TDS on deposits paid towards rent of building

This query is : Resolved

Hitesh (Querist)
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26 May 2010 I need answer in two senarios:

Suppose deposit of Rs.10,00,000/- is paid to the landlord in the year 2006-07. In the year 2008-09 the assessee decides to adjust Rs.50,000/- of the deposit every month against the rent payable. When is TDS required to be deducted on the said deposit and on what amount?

Senario 1- Rent agreement says the deposit is non-refundable in nature.

Senario 2- Rent agreement says the deposit is refundable in nature.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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29 May 2010 In cases where the tenant makes a non-refundable deposit, tax would have to be deducted at source as such deposit represents the consideration for the use of the land or the building, etc. and therefore partakes the nature of rent as defined in section 194-I. If however the deposit is refundable, no tax would be deductible at source. If the deposit carries interest, the tax to be deducted on the amount of interest will be governed by section 194A.

So

1. TDS deductible

2. TDS not deductible.

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