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This query is : Resolved 

09 September 2008 Is TDS to be calculated on Basic amount inclusive of Service tax or just on the basic amount.I m aware that TDS on rent is to be calculated on basic amount exclusive of Service tax.What abt other TDS payments?

09 September 2008 Hi,

TDS to be deducted from the Basic Amount Plus Service Tax.

I think on Rent also TDS is to be deducted from Basic Amount Plus Service Tax. But if am wrong please let me know the related section.


Yatesh Renuke

09 September 2008 on rent no tds on service tax

09 September 2008 Clarification on
deduction of tax at source (TDS) on service tax component on rental income
under section 194-I of the Income-tax Act

CIRCULAR NO. 4/2008, DATED 28-4-2008

have been received in the Board seeking clarification as to whether TDS
provisions under section 194-I of the Income-tax Act will be applicable on the
gross rental amount payable (inclusive of service tax) or net rental amount
payable (exclusive of service tax).

The matter has been examined by the Board. As per the provisions of 194-I, tax
is deductible at source on income by way rent paid to any
resident. Further rent has been defined in 194-I as

rent means any payment, by whatever name called, under any
lease, sub-lease, tenancy or any other agreement or arrangement for the use of
(either separately or together) any,-

(a) land; or

(b) building (including factory building); or

(c) land appurtenant to a building (including factory
building); or

(d) machinery; or

(e) plant; or

(f) equipment; or

(g) furniture; or

(h) fittings,

whether or not any or all of the above
are owned by the payee;

Service tax paid by the tenant doesnt partake the nature of income of the
landlord. The landlord only acts as a collecting agency for Government for
collection of service tax. Therefore it has been decided that tax deduction at
source (TDS) under sections 194-I of Income-tax Act would be required to be
made on the amount of rent paid/payable without including the service tax.

These instructions may be brought to the notice of all officers working in your
region for strict compliance.

These instructions should also be brought to the notice of the officers
responsible for conducting internal audit and adherence to these should be
checked by the auditing parties.



09 September 2008 TDS to be deducted only on the basic amt only

09 September 2008 (1) TDS has to be affected after excluding Service Tax component from payment of rent to the Landlord. The Department opined that "Service tax paid by the tenant does not partake the nature of income of the landlord".

(2) However we are PROHIBITED from using common sense and apply the same logic to all other types of payments attracting TDS provisions.

(3) So for all other types of payments attracting TDS provisions, you need to affect TDS on total payment including Service Tax compontent.

(4) Very unfortunate. But we should get used to.

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