TDS ON RENT PAID ABOVE RS 1,20,000.00 P.A.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 February 2010 Dear sir,
my client is in the business of readymade garments and having turnover around Rs 12,00,000.00 p.a.means acounts are not audited.but he is paying rent for shop Rs35,000.00 p.m.to the owner of shop.my query is the client have to diduct TDS on rent or not.
thanks
U B Mittal

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
Follow

18 February 2010 You need to deduct the TDS ,the provision related the Sec.44AB audit is applicable for sec.194C & 194J not for 194I.so you need to deduct the TDS

Querist : Anonymous

Querist : Anonymous (Querist)

19 February 2010 thank u sir for ur reply

i am attaching this article for ur reference.As per this article TDs is not to be required on Rent if the Accounts are not Audited. Pl look into the matter at the earliest and oblige
U B Mittal

Here we shall discuss Income Tax to be deducted on payments of Rent as per Section 194-I of the Indian Income Tax Act.

ïƒœ Person responsible for paying any income by way of rent to a resident shall deduct income tax at source on such payment at the time of payment or credit whichever is earlier.

ïƒœ The liability to deduct tax at source is on any person except individual and HUF. However, individual and HUF are also covered by liability to deduct tax at source if their books are required to be audited under section 44AB during the immediately preceding financial year. [The turnover from business/profession exceeds the limits specified u/s 44AB during the financial year immediately preceding the financial year in which the rent is paid or credited].

ïƒœ No income tax is required to be deducted at source if the aggregate amount of rent credited/paid or likely to be credited/paid to a single payee during the financial year does not exceed Rs.1,20,000/-.

ïƒœ Rates at which tax is required to be deducted:

1. Use of Machinery, Plant or Equipment: 10% [w.e.f. 1-6-2007 previously 20% ]
2. Use of any land or building including factory building or land appurtenant to a building including factory building or furniture or fittings : If the payee is individual or HUF : 15% In case of other payees: 20%.

ïƒœ Meaning of Rent for the purposes of Section 194-I: 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 of the following whether any or all of them are owned by the payee or not:

1. Land
2. Building including factory building
3. Land appurtenant to a building including factory building.
4. Machinery
5. Plant
6. Equipment
7. Furniture
8. Fittings

ïƒœ Where the assessee-hotel received payments from corporate customers under an agreement for use of the rooms in the hotel by such customers on regular basis, such payments would squarely fall within the term â€˜rentâ€™ as defined under the Explanation to section 194-I, and would hence attract deduction of tax at source. If such deduction results in any hardship or financial burden to the assessee, the proper remedy is to apply to the Assessing Officer under section 197 for the issue of certificate for deduction at lower rate or nil rate - Krishna Oberoi v. Union of India [2002] 257 ITR 105/123 Taxman 709 (AP.).

ïƒœ The CBDT have clarified that, while section 194-I would be attracted to payments received for providing hotel accommodation on a regular basis under lease/licence agreements, the said provision would not apply to cases where only â€˜rate contractâ€™ agreements are entered into, under which only room tariffs are fixed, because, where an agreement is merely in the nature of a rate contract, it cannot be said to be accommodation â€˜taken on regular basisâ€™ - Circular No. 5/2002, dated 30-7-2002.

ïƒœ Landing of aircraft or parking aircraft amounts to user of land of airport and, hence, landing fee and parking fee will amount to â€˜rentâ€™ within meaning of Explanation (i) to section 194-I - United Airlines v. CIT [2006] 152 Taxman 516 (Delhi).

ïƒœ There is no requirement to deduct tax at source if the payee is the Government. In the case of the local authorities and the statutory authorities, there will be no requirement to deduct income-tax at source from income by way of rent if the person responsible for paying it is satisfied about their tax-exempt status under clause (20) or (20A) of section 10 on the basis of a certificate to this effect given by the said authorities. [Circular No.699 dt.30-1-1995].

ïƒœ If there are number of payees each having definite and ascertainable share in the property, the limit of Rs.1,20,000/- per annum will apply to each of them individually. [Circular No.718 dt.22-8-1995]

ïƒœ The tax is to be deducted from the actual payment and there is no need of computing notional income in respect of a deposit given to the landlord. If the deposit is adjustable against future rent, the deposit is in the nature of advance rent subject to TDS. However, if the deposit is refundable, no tax is required to be deducted at source. If the deposit is non-refundable, it also takes the character of payment for the user of premises and is subject to TDS. [Circular No.718 dt.22-8-1995].

ïƒœ However, interest-free deposit given by a tenant to the landlord which has to be adjusted at the time the tenant vacated the premises forever, cannot be treated as an advance rent so as to require the assessee to deduct tax at source therefrom. P.S.Cars (P) Ltd. v ITO [2005] 4 SOT 143 (Delhi).

ïƒœ Warehousing charges are subject to TDS under section 194-I. [Circular No.718 dt.22-8-1995]

ïƒœ In case of payment to hotels for rooms hired, if the earmarked rooms are let out for a specified rate and specified period, they are construed to be accommodation made available on regular basis and subject to TDS. Similar would be the case, where a room or set of rooms are not earmarked, but the hotel has a legal obligation to provide such types of rooms during the currency of the agreement. [Circular No.5/2002 dt.30-7-2002].
ïƒœ However, where corporate employers, tour operators and travel agents enter into agreements with hotels with a view to merely fix the room tariffs of hotel rooms for their executives/guests/customers. Such agreements, usually entered into for lower tariff rates, are in the nature of rate-contract agreements. There is no obligation on the part of the hotel to provide a room or specified set of rooms. The occupancy in such cases would be occasional or casual. Hence, mere rate contracts would not attract TDS under section 194-I. [Circular No.5/2002 dt.30-7-2002].
ïƒœ If municipal taxes, ground rent etc. are borne by the tenant, no tax will be deducted on such sum since the basis for tax deduction at source under section 194-I is â€œincome by way of rentâ€. National Panasonic India (P) Ltd. v CIT(TDS) [2005] 3 SOT 16 (Delhi).

Other Issues on Indian Income Tax Deducted At Source: Introduction Contractor Payments(Sec 194C) Interest Other than Interest on securities Interest on Securities(Sec 193) TDS on Commission TDS on Other Sums TDS on Salaries(Sec 192) TDS on Professional Fees (194J)
Disclaimer: All the information provided above is for informative purposes only. You are advised to consult your tax consultant before you act upon any of the above information. In spite of this, if any person acts upon this information and suffers any loss, we are not to be held liable.

Though all efforts have been made to provide latest information, you are advised to check latest circulars, latest changes in law etc from the Indian Income Tax Department.
Privacy Policy

Enter your search terms Submit search form

Web
www.incometaxquery.com

Sponsored Ads

Â© COPYRIGHT http://www.incometaxquery.co