Income tax & tds on rent

Service tax will have to be added in the monthly rentals. You will have to get service tax reg number and file your service tax returns quarterly. The lessee will deduct TDS on the rental and not on the service tax component. If the TDS deducted exceeds your tax liability for the year, you shall be entitled to refund or else you may have to pay tax as self-assessment tax over and above TDS deduction. 

Check if you are renting out only the premises or some sort of plant & machinery also. 

I am not sure whether this rental shall be taxed under income from house property or income from business. I think it is income from house property. In income from house property you can avail 30% deduction, and in income from business, you can avail deductions toward expenses incurred.

As per Section 194 I tds will be deducted on actual Income earned so tds will be deducted on Rent not on service tax and this income is considered under the Income from House property.

Originally posted by : Mihir
	Service tax will have to be added in the monthly rentals. You will have to get service tax reg number and file your service tax returns quarterly. The lessee will deduct TDS on the rental and not on the service tax component. If the TDS deducted exceeds your tax liability for the year, you shall be entitled to refund or else you may have to pay tax as self-assessment tax over and above TDS deduction.  Check if you are renting out only the premises or some sort of plant & machinery also.  I am not sure whether this rental shall be taxed under income from house property or income from business. I think it is income from house property. In income from house property you can avail 30% deduction, and in income from business, you can avail deductions toward expenses incurred.

That Means:-

1. Monthly Advance cheque would be paid 95000+ 12.36% (service tax) ?
2. TDS will be deducted on 95000+ 10% (TDS) ?
3. If I Distribute the Rent in two names Supposedly me and my mother then can I save service tax to the Lessee because

       lessen wil bear 95000+ Serivce Tax + TDS = Will Be very high

       He is ok with 95000 + TDS = OK

Also If its the only source of income?

For Eg:-

I get Annual Rent 11,40,000 yearly

+ Service TAx i will get 

- TDS I will be deducted 

- Life Insurance of Rs. 30,000

- House TAx of Rs. 35,000 ( As per owner occupied)

= Balance Amount will be taxable or Tax free?

Originally posted by : viral
	As per Section 194 I tds will be deducted on actual Income earned so tds will be deducted on Rent not on service tax and this income is considered under the Income from House property.

That Means:-

1. Monthly Advance cheque would be paid 95000+ 12.36% (service tax) ?
2. TDS will be deducted on 95000+ 10% (TDS) ?
3. If I Distribute the Rent in two names Supposedly me and my mother then can I save service tax to the Lessee because

       lessen wil bear 95000+ Serivce Tax + TDS = Will Be very high

       He is ok with 95000 + TDS = OK

Also If its the only source of income?

For Eg:-

I get Annual Rent 11,40,000 yearly

+ Service TAx i will get 

- TDS I will be deducted 

- Life Insurance of Rs. 30,000

- House TAx of Rs. 35,000 ( As per owner occupied)

= Balance Amount will be taxable or Tax free?

Giving immoveable property on rent comes under service tax net. If the income from such services exceeds 10 lakhs, then one is liable to get service tax reg number and file service tax returns quarterly. Since the rental income in your case exceeds 10 lakhs, service tax will apply. 

It is understandable that the lessee will not want to shell out 12.36% more for service tax, but then again, one cannot argue with the law. 

The lessee will bear only rental + service tax. He will then deduct TDS at 10% on the rental income and not on the service tax component. And the service tax you receive will have to be deposited in the bank by you.

However, if the property belongs to two person, then the rent shall be divided between the two, and then service tax will not apply because each owner will earn less than 10 lakhs. 

In your calculation, you forgot to take 30% deduction. Gross rental - property tax = net rental - 30% deduction = income from HP. Total income - deductions u/s 80C-80U = taxable income. Tax liability - TDS deduction = balance tax payable or refund.

Originally posted by : Mihir
	Giving immoveable property on rent comes under service tax net. If the income from such services exceeds 10 lakhs, then one is liable to get service tax reg number and file service tax returns quarterly. Since the rental income in your case exceeds 10 lakhs, service tax will apply.  It is understandable that the lessee will not want to shell out 12.36% more for service tax, but then again, one cannot argue with the law.  The lessee will bear only rental + service tax. He will then deduct TDS at 10% on the rental income and not on the service tax component. And the service tax you receive will have to be deposited in the bank by you. However, if the property belongs to two person, then the rent shall be divided between the two, and then service tax will not apply because each owner will earn less than 10 lakhs.  In your calculation, you forgot to take 30% deduction. Gross rental - property tax = net rental - 30% deduction = income from HP. Total income - deductions u/s 80C-80U = taxable income. Tax liability - TDS deduction = balance tax payable or refund.

If this is the only source of income for me:-

Then do i get the refund as i mentioned above or have to pay tax.

All in all the rent of 95000 will come in hand p.m. or will be less.

Computation

95,000 x 12 = 11,40,000/-

11,40,000 x 12.36 = 140,904/-

Invoice amt - 11,40,000 + 1,40,904 = 12,80,904/-

TDS deduction 10% - 11,40,000 x 10% = 1,14,000

Amount due - 12,80,904 - 1,14,000 = 11,66,904/-