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Hotel Booking - Travel Agent

Bimal Mehta (Senior Accountant & finance managerial) (180 Points)

28 December 2010

My Client is Tour Operator . They Book Hotels in International for there Indian Client . Payment they Make Via RTGS .

Do They have to Deduct any TDS on this on Hotel Booking ?

If Yes Let me know under which section ?

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2 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 29 December 2010

CBDT later on issued a circular no No. 5/2002, dated 30-7-2002 for clearing the doubts as to what constitutes hotel accommodation taken on regular basis for the purpose. The circular clarifies in following words :

2. The Board have considered the matter. First, it needs to be emphasised that the provisions of section 194-I do not normally cover any payment for rent made by an individual or HUF except in cases where the total sales, gross receipts or turnover from business and profession carried on by the individual or HUF exceed the monetary limits specified under clause (a) or clause (b) of section 44AB. Where an employee or an individual representing a company (like a consultant, auditor, etc.) makes a payment for hotel accommodation directly to the hotel as and when he stays there, the question of tax deduction at source would not normally arise (except where he is covered under section 44AB as mentioned above) since it is the employee or such individual who makes the payment and the company merely reimburses the expenditure.

Furthermore, for purposes of section 194-I, the meaning of rent has also been considered. Rent means any payment, by whatever name called, under any lease . . . or any other agreement or arrangement for the use of any land. . . . [Emphasis supplied]. The meaning of rent in section 194-I is wide in its ambit and scope. For this reason, payment made to hotels for hotel accommodation, whether in the nature of lease or licence agreements are covered, so long as such accommodation has been taken on regular basis. Where earmarked rooms are let out for a specified rate and specified period, they would be construed to be accommodation made available on regular basis. 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.

3. However, often, there are instances, 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.

A rate-contract, therefore, may be said to be a contract for providing specified types of hotel rooms at pre-determined rates during an agreed period. Where an agreement is merely in the nature of a rate contract, it cannot be said to be accommodation taken on regular basis, as 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. In other words, a rate-contract is different for this reason from other agreements, where rooms are taken on regular basis. Consequently, the provisions of section 194-I while applying to hotel accommodation taken on regular basis would not apply to rate contract agreements.

To sum up , you will need to deduct tax

1. If you are Company or Firm or individual having turnover exceeding Rs 40 Lakhs and
2. The rental of hotel property is taken on regular basis under an agreement for specified period

In case of travel agents , merely making a contract for lower rate (what is called rate contract) shall not make travel agent liable to deduct tax u/s 194I.

So, casual or booking rooms for traveller occasionally will not require TDS on payments.

Tech V (2 Points)
Replied 04 June 2023

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