service tax on rental income

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Querist : Anonymous

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Querist : Anonymous (Querist)
17 August 2010 I have property in residential area. If I give the same on rent to NGO then should I charge service tax on rental income.

Yearly rent exceeds Rs. 10 Lacs. Please advice.

18 August 2010 Even though the provisions of Finance Act, 2010, have made "Renting" a service under service tax act.

But in view of the delhi high court's stay order : WP(C)3398/2010 # Home Solutions Retails Ltd Vs UOI, the scene is unclear.

Till the matter is fully decided, nothing can be said with surety.

The basic contention of the petition is the very fact that "Renting an immovable property can not construed as rendering of a service" & the whole case is being fought on this very definition. So, just wait till the final say of the judiciary is over.

But, consequent to the final judiciary order, if the case is decided in the favour of Union Govt, then the service tax may be applicable retrospectively.

But if the case is being decided in the other way, there may not any need for levying service tax at all.

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Querist : Anonymous

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Querist : Anonymous (Querist)
18 August 2010 pls note that the residential property have been given on rent.

24 July 2025 This is a classic and important query related to service tax on rental income from residential property, especially when rented to entities like NGOs.

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### Key points:

1. **Service Tax on Renting Immovable Property (Finance Act 2010):**
The Act brought "renting of immovable property" under the ambit of taxable services, making such rental income potentially liable to service tax.

2. **Residential Property Exception:**
However, **renting residential property for residential use was generally exempt** from service tax under the applicable rules and notifications.

3. **Renting to NGOs:**

* Renting residential property to an NGO (a non-profit organization) **does not automatically change the nature of use** โ€” if the NGO is using the property for residential purposes (e.g., staff accommodation), it should be treated as residential use.
* If it is used for commercial or non-residential purposes, it could attract service tax.

4. **Judicial Stay and Uncertainty:**

* As per the **Delhi High Court stay (WP(C)3398/2010 - Home Solutions Retails Ltd vs UOI)**, there was judicial uncertainty regarding whether renting immovable property is indeed a โ€œservice.โ€
* This case put a temporary stay on levying service tax on renting property, meaning no clear final direction was available at that time.
* The issue of **whether renting is a service or not** was under judicial review, causing confusion and caution in charging service tax.

5. **Retrospective Liability:**

* If the court finally decides in favor of the government, **service tax may become payable retrospectively**, possibly with interest and penalties.
* If the court decides against the government, then service tax would not apply on renting immovable property at all.

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### So, to answer your question specifically:

* **Renting a residential property to an NGO for residential use:**

* Likely **no service tax applicable** (as per the exemption on residential renting).
* However, if the rent exceeds Rs. 10 Lakh per annum, normally registration would be required if tax were applicable.

* **Due to the Delhi HC stay, it is safer to await the final judicial decision or consult a tax professional for your specific timeline.**

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### What you can do:

* Keep track of any judicial updates on this issue.
* Maintain proper documentation showing that the property is used for residential purposes by the NGO.
* If the rent crosses the threshold, monitor service tax notifications, as the position might change post final judgement.

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Would you like me to help summarize this for official communication or keep you updated on related rulings?


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