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Service tax on Rental Income

Sadhuanj (MBA) (68 Points)

22 May 2007

I am receiving a rent Rs 1.00 lakh per month which is sharing equally myself and my wife. The property is in the joint name. The property has given letout for a software company. As per the latest provisions of service tax, the service tax will be levied on rentals. Please guide the service tax provisions, whether service tax applicable to this case? In case if required to pay service tax.. who has to pay the service tax i.e service provider or service receiver. Please clarify ?

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118 Replies

Nirav Shah (13 Points)
Replied 22 May 2007

According to readings and findings in Service tax law & procedure latest addition, commercial rent is itself taxable hence aatrect 12.36% additional burden being service tax. i.e. if any body pays Rs.100/- per sq. feet or any way that person is liable to pay now Rs.112.36 being the rent of commercial properties. However the following properties are exempt from Service tax laws. 1. Vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbendary, mining purposes 2. Vacant land, of any type having no clear tytle for its use 3. Land used for Educational, sports, circus, entertianment and parking purpose 4. Building used solely for residential purpose 5. Building used for accomodation like hostel, hotels, boarding houses, holiday accomodation, tents, camping facilities 6. Renting of immovable property to/by a religious society/trust/body 7. Renting of immovable property to an educational body that does not includes commercial training/coaching centre. 8. Mixed use of land/building I.e. partly residential and partly commercial will be trreated as whole building/land commercial hence rental income will attract service tax @ 12.36% Exemption limit of Rs.800000/- is applicable i.e. only rent received or paid during the year more then Rs.8,00,000/- will attrect service tax @ 12.36%. Regards Nirav Shah

Ramanan R (CA Practice ) (65 Points)
Replied 22 May 2007

You will not be liable as the gross rental collection will be only 6 Lakhs which is well below the 8 Lakh limit.(Provided you dont have other receipts subject to Service Tax) Moreover it is still too early since the statue has not decided how much of the rent will be subject to Tax. It is hoped that they give some allowances on the Gross rent

Himanshu Tandon (Advocate) (144 Points)
Replied 22 May 2007

First of all you have to tell the actual title of the property is in whose name. if the title is in joint name then exemption of limit within 7 lakhs can be availed by you and your wife and if the title is on single name liability of service tax applicable on the person who is actual title owner. further quarry invited

(Guest)

In one of my client case,the property is in the name of 7 co owners who are individuals.The company(Say" A" Who is my client) has enter into a collaboartion agreemnt with the 7 co owners that the compnay will demolish the existing structure and build a new building.In that collaboration agreemnt it is mentioned that demolition and construction cost will be borne by the company and in turn company will get the half of the rent which that building will fetch after it is ready for letting out. Now the building is let out for commercial purpose.The tenant is paying the rent to the 7 co owners being the legal owner.These 7 co owners EACH are giving half of the rent to the company A .The total rent received by Company A is more than 8 lacs annually.My question is that whether the compnay A is liable for charging service tax to these co owners who are NOT actually the service recepient??Pl help me out!!

(Guest)

We are receiving a rent Rs. 1.50 Lakh per month. The property has given letout for a Factory space at Okhla. As the latest provision of service tax, the service tax will be levied on rent received. Please guide us what, we have to pay service tax on that amount, if so, what is proceduure and what is the limit?

Himanshu Tandon (Advocate) (144 Points)
Replied 25 May 2007

Service Tax is on Rental Property and Service tax has to be charged from tanants commercial property. your quarry means that 7 owner of the property and builder is getting half portion of rent from each 7 owner. the best way that half portion of rent of each 7 owner should be directly be received by the Company A and if the receipt of the company is above 7 lacs in a year he then company has to take a registration under service tax and charge service tax from tenent on pay tax when he cross the limit 8 lacs in a financial year. in 7 owners case if their half share is below 7 lacs in a year he then they are not reqire to take registration.

Himanshu Tandon (Advocate) (144 Points)
Replied 25 May 2007

Service tax is payble if gross rent received during the year is above 7 lacs and tax is payable after limit is crossed 8 lacs in a financial year. in case of rent it can be calculated on tips. If you are getting rent @ 1.5 Lacs per month on commercial property you have to charge service tax from tenent factory. if said factory is registered under Central Excise and paying Excise duty then he may take the CENVAT credit of said service tax paid by the them. the service tax is applicable from 01.06.2007 therefore registration has to be taken with in thirty days from the applicable of the service.
you cant hide the said amount as TDS must also be deducted on the said rent.

(Guest)

Thanks Himanshu for yr reply. The tenant is not ready to pay the share of Co a directly to A since Co A is not the landowner.Today i have read in ET today that exemption is there for revenue-sharing deals.In my case it is sharing of rent would it cover in this exemption??

(Guest)

The service tax has to be paid by the service providers.The law assumes that you have collected the service tax and therefore u can work backwards if yOur lessee does not pay the tax seperately.Whether u can demand the tax seperately from ur lessee is a matter of agreement enterd into by you and ur lessee.But u have to pay service tax.The co-owner issue need a clarification from CBEC. In my opinion if yiur wife has not invested her money in the propoerty,ypu may be treted as the person liable

ankit bhatia (financial services) (37 Points)
Replied 31 May 2007

yes the service tax will be payable on it - as per finance act '07.......but you have o pay only till 5th of month - following th month of reciept of rent.........also only fo rent accruing for the period- from 1-6-07 only...... you will be governed by the registration provisions also........

Sameer (20 Points)
Replied 05 June 2007

If a company "A" letout its premises to another company "B" with Telephone and leased connections etc. Query is- 1) Whether the "A" can avail set off of service tax paid on telephone and leased line etc? Please guide.

(Guest)

A company has rented a premises of Rs.5 lacs p.m. & engaged in business of software export to US client & also its not registered as STPI unit. Can u tell me the comapany is liable to pay the service tax to landlord, if yes then what amt? & comapny is also eligible to take the exemption in service tax on rental premises as services which are exported to out side of India.

Inderpal Singh Pasricha (CHARTERED ACCOUNTANT) (14 Points)
Replied 06 June 2007

I my opinion if you have filled ur income tax retrurn and disclosed the same as ur coowner of the property then u will not be liable to pay the service tax because u bothh can avail the exemption up to Rs 8 lakh. The land lord has to charge from the tenant

pooja (23 Points)
Replied 16 November 2007

whether the service tax payable will be assessed with respect to each service provider, that being the case if the property is jointly owned by two people. the exemption amount of Rs.8 lakhs will apply to each person or with respect to their share.