T.D.S.
This query is : Resolved
08 December 2009
I would like to know whether tax should be deducted at source on gross bill amount or at net bill amount? for eg. if the party has raised a bill of Rs. 1,00,000 for services provided and service tax @ 10.3 % i.e. 10,300, total bill amounting to Rs. 1,10,300 then we sould deduct T.D.S. on Rs. 1,00,000 since that is the income of that party or Rs. 1,10,300 since that is our expenditure? Please explain when (a) our services are covered under service tax and (b) when our services are not covered under service tax
Thank You.
Thank You.
08 December 2009
TDS should be deducted on amount including Service Tax, except service tax on renting of immovable property.
08 December 2009
agreed with expert. You need to deduct the tds on gross amount.
08 December 2009
thanx alot...
14 December 2009
But, could any one explain the logic behind this. What i understand is that T.D.S. is deducted only on the income of the person. In the above mentioned example, Service Tax does not form a part of the Income of the party providing the service since the is liabile to pay the service tax amount to the Service Tax Department. pls explain.
Thank You.
Thank You.
26 July 2025
Great question! Here's the logic and explanation behind deducting TDS on **gross bill amount including service tax**, except for renting of immovable property:
---
### Why TDS is deducted on **gross amount including service tax**?
* **TDS is deducted on the total amount payable to the service provider, which includes the service tax component.**
* The **reasoning** is that the entire bill amount (service + service tax) is the liability of the payer, and the service tax collected is considered part of the gross receipt by the service provider at the time of billing.
* Although the service tax collected is eventually paid by the service provider to the government, for the purposes of TDS, the payer deducts tax on the total payment made or credited to the service provider.
* This treatment helps in the effective collection of tax at source and avoids under-reporting of income.
---
### Exception:
* **For rent of immovable property, service tax portion is excluded** for TDS purposes. Here, TDS is deducted only on the rent amount, excluding service tax.
---
### Summarizing:
| Scenario | TDS Deductible On |
| ---------------------------------------------- | ------------------------------------------- |
| Services other than rent of immovable property | Gross bill amount **including service tax** |
| Rent of immovable property | Rent amount **excluding service tax** |
---
### Your specific example:
* Bill: ₹1,00,000 for services + ₹10,300 service tax = ₹1,10,300 total
* You **should deduct TDS on ₹1,10,300** (gross amount including service tax).
---
This is consistent with income tax rules and CBDT circulars.
---
If you want, I can also share relevant circulars and sections for your reference. Would you like that?
---
### Why TDS is deducted on **gross amount including service tax**?
* **TDS is deducted on the total amount payable to the service provider, which includes the service tax component.**
* The **reasoning** is that the entire bill amount (service + service tax) is the liability of the payer, and the service tax collected is considered part of the gross receipt by the service provider at the time of billing.
* Although the service tax collected is eventually paid by the service provider to the government, for the purposes of TDS, the payer deducts tax on the total payment made or credited to the service provider.
* This treatment helps in the effective collection of tax at source and avoids under-reporting of income.
---
### Exception:
* **For rent of immovable property, service tax portion is excluded** for TDS purposes. Here, TDS is deducted only on the rent amount, excluding service tax.
---
### Summarizing:
| Scenario | TDS Deductible On |
| ---------------------------------------------- | ------------------------------------------- |
| Services other than rent of immovable property | Gross bill amount **including service tax** |
| Rent of immovable property | Rent amount **excluding service tax** |
---
### Your specific example:
* Bill: ₹1,00,000 for services + ₹10,300 service tax = ₹1,10,300 total
* You **should deduct TDS on ₹1,10,300** (gross amount including service tax).
---
This is consistent with income tax rules and CBDT circulars.
---
If you want, I can also share relevant circulars and sections for your reference. Would you like that?
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