Tds on rent which include electricity charges

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 May 2013 Dear Freinds
What will be amount for TDS in case of rent , if it includes electricity charges (Fixed per month)also and agreement is a composite agreement for rent & electricity both.
Whether TDS is Deductible on payment of electricity amount fixed per month sepratly other than rent under a seprate agreement , if yes then under which section.

CA Alexandar Gazi

CA Alexandar Gazi (Expert)
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02 May 2013 Mr./Ms. ---

Sec 194 I - TDS on rent

Following is the definition of rent as per explanation (i) to section 194 I

[(i) “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;]

Looking to the above definition it is cleared that reimbursed electricity expenses could not be considered as rent or part of a rent.

Therefore, reimbursement of actual electricity charges along with rent in accordance with the agreement cannot be considered as rent. There fore no TDS is deductible against electricity charges portion.

But your case is different, as per the agreement a fixed sum was to be paid as reimbursement of electricity charges on regular basis. Point to be considered actual electricity charges was not being reimbursed, instead a fixed amount was being paid on regular basis as reiumbursement of electricity charges along with rent.

In my opinion, TDS is to be applicable at the prescribed rate U/S 194I on the entire amount (rental + fixed electricity charges)

Rate of TDS U/S 194 I
(a) two per cent for the use of any machinery or plant or equipment; and
(b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings:]

Note: TDS would be applicabe, in case where payer (tenant) is other than HUF and individual, if rental amount exceeding Rs. 1,80,000 p.annum. In your case rent including fixed electricity charges.

TDS under this section would also be applicable to individual and HUF, when they were carrying carrying business or profession and their books of accounts were required to be audited under the Income Tax Act, 1961.

Thanks,
Alexandar Gazi

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

04 May 2013 Dear Alexandar

Thanks for resolving my quarry.
now i have modified second part of my quarry.
i hope that you will resolve that too shortly.
good luck

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Great question! Here's how TDS on rent **including electricity charges** generally works:

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### 1. **If Rent and Electricity Charges are under a Composite Agreement**

* When the agreement lumps rent **and electricity charges together as a single composite amount**, then:

* **TDS under Section 194I** (Rent) is **deducted on the entire amount excluding GST or service tax** (since tax is not part of TDS base).
* The electricity charges are considered part of rent **if they are not separately charged** or covered under a different contract.
* So, TDS is deducted on **total rent + electricity charges** (excluding taxes).

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### 2. **If Electricity Charges are under a Separate Agreement**

* If electricity charges are paid **under a separate agreement**, then:

* TDS on rent **(Section 194I)** will apply only on the rent amount.
* Electricity charges are treated as **reimbursement of expenses** or payment for supply of electricity.
* TDS on electricity charges will depend on the nature of payment:

* If the electricity is supplied by a **contractor or service provider**, TDS may be deducted under **Section 194C** (Contractor).
* If it is a **reimbursement of expenses without markup**, no TDS may be required.
* If it is a **service charge**, then **Section 194J** (Professional/technical fees) or 194C may apply based on agreement and nature of service.

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### 3. **Common Practice**

* Usually, landlords include electricity charges as part of rent, so TDS is deducted **only once under 194I** on the entire amount excluding service tax.
* If electricity is paid separately to the electricity provider, then no TDS is deducted on such reimbursements by the tenant.

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### Summary Table

| Scenario | Section for TDS | Deduct on |
| -------------------------------------------- | --------------------------------------------- | ---------------------------------- |
| Rent + electricity combined in one agreement | 194I (Rent) | Total amount excluding taxes |
| Electricity charged separately (service) | 194C (Contractor) or 194J (Professional Fees) | Electricity amount (if applicable) |
| Electricity reimbursement without markup | No TDS | N/A |

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**Important:** Always check the terms of your agreement and consult your CA or tax advisor for your specific case.

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If you want, I can help draft a note or calculation example for your rent + electricity TDS. Want me to?

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