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income tax deduction

Vijay Wangikar (8 Points)

06 January 2018

is it compulsory to deduct tax from payment to hotel for lunch

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Amitav (Chartered Accountant) (5993 Points)
Replied 06 January 2018

No..Not required to deduct tax

Vijay Wangikar (8 Points)
Replied 06 January 2018

total bill above 1 lakh for training

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CA Rakesh Ishi (Working at Private Company) (7770 Points)
Replied 07 January 2018

Section 194C of the I.T. Act provide that any person responsible for paying any sum to any resident for carrying out any work (including supply of labour) for carrying out any work,

in pursuance of a contract between the contractor and a specified person, shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by any other mode,

deduct amount equal to 1%,where the payment is being made or credit is being given to an individual or HUF,

2% where the payment is being made or credit is being given to a person other than an individual or HUF, of such sum as Income Tax on income comprise therein.

Explanation attached to this section provides the definition of work. In this definition payment to a hotel for boarding does not fall within the ambit of work. The assessee has not hired services of any event organizer. It simply booked the hotel for boarding. The hotel did not work on behalf of the assessee as a contractor. Otherwise every guest whosoever stay in a hotel ought to have deducted TDS while making booking or staying in it.

Client place generally as and when required we use to book rooms and accommodation is provided to guests.. So it will be considered as "rate contract agreement" No TDS Applicable ..as per Circular no.5 dated 30.07.2002 But if they have changed the current policy and "some earmarked rooms" are reserved for guests it will come under "accommodation taken on regular basis" and hence TDS 194I applicable..

1) No TDS applicable if it is just rate contract agreement

2) However some companies do deduct TDS on safer side even in case of Rate contract agreements, But please deduct as per section 194I and not as per Section 194C.

3)No TDS applicable on food,beverages etc.

4)if you want to deduct TDS in my opinion it should be @ 10% under section 194I.

Consequently, the provisions of section 194-I while applying to hotel accommodation taken on regular basis would not apply to rate contract agreements. Thus as clarified in the said circular, TDS on rent will be applicable to hotel accommodation taken on regular basis as mentioned and not to the occasional or casual booking as covered as it is an arrangement under rate contract agreement.