Service tax on rent for jointly held commercial property

This query is : Resolved

Abhinav Jhunjhunwala (Querist)
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27 June 2012 Dear Experts,

I need your expert advice on the service tax liability for rental income from jointly held commercial property.

My mother and uncle are joint holders of a commercial property with Rs. 14.4L p.a. as rent EACH.
The property tax paid is Rs. 1L each p.a.

The tenant is running a sports lounge (bowling, snooker with dining facility).

Please advise on the service tax liability and also the procedure to pay the Service tax.
This is the first time anyone in our family is paying Service Tax on rent and have no clue what all needs to be done for paying it.

RENGARAJ R.K

RENGARAJ R.K (Expert)
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27 June 2012 Service tax is payable on this transaction. You have to apply for a service tax registration when once your rental income crosses 9 lakhs. There are two views:

1) Both have to apply for PAN card on the basis of 'Association of persons", Service Tax RC can be obtained and start paying Service tax after availing first 10 lacs. You can also deduct the municipal taxes paid on the property for calculating the taxable turnover.

2) If the rental agreement is made by sharing rental income by both the individual the individual income is only below taxable turnover and hence there will no be service tax liability.

Abhinav Jhunjhunwala

Abhinav Jhunjhunwala (Querist)
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16 September 2012 Dear Rengaraj,

Thank you for your response and expert opinion.

Please find below some more details pertaining to my previous query:

1. The said property is jointly owned by my mother and uncle, registered in their names individually and rent received in both names as per rental agreement (14.4l pa to be received by my mother and 14.4l pa to be received by my uncle).

2. The rental income started from February 2012. FY 2011-12 rental income received = 1.8L each by my mother and uncle.

3. As per some of the forums, if rental income has not crossed 10L in previous year, in current FY, we are entitled to an exemption up to Rs. 10L rental income and Service tax to be applicable above Rs. 10L income only. Is this applicable in our case?

4. Please let me know the procedure for applying for PAN card on the basis of "Associations of persons", Service Tax RC and how and when to pay Service Tax (rental income is Rs. 1.2lacs per month individually for my mother and uncle).