immovable property)
Circular No. 137/9/2012-ST dated 30-11-2012 (Service Tax on renting of immovable property)
Service Tax Manual, Chapter on Renting of Immovable Property
Legal principles of joint ownership and taxation in AOP under Service Tax Act.
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